Law firms are continually striving to reduce the cost of doing business in the highly competitive, fast-paced marketplace.  Regardless of firm size, early anecdotal evidence and research studies indicate that intranets offer the potential to generate a significant return on investment (ROI). 

 

Unfortunately, senior partners may still react with skepticism because they know that new technology usually costs more and may deliver less than promised.  This article will help examine and possibly mitigate these issues.

 

Decreased Cost of Printing

The starting justification for many intranets is the decreased cost of producing, accessing and distributing information within an enterprise.  Documents that need to be saved but not printed can be stored on an internal Web server and updated for a fraction of the cost of reprinting material.  It is not only the publishing but also the updating of information that leads to savings.  Intranets also allow information to be rapidly and economically deployed to a dispersed group of attorneys and staff. 

 

Fast Access to Information

Fast access to information is another key intranet cost saving.  If an intranet means that every attorney and employee in a firm saves 10 minutes per day, the cumulative cost saving is enormous—much greater than the savings from reduced printing and mailing costs.  One firm calculated that over a three-year period, it saved $390,000 through the elimination of phone calls, overnight mail and faxes.  Plus, they saved an estimated $22,000 by reducing the time required to find and access case and client data and collaborative information.

 

Increased Productivity

Increases in productivity from intranets arise from more rapid and easier access to information and exchange of information, plus they allow for flexibility in the time of delivery of information.  For example, by making materials accessible through an intranet to the desktop, staff and attorneys can access needed records on their own schedule, rather than being interrupted while working on another case.  Benefits from increased productivity are more difficult to measure than dollar savings from the reduced cost of printing and distributing manuals.  Law firms that budget, track and bill employee time in hourly increments have an advantage in this regard.  In addition to making information more easily and quickly accessible, intranets facilitate a global exchange of information that enables true 24/7 organizational productivity.

 

In terms of total ROI, an intranet targeted to improving the productivity and effectiveness of a firm’s attorneys may make a better case for the technology than employee access to normal business documents.  Ramping up the technology and dealing with the human factors, including employee training and work process reengineering, are formidable hurdles to achieving the high and rapid ROI some firms have claimed.  On the other hand, intranet advocates observe that as the technology proliferates and becomes a business necessity, the question of quantifying return on investment will become moot.  Until that day arrives, technology advocates would be well advised to focus intranet applications on solving the problems partners care about (e.g., serving more clients, increasing organizational speed and enabling collaboration).

 

While most people feel using an intranet to support their application is a clear benefit to their company, it is surprising just how significant the ROI from an intranet can be.  When the International Data Corporation (IDC) investigated the returns, the typical company achieved an ROI well above 1,000 percent—far higher than usually realized from a technology investment.

 

Even more significant than the high ROI is that companies in the study have recovered the cost of an intranet within six to 12 weeks, making the risk of not recovering the money spent on an intranet extremely low.  When IDC investigated the costs associated with an intranet, the cost of hardware and software was far less significant than the cost of personnel.

 

Personnel costs fell into two distinct categories: the one-time cost of application development and the ongoing costs associated with supporting the system and maintaining a steady flow of information content.  This cost can be further minimized by a pre-built intranet solution.

 

Still looking at the issue of cost, the ease-of-use of a browser has translated into a low cost form of training.  A well-designed intranet pays dividends in the reduction or elimination of training classes, and intranet implementations are resulting in minimal training expenses.  This savings is particularly valuable when deploying to a large number of people, to remote workers or to high-level management.  

 

On the savings side of the ROI equation, IDC found the intranet provides quantifiable benefits in areas such as reducing the use of paper.  However, the greatest area of savings is in increased productivity—it’s proven fact.

 

The intranet is eliminating the barriers to communication and allowing groups within companies and groups across companies to communicate and share knowledge.  The corporate intranet is finally offering the medium to follow through on the promises of groupware. 

 

Comparing ROI and Payback

While ROI calculates the effective interest rate, payback period calculates the time before the project returns enough money to cover the investment.  Two projects may have similar payback periods but different flows of money, in that one may return a large amount of money in the first month (which can then be reinvested), combined with a small trickle of money over the rest of the year.

 

The payback period allows a company to understand its risk by calculating a time period for recovering the cost of the initial investment.  By conservative calculation, if every employee saves 15 minutes a day finding that important procedure or file, it adds up to over an hour a week, over four hours a month and over 50 hours a year.  Couldn’t this time be used more effectively in servicing additional clients?  Anyone who has used technology realizes its potential as a communication, knowledge building and collaboration tool that will create new and more efficient ways of doing business.

About our author ...

David Christian is the President of Mindbridge Software.  He has over 15 years experience in software sales, marketing, development, design and implementation.  David is also the system architect for the intranet product, IntraSmart.  He can be reached at info@mindbridge.com.