Peer to Peer

June 2009

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Page 19 of 99 20 Peer to Peer Cutting the IT Budget ASK CIO THE R umors abound regarding the effect that the recession is having on large law firm information technology (it) departments. IT is often the third- largest expense category for large law firms, after salaries and real estate. Firms are revisiting IT practices, policies and agreements to reduce expenses, and this is resulting in staff and budget cuts at many firms. A recent survey of AmLaw 100 firms shows the impact these changes are having and provides insight on ways to meet today's economic challenges. REDUCING IT STAFF More than half the respondents indicated that they have reduced their IT staff in the past 12 months, and another 15% are considering reductions. Of those firms who have reduced staff, the average reduction was 6.45%, while the high was 20%. Many firms have avoided layoffs, or reduced their numbers, by instituting hiring freezes. Future layoffs may be minimized by keeping staff sizes flat as firms grow, eliminating part-time or consulting staff, transferring people to other roles within the firm, and "managing out" individuals with performance issues. If IT departments take these steps, firm management should recognize these efforts and avoid including IT in across-the-board administrative staff reductions. Surveys sometimes measure, among many other items, the ratio of IT staff to firmwide personnel. This ratio can indicate many things, including the service level required, the breadth of software and hardware supported, the firm's geographic reach and the efficiency of the IT services provided. Staff ratios can be deceiving due to differences in the composition of IT staffs from one firm to another. Nontraditional IT departments such as litigation support, practice support, library, records, conflicts, knowledge management and docketing may reside within IT or another administrative department, depending on the firm's preferences. The survey asked respondents to provide the ratio of IT staff to users supported. To level the comparison, respondents were asked to exclude nontraditional IT departments in their ratio, whether or not they report to IT. The average ratio was 28.2 to 1. The low was 11.5 to 1, while the high was 62.0 to 1. This wide range reflects the difficulty in making these comparisons, let alone relying upon them to make budget decisions. CUTTING IT ExPENSES IT costs can be divided into three areas, each of which can be included in staff, operating and capital expenses. First are costs required to stay in business, such as communications and maintenance expenses. Second are costs that are optional, but would be difficult to sacrifice. Examples include wireless devices, video conferencing and any cost-savings item. Third are discretionary expenses, which often consist of investments in new technologies. IT operating expenses, exclusive of staff costs, may be difficult to cut since large portions of them represent costs in the first two categories. Approximately15% of survey respondents indicated they have made no cuts in their 2009 operating expenses, while 71% have made cuts between 0% and 10%. Only one firm reported operating expense cuts as high as 20 to 30%. Capital expenditures, however, see greater reductions since they are easier to control in the short term. While 16% of respondents have made no capital cuts, 31% have cut between 0 and 10%, and another 31% have cut between 10% and 20%. Four firms have cut their capital expenditures between 20% and 50%, while three firms have made more than a 50% reduction for 2009. FACTORS TO CONSIDER WHEN MAKING IT BUDGET CUTS Many factors must be taken into consideration when determining where to make expense cuts. A rapidly growing firm may see greater cost reductions as work slows and staff is reduced. Firms that are moving or opening new offices may have significant extraordinary IT expenses. If a firm wishes to A survey was sent to the top IT person in each of the AmLaw 100 firms. 34 responses were collected from February 23 through March 4, 2009.

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