Neil Cameron Consulting – small firms not spending enough to survive?

Neil Cameron Consulting Group (NCCG), a UK specialist legal IT consultancy, today announced the release of its inaugural Law Firm IT Department
Survey.

“The relative size of the IT department has exercised law firms for many
years.  We have often been asked to
consult on this topic, and have been able to make sensible anonymous comment,
but we felt it was time to conduct a survey that delved deeper into not only
the size, but the shape of the IT department.  The results show that overall IT spend is down – perhaps
that is not surprising given the economic climate – but there are wide
variations in the figures, even within peer groups,” notes Neil Cameron,
principal of NCCG.

For years the key financial ratio for IT expenditure has been IT spend
as a proportion of turnover.  
In the 80s – 90s this was at 3.5%-4%, thereafter there was a slow but
steady rise to 5%-6% in medium and large firms (with a high-water mark of 13%
in one large firm in a single year of very high investment). The survey shows
IT spend is back down to 4.2% of turnover. (The Orange Rag reckons the figure is currently lower averaging at 3% across the top 250.)

The results for the top three peer groups (Top 50, 51-100, 101-150) are
similar, but alarmingly the survey shows that firms below the top 250 are
spending only 1.8% of turnover on IT – NCCG questions whether a functional and
reliable IT infrastructure can be obtained for that level of investment.

The overall ratio of IT staff to total number of users is 1:32, although
this varied across the peer groups with a ratio of 1:29 at the top end and 1:46
at the low end. The ratio of specifically Help Desk staff to total users is 1:101, which
is a fairly consistent ratio across the peer groups. Another staffing ratio specifically highlighted in the survey – although
not related to the IT department – is the number of Professional Support
Lawyers (PSL) to Fee Earners.  The
survey results give an overall ratio of 1:60.  This is down on NCCG’s earlier information from several
years ago when the ratio was typically in the range of 1:30-50 for larger
firms. There is evidence that of all the job types covered in the survey, the
positions of PSL and training staff are the first to be cut back in a
recession.

Another
issue that has been of perennial interest to law firm IT Directors has always
been the structure of the IT department. 
Best practice shows the IT department needs to provide: departmental
management, IT strategy, project management, business analysis, development, operations,
user support and training. The overall results show that the largest staffing category in the IT
department is Help Desk/User Support with about one-third of all IT personnel
in these roles, thereafter splits are: 15%-25% in Operations, 7-10% in
Training, 14-18% in Development, and smaller ratios in both Business Analysis
and Project Management. Results show that contract staff make up 10% of department staffing in
larger firms, and 3-5% in smaller firms. 
Staff turnover ranged from 4% to 8%.

Commenting on the results, Neil Cameron says “Firms are going to look
at these figures and, if they are in the area of the norm, think that they are
engaged in ‘best practice’; if they have a smaller IT department than the
average will pride themselves that they are more efficient; and if they have a
larger than the norm, hope they are delivering a higher level of service.  But one thing is certain: it is easier
to work out, and to justify, the level of IT resources required by a firm if it
has a clear and articulate exposition of its IT objectives and a documented set
of measurable IT service levels. 
And this is by no means true for all law firms.”

This is the inaugural Law Firm IT Department Survey and, as well as
providing these initial results, will serve as a baseline for future analysis
of trends.  NCCG intends to repeat
the survey annually. The survey was sent to over 400 firms, with responses received from 37
firms.  The results have been
sub-divided into the following peer groups: Top 50 firms, 51-100, 101-150,
151-250 and The Rest. A broader analysis of the results is available on the NCCG website at www.neilcameronconsulting.com