{"id":5463,"date":"2018-10-15T14:27:04","date_gmt":"2018-10-15T18:27:04","guid":{"rendered":"https:\/\/gutenberg-atl.staging.breakingmedia.com\/legal-innovation-center\/?p=5463"},"modified":"2018-10-15T14:49:02","modified_gmt":"2018-10-15T18:49:02","slug":"measuring-legal-tech-roi","status":"publish","type":"post","link":"https:\/\/abovethelaw.com\/legal-innovation-center\/2018\/10\/15\/measuring-legal-tech-roi\/","title":{"rendered":"Measuring Legal Tech ROI"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5464 alignright\" src=\"https:\/\/abovethelaw.com\/wp-content\/uploads\/sites\/4\/2018\/10\/XakiaTech-1.png\" alt=\"\" width=\"285\" height=\"156\" srcset=\"https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/10\/XakiaTech-1.png 686w, https:\/\/abovethelaw.com\/legal-innovation-center\/wp-content\/uploads\/2018\/10\/XakiaTech-1-300x164.png 300w\" sizes=\"auto, (max-width: 285px) 100vw, 285px\" \/>On its face, ROI seems pretty straightforward \u2013 a basic math equation that determines the ratio between an investment\u2019s profit and its cost. But with legal technology, this can get a little nebulous: Your department deals in time, not in widgets.<\/p>\n<p>Perhaps that\u2019s why 74 percent of law firms in the U.K. don\u2019t even try to calculate the ROI of their legal technology projects, according to a\u00a0<a href=\"http:\/\/bit.ly\/2Ck1oIN\">March 2018<\/a>\u00a0report by Lexis Nexis. While no similar statistic was available for corporate legal departments, we\u2019d make the educated guess that the majority aren\u2019t monitoring their legal tech return \u2013 despite the fact that, as a recent\u00a0<a href=\"http:\/\/bit.ly\/2CMJ6AP\">Association of Legal Administration<\/a>\u00a0presentation put it, \u201cROI is the only technology acronym that matters.\u201d<\/p>\n<p>Indeed, ROI is the language of the C-suite, and it\u2019s imperative for in-house lawyers to show fluency. (Recall that one-third of CEOs and directors rank \u201ccontrolling legal spend\u201d as a\u00a0<a href=\"http:\/\/bit.ly\/2PB11gG\">top-three priority<\/a>\u00a0for law department performance.) You need to know your ROI to demonstrate that you are a good steward of company resources, to test and validate your decision-making, and to inform future projects in your\u00a0<a href=\"http:\/\/bit.ly\/2PB6DHN\">legal technology roadmap<\/a>.<\/p>\n<p><strong><u>Legal Tech ROI: What You Need to Know<\/u><\/strong><\/p>\n<p>There are two factors behind legal tech ROI: time and money.<\/p>\n<p>Because your department\u2019s output is units of time, your first step is to understand the cost of this time. If you have access to specific HR data, you can nail down the exact cost of your department\u2019s time spend. Without it, you can make a good estimate with industry averages.<\/p>\n<p>According to\u00a0<a href=\"http:\/\/bit.ly\/2yi9O07\">Indeed salary data<\/a>, the average salary for an in-house solicitor is \u00a372,904, or roughly \u00a340 an hour. (If you\u2019d like to see salary data based on industry and experience, Hudson\u2019s\u00a0<a href=\"http:\/\/bit.ly\/2QMsCeM\">2017 Salary and Rates Guide<\/a>\u00a0is a helpful resource.)<\/p>\n<p>Now that you have an estimated cost for time, consider all the ways you will spend (and save) it over the course of your legal tech project:<\/p>\n<ul>\n<li>How long will this take us to implement? (Consider selection, vendor negotiation, installation, testing and training.)<\/li>\n<li>How many hours will each user spend on this solution each day?<\/li>\n<li>How many hours do we think this solution will save each user each day?<\/li>\n<\/ul>\n<p>When it comes to money, the questions are simple:<\/p>\n<ul>\n<li>How much will this cost to implement? (Account for all of the vendor\u2019s installation, maintenance and licensing fees.)<\/li>\n<li>How much will this cost per month?<\/li>\n<li>Does this eliminate work we had to pay an outside firm to complete, or save any other hard costs?<\/li>\n<\/ul>\n<p>Once you have these answers, ROI is a few calculations away \u2013 no matter what stage your project is in. The formula is below \u2013 or you can try Xakia\u2019s\u00a0<a href=\"http:\/\/bit.ly\/2yiMPSU\">LegalTech ROI Calculator<\/a>, which will do the math for you.<\/p>\n<p><span id=\"hs-cta-wrapper-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\" class=\"hs-cta-wrapper\"><span id=\"hs-cta-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\" class=\"hs-cta-node hs-cta-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\"><a id=\"cta_button_2534635_12bbb309-4569-4f5c-9b81-a78deff7469a\" class=\"cta_button \" title=\"USE ROI CALCULATOR\" href=\"http:\/\/bit.ly\/2PBKusD\" target=\"_blank\" rel=\"noopener\">USE ROI CALCULATOR<\/a><\/span><\/span><\/p>\n<p><strong><u>The Legal Tech ROI Formula<\/u><\/strong><\/p>\n<p><strong>Start by totaling the investment:<\/strong><\/p>\n<p>Investment, or Annual Expense = Implementation Cost + Cash Cost<\/p>\n<p><strong>Then calculate the net annual savings:<\/strong><\/p>\n<p>Net Annual Savings = Annual Savings \u2013 Annual Expense<\/p>\n<p><strong>Time to calculate the ROI:<\/strong><\/p>\n<p>Annual Return on Investment = Net Annual Savings \/ Investment<\/p>\n<p>Your answer will show you a percentage return. For example, if you generate an ROI of 75 percent, for every \u00a31 invested in this solution, the company will realize \u00a31.75 in benefit each year.<\/p>\n<p><strong>What\u2019s the payback?<\/strong><\/p>\n<p>To determine how fast your legal tech will \u201cearn its keep,\u201d it\u2019s helpful to calculate the payback.<\/p>\n<p>Start by calculating your monthly savings by dividing the net annual savings by 12. Determine the number of months until payback by dividing the investment by the monthly savings.<\/p>\n<p>(If you pursued law as a career because you were told there was no math, don\u2019t despair. Visit Xakia\u2019s\u00a0<a href=\"http:\/\/bit.ly\/2yiMPSU\">LegalTech ROI Calculator<\/a>, which will do the calculations for you.)<\/p>\n<p><strong><u>Beyond the Math: ROI Considerations<\/u><\/strong><\/p>\n<p>Of course, no mathematic equation can account for all of the nuances of a legal department, its processes and most importantly, its personnel.<\/p>\n<p>Your ROI may be higher as you find new uses for the tool and as users become more efficient with it. Moreover, this formula only covers one year; a software solution likely would generate benefits for multiple years (but we\u2019ll spare you any \u201cnet present value\u201d advanced calculus).<\/p>\n<p>Your ROI may be lower if the technology doesn\u2019t work as expected or if user adoption stalls. Recall that user involvement is\u00a0<a href=\"http:\/\/bit.ly\/2OWGOVz\">15 times more critical<\/a>\u00a0than having the right tools \u2013 although there\u2019s no accounting for attitude or aptitude in the ROI equation, both factors will have a major effect.<\/p>\n<p><strong><u>What\u2019s Reasonable?<\/u><\/strong><\/p>\n<p>Every company will have different expectations for ROI, but it\u2019s helpful to have a target in mind.\u00a0<a href=\"http:\/\/bit.ly\/2RTHfhI\">Rhonda Robati<\/a>, the chief revenue officer of Velpic Inc., said ROI for technology investments typically range from 47 percent to 87 percent; as a best practice, she said any technology investment should have an ROI of at least 65 percent. In other words, you want at least \u00a31.65 for every \u00a31 spent.<\/p>\n<p>But remember to think beyond the numbers. Any quality in-house legal technology solution should bring myriad benefits that won\u2019t show up in an ROI calculation: less stress, happier staff, happier business clients and fewer missed deadlines chief among them. Numbers matter, but quality intangibles can be the ultimate return.<\/p>\n<p><span id=\"hs-cta-wrapper-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\" class=\"hs-cta-wrapper\"><span id=\"hs-cta-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\" class=\"hs-cta-node hs-cta-f37cc393-0749-4eaa-bb4f-f7df0e5bc163\"><a id=\"cta_button_2534635_12bbb309-4569-4f5c-9b81-a78deff7469a\" class=\"cta_button \" title=\"USE ROI CALCULATOR\" href=\"http:\/\/bit.ly\/2PBKusD\" target=\"_blank\" rel=\"noopener\">USE ROI CALCULATOR<\/a><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p class=\"summary\">With legal technology, ROI can get a little nebulous: Your department deals in time, not in widgets.<\/p>\n","protected":false},"author":55575,"featured_media":5464,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2974],"tags":[329,3549,2445],"class_list":["post-5463","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal-technology","tag-legal-technology","tag-roi","tag-xakia-technologies"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - 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