Although there was a big post-pandemic push to move to the cloud, some law firms still find themselves at a crossroads between maintaining their traditional on-premises document management system (DMS) and transitioning to more cost-effective cloud-based solution. The financial implications of sticking with on-prem systems are becoming a significant concern for legal practices reviewing their overhead, workflows, and profitability.

Building on Rebecca Sattin’s blog on 5 Signs that it’s time to evolve from on-prem to the cloud, let’s dive deeper into the first sign, which focuses on the rising costs of maintaining an on-premises DMS.

The Financial Burden of On-Premises Systems

On-premises systems require substantial upfront investments in hardware and software. This traditional setup not only involves initial capital outlay but also ongoing expenses related to maintenance, upgrades, and security long after the depreciation benefits have ended. Forrester estimates in a Total Economic Impact Study that moving to cloud solutions is 30-50% less expensive than upgrading servers on-premises and reduces administrative costs by 40%.

Compare this with Carbert Waite’s experience using cloud-based software: “Maintaining on-premises hardware is a big capital expense,” says Partner and Executive Committee member Dylan Snowdon. “You get to depreciate it for a few years and then you’ve got another big capital expense. So moving to a cloud DMS was certainly something that was of interest to us as part of our overall IT roadmap.”

Scalability and Flexibility Concerns

On-premises DMSs are notoriously rigid and most systems have been in service for some time with growing pools of data. As law firms grow, scaling infrastructure to meet increased demand can be both costly and time-consuming. And some firms over-purchase capacity to ensure they can handle peak loads, which may only occur infrequently, leading to wasted resources and inefficiencies.

Scalability was a top priority when startup Astraea Group began searching for a new DMS. “We wanted a solution that was right for the size of business we are now and one that could grow with us, so we wouldn’t have to change systems in a year or two,” says Nina Stewart, founder. Switching to a cloud-based platform solved that problem, enabling the firm to see quick returns on their investment.

The Security and Compliance Hurdle

Whiles security is often touted as a strength of on-premises solutions, the reality can be different. Many security structures for on-premises systems were designed to protect data within the firm’s four walls. Today’s remote access needs present greater security risks and challenges that the cloud can address.

The thing is, most law firms simply cannot devote the resources to robust cybersecurity that a cloud-based DMS provider can. “High-profile data breaches were a real wake-up call to the legal sector in Australia. We quickly recognized that moving our document management to the cloud would give us an added layer of security,” explains Marco Marcello, Manager of Information Systems at Lavan.

Downtime and Maintenance: Hidden Costs

Another significant issue is the downtime associated with on-premises systems. For law firms, where billable hours directly correlate with revenue, downtime is not just an inconvenience; it’s a direct financial drain. (Raise your hand if your indexer has stopped working to enable search or just locks up the system.)

Not convinced? Here’s the cold, hard data: In a 2022 survey, 44%of respondents put the cost of IT downtime at $16,700 per server/per minute — that’s approximately $1 million per hour.

Cloud providers have dedicated resources to bring servers back online quickly and mitigate costs when issues arise. The question is, does your firm?

Client and Employee Expectations

Today’s clients and workforce expect agility and flexibility that is similar to what they experience when dealing with other businesses. That is something that on-premises systems struggle to provide. Clients want easier collaboration on legal services, and talented lawyers are seeking flexibility in their work environments, so they can work wherever and whenever they need to.

A cloud-based DMS can give employees the flexibility they need to deliver top-tier client service. It’s also good for the long-term growth and stability of the firm:

“Enabling staff to access our documents from anywhere using their device of choice is becoming increasingly important,” explains Julie Berry, an IT partner at Saffery. “We think this is crucial for employee productivity and happiness as we look to attract and retain the best talent.”

Conclusion: Time for a Change?

The operational costs associated with maintaining an on-premises document management system are untenable for competitive law firms. Transitioning to a cloud-based DMS not only addresses the financial drain but also positions firms to better meet the expectations of clients and employees while enhancing their ability to scale and adapt to market demands.

As law firms navigate these financial and operational challenges, the choice becomes apparent. Investing in cloud technologies is no longer just an operational decision; it’s a strategic move critical for future-proofing a law firm in a digital age.

Law firms looking to remain competitive in an increasingly digital marketplace must consider these factors and evaluate the potential benefits a cloud migration could bring. The initial investment in transitioning to the cloud is quickly offset by the reduction in operational costs, improved scalability, enhanced security, and the ability to meet modern expectations.

As you consider the significant advantages of evolving to the cloud for your law firm, it’s crucial to separate fact from fiction. Dive deeper into the realities of cloud-based technology with our guide, Cloud Myths — Debunked! Gain clear insights and make informed decisions to ensure your firm stays competitive in the digital age. Download your copy today and lead your firm toward a more cost-effective and productive future in the cloud.