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How often do you fly? Annually? Monthly? More than once a month? Frequent flyers seem to have a better appreciation for the “price/need/convenience” equation than those of us who fly infrequently. If I am only in a plane twice a year, I can tolerate cramped seating, schlepping my own bags, and toting my own meals on board. If I am a frequent flyer conducting business while traveling, I am much less likely to tolerate these “privations” in order to save a dollar or two.

So too with Cloud-based computing. If I am an occasional user of online document storage, or calendaring, or contact lookup, I may be perfectly content to use the so-called “free” or nominal cost services, and put up with their shortcomings and idiosyncrasies. If using the Cloud becomes a routine part of my day and is critical to my business, however, suitability to my business needs has to trump price.

When it comes to the Cloud, computations for “comparative cost of ownership” are even more complicated than airline seat pricing. I have read various studies that estimate the “break-even point” for Cloud-based vs. on-premises software costs at anywhere from 36 to 72 months, generally by comparing subscription fees vs. license acquisition and associated hardware costs. These estimates, in my view, should always be accompanied by that infamous automobile advertising slogan, “Your mileage may vary.”

Beyond the tangibles (e.g., do you have a server now? How old is it? Who maintains it, and at what cost? Is maintenance a fixed or a variable cost?) lie the less measurable variables, like convenience, timeliness, data security, disaster prevention, and mobile access, to name but a few. Not unlike the frequent flyer who plunks down considerably more money for a first- or business-class seat (and thereby subsidizes the rest of us in the back of the plane) subscribers to Cloud-based business software have factored in both the tangible and intangible costs, and often have determined that “need trumps price” (and like frequent flyers, these users are in some cases subsidizing the “free” users of the stripped-down version of that same software). And the more savvy subscribers have begun to recognize that these comparative cost of ownership calculations really obscure the larger picture regarding technology trends.

According to a couple of recent surveys, adoption of Cloud-based software applications saw a sharp increase over the past 12 to 18 months, most notably in the solo and small firm space. A recent ILTA survey reported that slightly more than one-third of law firm survey respondents are using some form of Cloud technology now, and another third are actively researching and/or planning for its adoption. A similar ABA survey found, the strongest concentration of interest among Cloud-based users is in the areas of practice management and time billing, followed closely by document management. There is an ever-expanding menu of Cloud-based choices in both of these application categories, and some on-premise software vendors (like Lexis) are beginning to sneak Cloud components into their more traditional software offerings (e.g., Mobility, and the soon-to-be-released WatchDox).

The point here is that pricing and feature comparisons between Cloud-based and on-premise applications really beg the question when defining a future technology direction for your firm. The advent of robust Cloud-based law office automation applications is causing a fundamental shift in the way many firms are assessing their technology requirements. To apply the same metrics to Cloud applications and on-premises software is not unlike comparing driving and flying. Both methods of transport will get you there, but most travelers apply very different metrics in evaluating options for travel by air vs. ground transport. Evaluations of Cloud-based law office management applications should follow suit, and be made with their own set of metrics appropriate to “the vehicle” selected.

An equally important factor for any law firm to evaluate when looking at Cloud-based applications is compliance with ethical standards for security and confidentiality. This is not a trivial issue, and has been addressed by various state and national law practice governing bodies over the past few years. My partner Andrea Prigot will be addressing this important issue in our next post here. Stay tuned.