For many years, software companies have traditionally offered their clients multi-year contracts. It is no different for docketing software providers. There are many advantages to signing a contract that locks you in for several years. However, there are also disadvantages and red flags that you need to know before signing.
So let’s take a look at the advantages, disadvantages, and red flags:
Advantages
- Multi-year contracts generally do reduce costs over the life of the new contract. Firms can save money.
- Budgets are easier to predict every year. When budgeting time comes around, managers can easily account for the next fiscal year.
- Saves on administrative time having to evaluate their current software or vendors every year. Many firms have reduced staff now and do more with less. That means less time.
- Locking into a multi-year contract that actually saves the firm lots of money will definitely enhance the manager’s career and possibly salary and bonus.
- Strengthens the existing relationship between the firm and the vendor. Such a long term commitment should provide the opportunity to bolster the professional connection between the vendor and the firm.
Disadvantages
- A multi-year contract may actually end up costing you more than you thought. Make sure you closely review all the terms related to the initial costs and annual percentage increases of the software and maintenance subscription fees. Do the math carefully and twice. You might end up being surprised that you really did not save much at all.
- No flexibility in response to the changing conditions in the legal market, which could mean greater liability and risk to the firm. Firms merge, bring on large lateral groups with special needs, and lose revenue to departing partners. Responding to such conditions if needed with your docketing software will be extremely limited.
- Competition may decrease and result in less innovation. Firms are always looking for products with more features and capabilities, products that cost less but can do more, and products that just plain solve their needs better than any other product can. When vendors compete, firms get what they want.
- Prevents firms from taking advantage of new technologies, integrations, or service models going forward.
- Being locked into a contract for several years is not always desirable, particularly where the alternative is to incur cancellation charges that could offset the initial savings.
Red Flags
- If your docketing software vendor begins offering you a multi-year contract, drastically reducing their annual subscription and maintenance fees, and offering unlimited access to some of their services, think twice about their generosity. Most likely this is a vendor that is responding to new competition, has not listened to their clients for many years, and is threatened because of their lack of innovation and product development.
- Your existing vendor suddenly begins to speak poorly of the competition and the new products in the market.
- After months of no contact, your existing vendor begins reaching out to you regularly to discuss your well-being and then you realize it is time to renew the contract.
The dynamics of the legal market are drastically changing. We are in a new age of docketing software and vendors, with so many innovative ideas and challenges facing every law firm, docketing professional, and software vendor. You are no longer limited to the same vendor and product you have used for the last 10 plus years because there were no other players around. The age of monopolized products and services are gone and that is due to the basic concept of competition. One of the main reasons why there are new players and product offerings is due to years of client complaints about the firm’s existing docketing vendors.
Multi-year contracts can be very lucrative for both the firm and the vendor. The vendor especially benefits by eliminating the competition. It has always been my belief that the firm should ask for the multi-year contract and not the vendor pushing it on the firm. Before you sign a multi-year contract, evaluate your firm’s needs and make sure you are willing to commit. Be very curious why the vendor is now offering multi-year contracts when they may not have for many years.
At American LegalNet, we partner with our clients and understand their needs and issues. We do not push multi-year contracts and would rather work closely to solve any issues and create enhancements to further our relationship and stake in the firm. We want to work hard in order to continue to win your business. We do what you want and need and respond accordingly, even if it is you asking for a multi-year contract.
Chris Gierymski is the Director of Business Development at American LegalNet and can be reached at cgierymski@alncorp.com.
