Law firm technology managers regularly face the question of when to upgrade software or hardware. The answer is neither easy nor obvious. Beware the Underlying Costs of Using Dated Technology from the New York Law Journal on provides a good analysis of some of the hidden costs of not upgrading.

The important point – and one on which corporate IT managers have increasingly focused – is the “total cost of ownership” or TCO. TCO reflects all of the costs of acquiring and operating systems. Hardware makers are fond of pointing out that the hardware acquisition cost is a relatively small percent of TCO (I recall seeing numbers of about 15%) and therefore purchasers should be willing to spend a bit more on hardware if it is less costly to operate. While self-serving, the general point is true.

For example, some law firms that have postponed upgrades of PCs because of budget considerations find that “playing catch up” a year or two later ends up costing more than if they had stayed on a regular upgrade cycle. This may make sense in partnership accounting and in managing profits per partner year over year, but the underlying economics are not favorable.

I am not suggesting that law firms or departments rush out and always buy the latest upgrade. Rather, the goal should be consciously and carefully to analyze TCO and make rational economic decisions. If the economics must be over-ruled because of political or budget considerations, that should factor explicitly into the decision. And if that does happen, firm management should not blame IT staff for higher costs in the future.