Sunday, December 4, 2011

PCLaw vs. Cloud based bookkeeping

For the last few weeks, the LinkedIn Legal IT Network has been hosting a rather a heated debate on Cloud services. Many law firms have embraced or are considering cloud technology as part of their practice management. Thus far, the LSUC and/or LawPRO have placed no restrictions on law office cloud based solutions. Instead, they have opted to place the onus on you to conduct your own due diligence. The main issues are client confidentiality, backup, and timely accessibility.

It is up to you to investigate your Cloud service provider, to ensure they have adequate security measures to protect your clients’ privacy. You also need to be aware of other less obvious issues like “The Patriot Act”, if the servers are located in the USA. One Bar association article recommend amending the provider’s standard service agreement, to specify the data you are storing and their duty to protect it.
“Before attorneys begins placing sensitive
information on the Internet, they should draft language
into the agreement that specifies the types of information that are protected under the provider’s security agreement. This may include, but not be limited to, data from a third party, data drawn from both electronic and non-electronic formats, metadata, trade secrets, personally identifiable information,
and intellectual property. Attorneys should carefully
formulate this language so it accurately covers all of the categories of information contained in their records.”
And, how will you and your client be compensated if there is a breach in security? Think it cannot happen? Breaches so far in 2011: Sony, the data-security firm RSA, Lockheed Martin, the email wholesaler Epsilon, the Fox broadcast network, NASA, PBS, the European Space Agency, the FBI, the British and French treasuries, and insurance giant Citigroup.

Many Cloud providers offer different service packages, varying the level of service provided, performance guarantees, and compensation levels. The cheapest packages usually deny any and all liability for the Cloud provider, leaving you financially liable to your client with no third-party indemnity.

Does the Cloud provider have sufficient backup procedures to safeguard your data. Accessibility to your own data can be affected by power outages, system crashes, and maintenance at your Cloud provider’s location. Is their support centre well staffed and able to assist you if you have a problem? Also of concern: is the Cloud provider a viable company and what happens to your data in the event of bankruptcy?

For Cloud based bookkeeping, most of the solutions currently offered are not true accounting programs. They allow you to make bookkeeping entries, but the reconciliation and reporting functions are extremely limited. You end up having to do this things manually or in an Excel spreadsheet, so any perceived convenience or savings are lost due to time wasted.

The main issue here is accessibility. The LSUC requires you to be able to produce your accounting records on demand. If the Cloud server is down, for whatever reason, you have a big problem. And If the Cloud server is down on the day of your LSUC spot audit, you have a crisis.

Personally, I see Cloud computing as a very useful tool for large firms. This allows all employees to work as a team, by having access to all files from any location. Another big goal of Cloud seems to be sharing with clients (dropbox, etc.).

But for a small firm or solo-practitioner, the effort seems rather pointless. You and your staff can already use remote programs like LogMeIn to gain access to your data from anywhere. And as a solo, there is not much need for such widespread sharing, as your collaborative network is small.

Are you a solo or small firm using the Cloud? I would be interested in any comments on your experience with Cloud based solutions. Any issues with the transition? How has your staff adapted? Any training issues? Are you happy and was it worth the investment?

As always, I invite your comments and suggestions for future post topics. Next week – PCLaw Errors.