Turnaround Case Study - Software Firm

The Background:


This endeavor involved the turnaround of a highly proprietary software provider (the “Client”) that focused exclusively on law firms. The software solutions included accounting, billing, finance, document management and dockets (calendaring) for law firms. This solution was designed for a sole proprietor to 200 attorneys. Despite having a total of +500 customers, less than 20% attempted to utilize the full suite of the solution. This software company was a major division of a public company. The Client acquired competitors attempting to integrate the “best of breed” solutions. The Client had written the billing aspects of the solution, whereas alternative entities wrote the accounting, docketing and document management. The integration of these solutions was a boondoggle at best. The modules noticeably appeared different, were implemented in different code, and were unable to share core files (i.e., billing rates, client’s history), documentation, version control, and data restoration. The solution was only as strong as its weakest link — and there were weak links. Just image the interfacing.  

The industry market was golden. Legal firms were growing geometrically, merging and required a truly integrated solution for all aspects of their workflow. Furthermore, in reality, law firms have the same core processes; whereas a manufacturing organization has a limitless set of diverse processes, discrete vs. repetitive, types of cost accounting vs. process costing, ad infintum. The law has billable hours for services provided by attorney, office or any other profit / cost centers. Relatively speaking, codifying the processes and accounting for the law firm are less complicated than a manufacturing entity.

This software division of the Client was losing money quarter after quarter.  The integration of these alternative branches of the “best of breed” methodology was materially understated and more complicated than anticipated.  

The Problem:

To make the challenges of the turnaround client even worse than the aforementioned, the following was experienced:

Technology - The overall technology was antiquated. The technology did not take advantage of the revolutionary changes in coding and infrastructure that had become the de facto standard in the past 10 years. The integration solution needed to be a comprehensive solution leveraging the “latest and greatest” technology including mobile computing, cloud, hardware immaterial, and needed to accommodate larger firms. Several of the key technology limitations were:

  • The 200-user barrier needed to be eliminated. Although 199 was the actual limitation, any law firm which attempted to use this hybrid solution with more than 75 attorneys would wait hours for the billing process to re-calculate for the billing periods;
  • Required a Windows operating system
  • No cloud / internet technology;
  • Need to be able to enter all data via mobile devices
  • Need for speed – some reports and calculation could take hours;
  • Lack of standardization; and
  • Professional documentation.

Supportability / Combinations of “Solutions” - This limitation may best be described as the “complexity of options.” The Client had four different diverse “integrated solutions,” which would generate over 30 different combinations of “solutions,” each with alternative set-up, files, etc.

 

Core issues such as, which modules you utilized required different hardware, software interfaces and report writing. Add to this mix the numerous versions of each module. The number of combinations of “solutions” was exponential.

This was unmanageable for the customer support staff assuming that the customer support staff was fluent in each of the modules. The customer support team was not consolidated nor were they in one physical location.

Sale of Customized Options – this was a self-inflicted disaster. The consulting arm of the Client would sell customization for many of its clients. This level of customization was at the peril of the software solution and its ability to upgrade, document, test and it went against its strategic direction.

Personally, we do not advocate customization for these “one off” unique requirements. Just because you could write the code tailored for a single client situation does not mean that you should. This customization approach set back the product development, its resources and its strategic direction. This is the area that created and caused the most internal grief. Take the aforementioned “Combination of Solutions” that the Client provided and multiply that times the Customized Options – the versions and upgrade options were literally out of control. This self-inflicted situation did not even take into account the users’ customization.

Backlog of AR – Due to the pool of dissatisfied customers, the aging of the accounts receivable was becoming a major issue. Customers were no longer paying until the product performed to an acceptable manner. And once one law firm was able to structure such an arrangement, others jumped on the deferment of payments.

Law Suits – Our society is very litigious. However, add to the fact that your customer base consisted 100% of law firms and you were unable to deliver an acceptable product. This yields an unmerciless number of legal proceedings.

Installations – Installation required a “rocket scientist” – too many variable options / combinations / hardware requirements.  

Why Us?

Lakelet was selected due to its unique combination of experience with technology, finance and project management success. Not many turnaround firms have Certified Information Technology Professionals (CITP) as well as Certified Turnaround Professionals (CTP) on staff. Lakelet was seeking a holistic solution for the user community, not a technology toy. Our goal was to ensure this division could and would be profitable. Lakelet had “no dog in this fight,” as to the best module, subsidiary to maintain, technology direction, where the division should be housed, etc.

The Solution:

At the outset, our original plan was not to have this become a 24-month engagement. It was predicted that an overall assessment for the board and the shareholders, as to the strategic direction required, and a “road map” as to how best to get this achieved.

Initially, Lakelet provided the board of directors with a detailed plan after a one-month analysis. This plan required Lakelet to:

  • Visit the numerous facilities;
  • Determine the competence of the teams – programmers, management, documenters, testers, customer support and designers;
  • Visit key users – with emphasis on the disgruntled users;
  • Inform the disgruntled users that Lakelet was in place to address their needs. The Client also allowed us to share our findings with the user community. A brave move – but truthfully, the user community knew of more issues than management. It was the user community that brought us the time to resurrect this solution;
  • Determine the viability of the current direction;
  • Analysis as to where the industry was. Could we catch-up? Should we invest in the division even if the costs > benefits for the next few years? Recall in technology a two-year window is a life time;
  • Legal ramifications in this litigious market if we were to cease certain modules;
  • Cost / Benefit Analysis;
  • Measure the Client’s ability for change and the commitment involved; and
  • Present the board of directors with options and a strategy to make this division profitable.

After our one-month comprehensive analysis was shared with all stakeholders, the board of directors approved our solution. The board’s action was drastic, but resolute. They “threw the baby out with the bath water.” A software solution was required, but a total rewrite was needed. This included finding and hiring the necessary resources, consolidating to one location, and developing a team of highly qualified specialists to become the customer support services.

This solution was not orthodox. But, playing in the present marketing / technology landscape and political environment, the solution included:

  • Restructuring the entire division as one core business under one roof. This included, but was not limited to:
    • Core technology platform;
    • Standardization;
    • No relocations to the new division headquarters;
    • Entirely new team; and
    • The solution had its own technology and development functions – documentation, customer services, and sales team. This was to be a fully self-contained entity. More on this later.
  • All customization for users ceased immediately;
  • Added true performance speed to the application by utilizing a more robust integrated database;
  • Announced to full user base that a total rewrite of the solution would be available to them in 18 months at no cost;
  • Triaged what was really important to the customer base;
  • Deleted the calendaring and docketing modules;
  • Added dashboard for summary information;
  • A timeline was announced that all customers had to be on the “latest and greatest” within 12 months of its acceptance. The acceptance was determined by the user community – we made them part of the solution. In hindsight, the candid interchange and meeting with the user community was vital;
  • 50% of the outstanding accounts receivable would be paid with the balance paid on the“acceptance date”;
  • Obtained agreement that all legal action would be deferred until the firms had a chance to review at the “acceptance date”; and
  • The Client would transition each law firm over to the new solution

The Results:

It was not always an easy path – especially the transition of the staff relocation and hiring. However, within 12 months of the acceptance date, the Client had 500 law firms on the integrated solution. They lost approximately 15% of the clients throughout the process. But, from a cash flow perspective, this loss was more than absorbed by the revenue coming from:

  • The customers acquired more core modules once fully integrated;
  • Able to raise the support and maintenance agreements;
  • Installations took hours not days / weeks;
  • In addition to legal firms, without changing a single line of coding, the solution was able to accommodate other professional firms, like accounting firms;
  • Implemented a training certification for the user community. Training fees became over 25% of the total division revenue;
  • Ceased customization and supplied users with a more robust report writer and interface with Excel;
  • Implemented a software program that converted from our competitors’ software to our new solution. This allowed us to add numerous new firms to our solution;
  • We would transition over for a fee;
  • The solution was more stable and scalable. The limit in the number of users was 999 per solution;
  • Developed a true user community and user group.

The software solution was a profitable stable solution utilizing the most current software and hardware infrastructure. The Client realized that they were not a software development specialty solution provider. This was not their core expertise. If they continued with the solution, they would be in this same situation in three years. The Client had a good solution that was very marketable with a proven user community. Accordingly, with our assistance, the Client was able to sell this division / solution and reap a significant profit. 

Looking for Strategic Partners and Capital? Lakelet Capital LLC >>