Many practice management organizations subsidize a portion of migration fees. This article explains the best way to do this so that expectations can be clearly set for both parties.
Data migrations are complex and many details are often not known until the project has started or well under way. It is also common for firms to expand/change the scope of the migration both during the scoping process, once the migration has started, and even once the migration is complete. As such, the cost of a migration is always subject as the client changes what they want.
The purpose of this article is to provide guidance that practice management organizations can use to set clear expectations that are insulated from changing client desires.
Because a migration may be re-quoted multiple times based on different scenarios, you should avoid subsidizing a percentage of a migration fee - instead, subsidize a fixed amount that might equal a certain percentage.
For example, if a client has received a quote for a $8,000-$12,000 migration, if you want to subsidize half of that amount, indicate that you will subsidize either $4,000, $5,000 or $6,000. DO NOT indicate that you will subsidize 50% - if you do, and the client later expands the scope of the migration beyond what was initially quoted, you may find yourself subsidizing more than you intended. This also helps the client understand that if they expand the scope of the migration, their fee might increase but your subsidy will not.
In order to make sales processes more fluid, we recommend creating an internal Subsidy Formula that your sales team can leverage. As an example, your organization might say:
"We will subsidize $3000 per 5 staff members of the firm."
The above example is a great formula because it is scales with the number of firm users which is: (1) often a general indication of how complex the migration will be and (2) correlates with the value of the client to your organization. It also enables your sales team to know exactly what options are available so that they do not have to request approval for every single opportunity.
As a matter of best practice, we highly recommend subsidizing the Client not the Consultant. There are a few reasons why.
When a consultant is doing a migration, it is standard practice to charge the total cost of the migration in 3 or more payments. As an example, your client may receive a quote for a migration as follows:
Payment 1: $1,000 Due on Scheduling
Payment 2: $5,000 Due on Initiation
Payment 3: $2,000-$6,000 Due on Completion
Total Cost: $8,000-$12,000
If your organization is covering $4,000 it becomes difficult to know when to make the payment. The project will not start until payment #1 is complete but that amount does not nicely align with the subsidy.
Often times law firms take an extended period of time planning their migration but once they are ready to move, they expect to move quickly.
Because the project progresses as milestones are completed, if you are making payments on the client's behalf, you will inadvertently make the process slower. The client may be ready to get started but the project will not progress until your Accounts Payable team has paid all or a portion of certain fees.
Our recommended best practice is that after the migration is complete, the client should submit a copy of paid invoices to your accounting department and receive a credit on their account equal to the amount you are subsidizing.
As an alternative to the above, prior to the migration commencing, clearly communicate to the consultant the fixed amount you are subsidizing. The consultant should submit an invoice to your organization for that amount and offset the client's fees by the same amount.