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December 2000
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ASP Spotlight

ASPs: The Better Mousetrap?

By Don Murray

JUST WHAT we need, another TLA ("Three Letter Acronym")! Actually, the "ASP" acronym that stands for "Application Service Provided" is fairly descriptive -- an application service provider hosts software applications and related services on a single, secure, Internet based environment and rents the ASP offerings to its clients, charging a monthly or per-transaction-based fee.

ASPs: The Better Mousetrap? Many believe ASPs will be the next "killer outsourcing applications" that will trigger the demise of all shrink-wrap software and I.T. departments. In fact, Tom Berquist, of Goldman Sachs, predicts "the ASP trend will be as revolutionary as the PC was to the mainframe world."

Although still in the early-adopter phase, analysts expect the ASP market to grow rapidly over the next few years as bandwidth becomes less and less expensive and high capacity systems are implemented. While somewhat varied in their predictions, these analysts estimate that the ASP market will reach between $7.8 billion and $48.5 billion by year 2003. According to Berquist, by year 2003, the revenue generated from "business-to-business" (B2B) e-commerce on the Internet will be approximately $1.3 trillion.

What makes the ASP model unique is that it converges ASP technology with the connectivity of the Internet. Such convergence makes possible significant new productivity gains for legal teams, which in turn transforms or -- perhaps more importantly -- revolutionizes the economics associated with the practice of law. By utilizing a legal ASP, instead of the traditional closed law firm server, corporate clients and their outside counsel can collaborate easily, and streamline the way customers, suppliers and partners work together. Further, the collaborative information stored on an ASP platform produces valuable data that can be captured, analyzed, and understood. In other industries, this has led to new corporate knowledge about best practices and best performers.

While many lawyers have unwittingly already begun to experience some of these gains, with ASPs such as LEXIS/NEXIS, Westlaw, and Hotmail, the real benefits have not yet been realized. In the legal ASP market, the real benefits will come from those ASPs that tackle the difficult challenges of transforming disparate software applications into bundles of useful services that will enhance the ways disperse legal teams work together.

However, the burgeoning ASP industry will not be immune from consolidation -- where dominant players consume or weaken their competitors. Given the traditional barriers that must be overcome for the legal community to adopt new technology, the successful ASPs will be those that provide significant measurable savings to corporations and insurance companies through intuitive tools that enhance the attorney-client relationship. Such ASPs will enable the formation of new online legal communities, that immediately experience measurable gains in productivity and economics which will be passed on to both the law firm and corporate client.

A New Environment

What will this new ASP world probably look like? The dominant legal ASPs will be those that, by offering integrated software, bring together clients, attorneys, experts, and other vendors into a single online legal community. For example, on a single ASP platform, a corporate client may select outside counsel by reviewing performance data on that individual or a completed "Request For Proposal" that has been analyzed by online evaluation tools. A client can conduct a final interview using the ASP's video conferencing system.

Once the lawyer is selected, all relevant documents will be scanned and loaded onto the network, where both client and outside legal professionals can manipulate the documents with powerful document management tools. In addition, legal research and expert witness repositories can be saved in organized databases that are immediately available to the many legal teams which represent that client-- thus building upon work already done and avoiding the expensive duplication of effort among outside counsel.

Clients can choose to have invoices submitted electronically, and compared against budgets and their billing guidelines. Once a bill is approved, electronic payment can be accomplished by a push of the button. However, perhaps of most significance is that lawyers and clients will find alternatives to time-based billing, which rewards inefficiency, and only occasionally matches compensation with the value of the work performed.

Like the telephone, the benefits of the collaboration offered by ASPs increase exponentially as the community of users grows, and as members create new ways to use these tools for their benefit. Business trends will be perceived through an ability to quantify and analyze developments occurring in open legal files being managed by outside counsel.

No longer will large companies have to deal with the same issue being managed separately by multiple law firms all proceeding without the knowledge of the other, and without the clarity of a national strategy. In addition, as mentioned above, data mining and data discovery tools will make it simple for each client to define the "best performance" criteria consistent with their own business goals and easily identify the best lawyer within a specific area of law.

Today, only the Fortune 50 companies and huge law firms take full advantage of technology in the management of legal matters. Tomorrow, small companies and law firms alike, will have access to the same tools without incurring the substantial capital investment.

Selecting an ASP

In selecting a legal ASP, be sure the provider has a great deal of legal domain knowledge and is committed to providing intuitive tools that enhance the attorney-client relationship, which in turn improves the economics of law. Anything less will lead to tools that nobody will use!

As for the technology, because ASPs offer a very different approach from traditional software, to get the most out of the ASP, some basic initial steps are advisable:

1. Choose One Platform

Many law firms and some businesses attempt to capture the productivity gains available from ASPs by creating their own Extranets. If done right, Extranets offer opportunities to collaborate on that data. However, the problem is that any lawyer with more than one client, and any client represented by more than one law firm, faces a potentially dizzying array of extranets and user interfaces. A full-service ASP, on the other hand, offers one place to assemble the legal team, organize their work, and share a wide range of collaborative tools.

2. Don't Wait for Perfection

Some pundits counsel that no one should entrust their work to an ASP until it is absolutely secure and reliable. While this seems like pretty good advice, none of us would be using telephones, e-mail, or other new technology if we had waited for this standard to be satisfied. We do not live in a world of absolutes, as Microsoft Corp. has found out with its recent network security breaches and software security problems. A more realistic standard is to compare the reliability and security of any new technology, including ASPs, with what is currently being used. If the alternative is a significant improvement to the business, it should be considered. For example, you might compare the security and reliability of your current e-mail system using law firm hosted servers, with the features of a collaborative ASP platform using encryption and its own secure data center. You may find that your current system has significant limitations, and that the ASP provides a quantum leap forward for features that you consider important.

3. Take a Test Drive

One of the unique advantages of the ASP model is that there is minimal upfront investment, in capital or people costs. Once a secure connection is established over the Internet, the ASP provides the rest. Therefore, it is often easy and inexpensive to experience first-hand the ASP-enabled environment.

4.Bring the Team (Avoid Internet Electrocution)

Because the real productivity gains offered by ASPs come from collaboration of legal teams, it is difficult to experience those advantages unless you give the team a chance to use it. However, it is crucial that the team has an objective and measurable business purpose and goal in mind. To automate a Web business process without a clearly defined goal is what I call "Internet Electrocution." "We don't know if its saving us any money, but isn't it cool!" After a brief introductory period in which the team learns the basic features offered by the ASP and the business case is proven, the team will create its own, often unanticipated, ways to get the most out of the new technology. The benefits will be in direct proportion to the amount of work that is being done, and the number of team members who are working together in new ways.

5. Select a Long-Term Player

As discussed above, this is a new industry, which will inevitably experience consolidation. Look for an ASP that has a track record of offering a wide range of services to a diverse group of substantial clients. Some good work upfront will pay dividends in avoiding potential disruptions down the line.

Worth Doing

Not many new technologies offer such high potential productivity gains, with such a minimal investment. ASPs are opening up a new collaborative environment, one that is unique in its potential usefulness to widely dispersed legal teams and clients. Those who anticipate these gains, and who explore this new environment, will be richly rewarded with competitive advantages. We are all on the wave -- it's our choice whether we just float along, or grab a surfboard and make the most of it.

Don Murray is president of ELF Technologies Inc., based in Seattle.

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