Application Service Providers
Surprising Survey Results
Editor's Note: The Legal Technology Institute of the University of Florida Fredric G. Levin College of Law, lead by director Andrew Adkins, conducted a survey of legal practitioners to assess the current state-of-the-art of application service providers (ASPs). Here is a summary of the results.
By Andrew Adkins
LAW FIRMS today face multiple dilemmas involving technology. The general trend over the last five years has been to move away from the "capital expenditure" view to the "maintenance" view.
Both firms and law departments realize that increased use of computers by the attorneys requires more human resources, such as training and help desk functions. In addition, the sophistication of the legal profession has grown dramatically since the introduction of the graphical computer environment (Microsoft Windows and Macintosh). More users using more applications require more resources.
The Application Service Provider (ASP) model is new to the industry. ASPs are becoming mainstream topics in the business industry. The legal profession is no exception; seasoned industry developers, integrators, and consultants are providing the technologies, the products, and the services using this new model, delivering software to the lawyer's desktop.
For those of us who've been around computers for years, especially older, mainframe computers with dumb terminals using time share, this is not a new computing model. However, with of the advent of the Internet, the World Wide Web, the newer Web browsers and the acceptance of utilizing the Internet for communications and correspondence, the ASP model is definitely worth some attention.
The definitions of an Application Service Provider (ASP) vary, depending upon whom you ask, but most all agree on one similar concept: renting software applications over the Internet on a subscription basis. With the ASP model, you access your software application over the Internet or through a private network. The service provider owns the infrastructure that hosts the application, and is responsible to make sure its customers can access the applications and data on a 24/7 schedule. You may use an Internet browser or you may access the application using "thin client" technology, such as a Citrix-based system.
Large law firms report an overwhelming 43% increase in requests by clients for real-time access to case-related information.
During the summer of 2000, the staff of The Legal Technology Institute conducted a comprehensive study of how the legal profession views the Application Service Provider model. It was conducted by mailing some 26,500 print survey questionnaires to randomly-generated lists of legal professionals provided by the American Bar Association (ABA), the Association of Legal Administrators (ALA), and the American Corporate Counsel Association (ACCA). In addition, the complete survey was printed in the July 2000 edition of Law Technology News.
More than 900 completed and qualified survey questionnaires were returned to The Legal Technology Institute. Of those, 60 percent of the survey respondents were attorneys, 21 percent were administrators, and 5 percent were information technology staff. About 70 percent of the survey respondents work in private law firms, 15 percent in corporate law departments, and 5 percent in government law departments. About 10 percent of the survey respondents were either not-in-practice, or in the academic or judicial environments.
The eight page survey questionnaire contained a total of 92 questions in seven sections, most examining different aspects of technology use and issues dealing with technology. The first three sections (I-III) focused on a very wide range of demographic data. The next section (IV) focused specifically on the use of ASPs. The following two sections (V-VI) focused on the general computer environment and Internet use. The last section (VII) focused on computer department and budget information.
With the advent of Internet technologies and the exploitation of providing access to law firm data through the Internet (Extranets), 20 percent of the survey respondents reported an increase in requests by clients during this past year for real-time access to case-related information. Large law firms report an overwhelming 43 percent increase in requests by clients. Real-time access to case-related information includes client collaboration, calendaring, and case-related information and documents.
Only about 8% of the profession currently has an Extranet; but corporate law departments lead the way, with about 17%.
However, the study shows that only about 8 percent of the legal profession currently has an Extranet. Corporate law departments lead the way, however, with about 17 percent reporting having an Extranet. This indicates clients are requesting access to their case information, but the legal profession has not met those needs. However, of those firms not having an Extranet, 12 percent indicate they will develop an Extranet in the future.
Another surprising result was the number of law firms and law departments currently using ASPs. While most ASP vendors perception indicated less than 5 percent of the legal industry use ASPs, the study reports that almost 9 percent currently use ASPs of one type or another. Of those, government law departments report a slightly higher (13 percent) use of ASPs than private law firms or corporate law departments.
With only a handful of legal-specific ASPs currently in the market providing products and services, the legal profession seems to prefer a "per user, per application" pricing scheme. This is somewhat surprising, since the legal profession typically looks to save money by licensing software on an "unlimited number of users" basis.
Another surprising figure reported in the ASP study was the high number of legal professionals who do not use a computerized calendaring program. Almost one fourth of the survey respondents reported not using a computerized calendar or docket system. With the proliferation of computer technology it is surprising that the legal profession is not 100 percent automated in its calendaring. Yet, about 22 percent reported using Microsoft OutLook as their primary calendaring program, followed by Novell GroupWise (12 percent).
Government law departments report a slightly higher (13%) use of ASPs than private law firms or corporate law departments.
Some findings verified the common wisdom. Law firms like to hold onto technology and are tired of "upgraditis -- What you buy today will be obsolete tomorrow." The legal profession is a conservative industry and, as shown by the study, more than 50 percent typically hold onto computer desktops for three years or more.
Word versus WordPerfect? In the 1997 Internet Lawyer -- Microsoft Corp. survey, two-thirds of the legal profession used WordPerfect products; 42 percent of corporate law departments reported using Microsoft Word. However, not surprising with the transmigration of WordPerfect to Corel WordPerfect over the last few years, the numbers have changed significantly. The ASP Study reports that Microsoft Word products have gained significant marketshare in the legal profession. Microsoft Word (47 percent) and Corel WordPerfect (47.5 percent) are used evenly throughout the legal profession, as a whole. However, an overwhelming 87 percent of the corporate law departments now use Microsoft Word as their primary program.
Internet use has also increased. The 1997 Internet Lawyer Microsoft Corp. survey reported about 71 percent of the legal profession used the Internet, either at the office or at home. The ASP Study indicates that almost 90 percent of the legal profession now use the Internet at work. This is not surprising, because the Internet has grown significantly over the last few years with more information available to the practicing legal professional.
Almost 25% of the survey respondents said they do not use a computerized calendar or docket system.
Netscape Communicator/Navigator versus Microsoft Internet Explorer? Microsoft also has gained significant ground in the past few years with growing marketshare in the browser wars. In 1997, 45 percent of the legal profession used Netscape Navigator, with only 12 percent using Internet Explorer. However, the ASP Study reports Microsoft's Internet Explorer used by almost 55 percent of the legal profession, while Netscape dropped to about 25 percent. Many in the industry believe this is due to the fact that Microsoft Internet Explorer is already installed on the newer computers, while users must download a huge file and install Netscape Communicator.
With the growth of the Internet and as a whole, our entire society becoming more online literate, it's no surprise that law firms and law departments are developing Web sites. In 1997, one-third of the legal profession reported having an Internet Web site (61 percent of Large law firms reported having a Web site). The ASP Study reports almost two-thirds of the legal profession now has an Internet Web site (94 percent for large law firms). Law firms are seeing the potential for the use of the Internet as an extension of their existing marketing practices.
How confidential is information sent over the Internet? In 1997, only 8 percent of the legal profession reported using a secure (encrypted) e-mail application. It's nice to know that lawyers are conscientious when sending confidential e-mail to clients through the Internet: almost 20 percent reported using encryption or other additional security in the ASP Study.
An overwhelming 87% of corporate law departments now use Microsoft Word.
A full two-thirds of respondents say they are not yet very familiar with ASPs. The most recognized players: Elite.com, ELF Technologies and IKON Virtual Filing Room; yet, these are recognized by less than 15 percent of the respondents. ASP definitions vary, even within the industry itself, but about 40 percent of the survey respondents define ASPs as Web-based applications or Access to Software and other services.
Of the 9 percent law firms and law departments currently using ASPs, legal research (71 percent) is the overwhelming function provided by ASPs. Time, billing and invoicing follows a distant second, at 46 percent. Satisfaction levels vary, but about 85 percent of survey respondents currently using ASPs indicated they were reasonably satisfied.
In almost every discussion of ASPs, two issues come up. Indeed, survey respondents perceive security (44 percent) and reliability (36 percent) as the primary barriers regarding use of ASPs.
Survey respondents defined the main benefits of using an ASP as low technology investment for the firm (19 percent), and low initial cost of an ASP (13 percent). Firms and law departments currently using ASPs cited low technology investment (31 percent). When considering costs, law firms and law departments typically consider the "return on investment" (ROI). Almost half of the survey respondents expected the ASP ROI to be one year or less.
ASPs are a new model using fairly new technology. With this combination, there are likely to be problems with the use of the technology and the implementation of the technology. Survey respondents indicated the biggest problem with ASPs is security and integration into the firm or law department. Yet, even with these issues and problems, 40 percent of survey respondents indicated they would likely consider an ASP.
About 25 percent of the legal profession still accesses the Internet using a 56.6 Kbps or less modem. However, over 40 percent of respondents indicate they would install a high speed Internet connection to take advantage of ASPs. This confirms there is a perceived need to move into a higher speed connection and the legal profession is ready for it.
Two-thirds of respondents say they are not yet very familiar with ASPs.
What would it take to get the legal profession to move to an ASP? Access to the ASP anytime and anywhere was the overwhelming decision driver. About 50 percent of the legal profession currently has remote access to the office network. Having remote access is one step closer for law firms and law departments to move to an ASP.
Novell NetWare, once the leading network operating system in the legal profession has given up significant marketshare to Microsoft. Only 27 percent of survey respondents reported using Novell, while almost 49 percent use Microsoft Windows NT as their network operating system. But, also note that 10 percent of the legal profession still does not have a local area network.
More than 50 percent of the legal profession provides remote access to the office network. More than one third (36 percent) of the profession uses a portable computer; up from 1997, when The Internet Lawyer --Microsoft Corp. survey reported 22 percent.
Document management, probably the most under-rated application in the legal profession, has made some headway, but more than 50 percent of the profession does not use a document management system. The same with case management software -- more than 55 percent don't use case management.
Not surprising, Microsoft OutLook leads the profession in electronic mail applications at 42 percent; Novell GroupWise falls to a distant second at 17 percent. The important point here is not what applications are in use, but the fact that less than 5 percent of the survey respondents reported not using e-mail. In 1997, The Internet Lawyer -- Microsoft Corp. survey reported only two-thirds of the legal profession used electronic mail. It is apparent that legal professionals understand the importance of electronic communication.
About 25% of the legal profession still accesses the Internet using a 56.6 Kbps or less modem.
Increased technology usually means increased support efforts to continuously maintain these new systems. Yet, almost one-third of the profession indicated they do not have a computer department or computer staff. However, smaller firms either do not or cannot afford to hire full time staff to handle just the computers; typically they outsource the service and maintenance to integrators or computer dealers. In fact, the study reports almost one-third of small firms outsource computer support.
Most survey respondents reported being reasonably satisfied with their computer department staff. Also reported: low turnover among computer department staff. What was surprising, however, was the reported functions performed by the firm's computer staff. Only about half of respondents indicated the firm's computer department staff handles traditional installation (hardware, software, networking) and maintenance (hardware, software, maintenance).
Almost 40 percent of the survey respondents reported the computer staff adds a competitive advantage in delivering value to the firm's clients.
The Application Service Provider is a new model for delivering software applications. While there are many companies in the industry with ASP models, there are relatively few that are actually delivering products or services. There are many reasons why ASPs are so hot in the technology industry right now. Most deal with the amount of money available from venture capital investment firms. It takes a lot of capital to start up an ASP.
More than 50% of respondents do not use a document management system.
ASPs represent a "business-to-business" (B2B) model, including e-commerce and the dot-com companies. Reports from information providers such as IDC, Gartner Group, Forrester Research and others indicate the ASP market is just now getting started with market projections from $2 billion up to $50 billion by 2003. That's a lot of potential business and VCs are hopping on the market. With so many willing investment firms around, many existing and new companies are moving to the ASP marketplace.
There are many benefits to moving to an ASP. But, they all depend upon knowing how much it costs for your current technology environment. Industry figures vary, but the Legal Technology Institute projects that an initial annual cost for new technology ranges between $4,500 and $8,500 per user in the law firm. This figure represents a full turnkey system and includes the cost of the computer hardware (file servers, desktop workstations, printers), computer software, computer networking (including cabling and hubs), communications systems (servers, e-mail, Internet), systems integration, training, maintenance and support. On top of that, make sure you include the cost of your computer department personnel (salaries, benefits, education), your computer consultant, and any other computer-related expenses.
It's a homework assignment, but the exercise will certainly open your eyes to the cost of technology within your law firm. Once you understand the costs of your current technology, you can determine the monthly cost per user. Because ASPs base their fees on a subscription basis, this gives you a comparison for costs among ASPs. You may even find yourself digging a little deeper to find a particular cost driver, such as litigation support, video conferencing, or even your time and billing.
Only 27% of respondents use Novell; almost 49% use Microsoft NT.
When you decide you want to pursue a relationship with an ASP, there are always questions and issues. First and foremost, protect your data. The service level contract with the ASP should have documented standards for data backup, how often the data is backed up, where the data is stored, and how will you get the data in the event of ASP termination. Most ASPs will contract for a three to five year period, so you're locking in the law firm for a period of time.
Andrew Adkins III is director of the Legal Technology Institute at the University of Florida Fredric G. Levin College of Law, at Gainesville. He is a member of the LTN Editorial Advisory Board, and chair of ABA TECHSHOW.