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     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; seasonsed 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 the 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 (24 hours a day, 7 days a week) schedule. You may use an Internet browser or you may access the application using “thin client” technology, such as the Citrix-based solution. 

     In May 1999, the ASP Industry Consortium was launched with an initial 25 members. It is an advocacy group of companies formed to promote the ASP industry by sponsoring research, fostering standards, and articulating the measurable benefits of this evolving delivery model. These are common goals for almost any new industry consortium – not surprising. 

     What is most surprising and why the legal profession should be looking seriously at the ASP model is that the Consortium grew to 100 members in less than three months, surpassed 200 members in early November 1999, reached the 300-member level in January of this year, and added its 400th member in March. Having grown by an astounding 1900 percent during its initial year of existence, the Consortium recently marked its first anniversary by welcoming its 500th member company. The Consortium now includes members from 21 different countries. This ASP thing is not a fad, it’s not a trend – it’s real and it’s the future of computing.

 Study Methodology
     During the Summer of 2000, the staff of The Legal Technology Institute conducted the most comprehensive study ever attempted of how the legal profession currently views the Application Service Provider model. The survey 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, an American Lawyer Media publication. 

     Over 900 completed and qualified survey questionnaires were returned to The Legal Technology Institute. Of those, 60% of the survey respondents were attorneys, 21% were administrators, and 5% were Information Technology Staff. About 70% of the survey respondents work in Private Law Firms, 15% in Corporate Law Departments, and 5% in Government Law Departments. About 10% of the survey respondents were either Not-in-practice, in the Academic environment, or in the Judicial environment. 

     The eight page survey questionnaire contained a total of ninety-two (92) questions in seven sections, most of which examined 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 Application Service Providers. 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. 

 Surprising Results
     With the advent of Internet technologies and the exploitation of providing access to law firm data through the Internet (Extranets), 20% 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% increase in requests by clients. Real-time access to case-related information includes client collaboration, calendaring, and case-related information and documents. But, the Study shows that only about 8% of the legal profession currently has an Extranet. Corporate Law Departments lead the way, however, with about 17% 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% 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% of the legal industry use ASPs, the Study reports that almost 9% currently use ASPs of one type or another. Of those, Government Law Departments report a slightly higher (13%) 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% automated in their calendaring. Still, about 22% reported using Microsoft OutLook as their primary calendaring program, followed by Novell GroupWise (12%). 

NOT Surprising Results
     Law firms like to hold onto technology and are tired of “upgraditis.” “What you buy today will be obsolete tomorrow.” But, the legal profession is a conservative industry and, as shown by the Study, over 50% typically hold onto their computer desktops for three years or more.

     Word versus WordPerfect? In the 1997 Internet Lawyer - Microsoft Corporation Survey, two-thirds of the legal profession used WordPerfect products; 42% 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%) and Corel WordPerfect (47.5%) are used evenly throughout the legal profession, as a whole. However, an overwhelming 87% of the Corporate Law Departments now use Microsoft Word as their primary word processing program. 

     Internet use has also increased. The 1997 Internet Lawyer - Microsoft Corporation Survey reported about 71% of the legal profession used the Internet, either at the office or at home. The ASP Study indicates that almost 90% of the legal profession uses the Internet at work. This is not surprising, since the Internet has grown significantly over the last few years with more information available to the practicing legal professional. 

     Netscape Communicator/Navigator versus Microsoft Internet Explorer? Microsoft has gained significant ground in the past few years with growing marketshare in the browser wars. In 1997, 45% of the legal profession used Netscape Navigator with only 12% using Internet Explorer. However, the ASP Study reports Microsoft’s Internet Explorer used by almost 55% of the legal profession, while Netscape dropped to about 25%. 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% 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% 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% 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% reported using encryption or other additional security in the ASP Study. 

 Application Service Providers
     The focus of the Study is on Application Service Providers. Yet, the legal profession is not yet  familiar with ASPs, the model, or the players. Two thirds of the survey respondents indicate they are not very familiar with ASPs. The most recognized ASPs in the legal profession are, according to survey respondents, Elite.com, ELF Technologies, and IKON Virtual Filing Room; yet, these are recognized by less than 15% of the respondents. ASP definitions vary, even within the industry itself, but about 40% of the survey respondents define ASPs as Web-based applications or Access to Software and other services. 

     Of the 9% law firms and law departments currently using ASPs, Legal Research (71%) is the overwhelming function provided by ASPs. Time, Billing & Invoicing follows a distant second at 46%. Satisfaction levels vary, but about 85% of survey respondents currently using ASPs indicated they were reasonably satisfied. 

     In almost every ASP discussion there are concerns and issues that relate to law firms or law departments using an ASP. In most cases, it has been reported in the past that Security and Reliability are the top issues. The Study agrees with those assumptions, indicating survey respondents perceive Security (44%) and Reliability (36%) as the primary barriers regarding use of ASPs. 

     There are benefits to using an ASP; the ASPs themselves will provide you with a list of many benefits. Survey respondents indicated the main benefits of using an ASP include a Low Technology Investment for the Firm (19%) and Low Initial Cost of an ASP (13%). Those law firms and law departments Currently Using ASPs also reported that the best aspect of using ASPs is the Low Technology Investment for the Firm (31%). 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% of survey respondents indicated they would likely consider an ASP. It would seem the perceived barriers to overcome in the legal profession are Security and Integration issues.

     About 25% of the legal profession still accesses the Internet using a 56.6 kbps or less modem. However, over 40% of survey respondents indicated they would install a high speed Internet connection to take advantage of ASPs. This indicates there is a need to move into a higher speed connection and the legal profession is ready for it.

     What would it take to get the legal profession to move to an ASP? Access to the ASP Anytime & Anywhere was the overwhelming decision driver. The Study shows about  50% 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. 

 Current Technology Environment
     Novell NetWare, once the leading network operating system in the legal profession has given up significant marketshare to Microsoft. Only 27% of survey respondents reported using Novell, while almost 49% use Microsoft Windows NT as their network operating system. But, also note that ten percent of the legal profession still does not have a local area network. 

     Lawyers are becoming more mobile and working from remote locations. It’s no surprise with technology becoming faster, cheaper and lighter that over 50% of the legal profession provides remote access to the firm’s office network. The ASP Study also reports more than one third (36%) of the legal profession uses a portable computer; in 1997 The Internet Lawyer-Microsoft Corporation Survey, 22% reported using a portable computer. 

     Document management, probably the most underrated application in the legal profession, has made some headway, but over 50% of the profession does not use a document management system. The same with case management software - over 55% don’t use case management. 

     Not surprising, Microsoft OutLook leads the profession in electronic mail applications at 42%; Novell GroupWise falls to a distant second at 17%. The important point here is not what applications are in use, but the fact that less than 5% of the survey respondents reported NOT using electronic mail. In 1997, The Internet Lawyer - Microsoft Corporate Survey reported only two thirds of the legal profession used electronic mail. It is apparent that legal professionals understand the importance of electronic communications and are using e-mail. 

 Computer Department Staffing
     Increased technology usually means increased support efforts to continuously maintain these new systems. Yet, almost one third of the legal 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 Law Firms outsource their Computer Support.

     Most survey respondents reported being reasonably satisfied with their computer department staff. Also reported was a low turnover among computer department staff. What was surprising, however, was the reported functions performed by the firm’s computer staff. Only about one half of the survey respondents indicated the firm’s computer department staff handled the traditional installation (hardware, software, networking) and traditional maintenance (hardware, software, maintenance). 

     When asked about the “value” to the firm’s clients of having a computer staff, almost 40% of the survey respondents reported the computer staff adds a competitive advantage in delivering value to the firm’s clients. 

 Looking Forward
     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. 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. Since 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.

     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.

     The sponsors of this ASP Study, as well as other ASPs, have made significant investments in the technology, the deliverables, and the industry in general. They are the pioneers in the ASP world and lead the way to providing this new model to the legal profession. The importance of this ASP Study is twofold: one, to educate the legal profession as a whole on the importance of the ASP and two, to provide information to the ASP industry on the factors, the benefits, and the issues concerning the Future of ASPs in the Legal Profession.