Law 2.0?

Introduction

 

Small firms

 

A few years ago I wrote in Computers & Law about the problems smaller firms have with IT.[i] Small firms make up the vast majority of the UK legal profession and things have not got much better for them in the intervening period. Lawyers in such firms still do not have the time, expertise or inclination to immerse themselves in the intricacies and arcane peculiarities of IT. Most cannot afford dedicated IT staff and even those that can face stiff competition for such employees due to the current IT skills shortage, which is particularly acute in London. On top of all these pressures are the changes which will be wrought by, and challenges which will result from, the Legal Services bill (which some think could be implemented by 2010) such as entry of branded, household names into the legal services market.

 

Four years from my assertion that more needs to be done to assist smaller firms, potentially momentous developments are occurring in the IT landscape which may very well provide relief. These developments have the potential to drastically improve the ease with which such firms can avail themselves of the IT tools they need, and to dramatically ameliorate the IT burden under which many small firms currently labour (such as a lack of resources to manage and effectively deploy and use IT). This transformation, which some characterise as a revolution in the IT industry, is the move towards Software as a Service (SaaS).[ii]

 

SaaS refers to the use of programs which are managed and provided for you by third parties which host, maintain and support them remotely, on their own hardware, in their own data centres. The idea is that such software ‘products’ are provided to you and used by you in the same way as are traditional utilities such as water, gas, electricity, telephone networks. You pay a monthly or quarterly fee, as you would for such utilities, and as with the suppliers of those utilities you are free to switch to a different provider if its deal seems better. The intuitive appeal of such a model, compared to the traditional practice of being oneself responsible for all the tasks associated with serving one’s IT needs, or the costs involved in conventional outsourcing (which anyway is usually only suitable for larger firms) is clear. But is it realistic?

 

Teleworkers and Remote workers

 

Before further discussing SaaS I wish to note another, and increasingly numerous, type of lawyer for whom SaaS would seem eminently suitable. These are the remote or ‘teleworking’ lawyers. Like the small firm they need to use IT, do not have the luxury of an on-hand IT department that the larger firms do, and can little afford the time and effort to support and maintain all the hardware and software which furnishes a traditional office.

 

Teleworking, and in particular home working, is increasing, not least due to government actions such as the introduction in April of the Work and Families Act. Sector initiatives, such as the Law Society of England and Wales’ Quality of Life campaign, can only help to foster the growth of more flexible and consequentially more remote working. Moreover, as Managing Partner recently commented, employees have for some time been demanding greater job satisfaction and flexibility and, with a relatively small pool of talent to draw upon, those employees are in the driving seat, with high expectations of working practices and culture.[iii]

 

Gartner notes also a generational dimension to the inexorable rise of teleworking across all types of work, commenting that as younger people who are used to communicating via the web from an early age enter the workforce they will expect and demand flexible working.[iv]

 

Broadband Changes Everything

 

One obvious note of scepticism voiced by many on first hearing about the idea of SaaS is something along the lines of: ‘Given that my existing locally installed desktop applications take an eternity to load and perform anything but the most basic task, surely an online application would simply grind to a halt’.

 

The sluggish performance of a piece of software running on a PC could be due to a slow backplane, insufficient memory, poor processor, fragmented program code in an overloaded hard disk, or something else. There is nothing that SaaS can do about the quality of a user’s workstation or inadequate disk ‘housekeeping’. However SaaS can circumvent these deficiencies because it needs a bare minimum of those (limited) local resources. With SaaS the PC only needs to display information on screen; memory and processor intensive calculations (for example when using a spreadsheet) are done remotely on the provider’s high specification hardware, and it is that provider’s hard disks which will house the program code. The ‘backplane’ between that provider and the user, ie the Internet, is what has been the fundamental bottleneck in the past and, ultimately, the reason why the idea of Application Service Providers, much heralded a number of years ago (and the same basic idea as SaaS), ultimately failed. This is where there has been a drastic transformation and why the model of SaaS (or web services) is now viable, and being heavily invested in by major IT companies. Specifically it is the widespread availability of cheap, extremely reliable, very fast, broadband access to the Internet that has made this model of IT provision a reality.

 

The result of the broadband advances is that online applications can now perform in a manner and speed as good as, if not better than, that of traditional software running on your desktop PC. You can receive swift responses from an online program using your old PC, whereas if you tried to install and run software to provide the same functions locally that PC would indeed grind to a halt. Such fast connections are the result of the consumer market driving the demand for extremely reliable and ever faster connections. The consumer sector is where the infrastructure providers will make their money so we can be confident of future reliability and speed for business applications; if the cable and telecom companies are building the capability to deploy TV and interactive gaming over the Internet,[v] you can appreciate that broadband might just about be up to the less demanding job of providing you with a decent online word processor.

 

The Benefits of SaaS

 

What are the main attractions of SaaS for a small (or indeed any) firm compared to traditional in-house IT provision?

 

Software maintenance

 

The vital task of keeping programs secure through upgrades and updates, malware protection, etc is performed professionally by the hosting company for whom such matters are part of its core business, not an additional chore for an overworked lawyer. New versions of programs are made available almost immediately and firm time is not wasted during their installation. Using SaaS you simply logoff one day and the next day logon and go with the latest software already in place.

 

Financial costs

 

As well as the time required to manage in-house IT effectively its cost is another mater which has, over the years, consistently been identified as an impediment to its full and effective adoption by small firms. The latest confirmation of this, conveyed as being particularly acute by reference to the arrival of alternative legal services providers which the reforms mentioned above herald, comes in the results of a recent survey from Central Law Training, entitled The Future of Small-Medium Regional Law Firms in the UK.[vi] However, even if you can afford the financial pain of in-house IT, you should ask yourself what your outlay actually buys. Gartner succinctly, if rather depressingly, sums this up, ‘ … 65% of [traditional] IT spending is used just to ‘keep the lights on’, and delivers no competitive advantage.’[vii] Another analyst is less conservative, claiming that, ‘In general, between 70 and 90 percent of their [IT managers’] existing budget is already committed to … ‘keeping the lights on’, in other words, running and maintaining existing systems’.[viii]

 

Under the SaaS model various instances of such conventional IT costs are avoided or reduced. For example, the cost of the Microsoft licences; the cost of purchasing, maintaining, running, etc. the underlying server hardware; the cost of IT expertise (whether in-house staff or contracted) for installation, maintenance, security; the cost of the never-ending upgrade cycle; the cost of the networking infrastructure. Furthermore, by using online programs hosted by a service provider, the firm not only reduces its own IT outlays but also benefits from the provider’s financial investment in hardware, infrastructure, security, backup, IT staff, etc.

 

Economy & flexibility

 

SaaS reduces the risk of a long term commitment to a piece of software that may turn out to be inappropriate. With SaaS you can stop using (and paying for) the program after a month or one quarter. Moreover, the price paid for a web service is often tiered, meaning that from all the features available you choose a particular set at a given price rather than paying for everything, half of which you will never use.[ix] Compare this pay-as-you-go model with traditional on-premises software for which you pay a large ‘up front’ licence fee, for a ‘fully featured’ product, ie full of capabilities you will never use.

 

Commoditisation

 

Among the analysts who have commented on the benefits of SaaS, and the ‘quiet revolution’ in the provision of IT services which it represents, is the Harvard professor Nicholas Carr. His thesis, IT Doesn’t Matter, is that the commoditisation of IT means that it can no longer be expected to furnish you with a competitive edge over your rivals, but should rather be viewed simply as another essential service, necessary for your corporate survival. SaaS is a patent example of this commoditisation. Carr observes the increasing sophistication of the type of task now being executed by such web services and notes how ‘ [t]he burden of running software is shifting from the buyer to the seller.’[x] This should please all firms.

 

Information Age neatly summarises the advantages of SaaS: [its] growing appeal is down to cost and convenience. Using a remotely hosted application means there are no up-front capital costs associated with deploying new systems, while ongoing maintenance and management can be paid monthly without the need to recruit and retain expensive IT staff. Lead times to SaaS deployment, in theory, can be measured in hours, or even minutes.’[xi]

 

Long-term Prospects

 

While the self interest of the telcos and other providers of the Internet infrastructure should ensure ever swifter, ever more reliable connections for us all,the ‘pipes’ of this new utility are of little use if there is nothing flowing through them.

 

How committed are the major software companies, in the medium to long term, to providing software as an online service?

 

The overwhelming evidence is that they are totally committed to the model. The broadband improvements noted, and the advent of programming languages and techniques that allow online programs to emulate the responsiveness of software installed on a local hard drive, have made the SaaS business model viable and profitable in the eyes of the IT giants. As Karl Noakes, channel development director, Microsoft, says: ‘There is now a compelling business proposition to embrace SaaS’.[xii] Consequently Microsoft, Google and others believe in online software and are investing in it heavily.

 

Why are IT companies embracing the SaaS model?

 

While the evidence that IT companies large and small are adopting this method of providing users with IT is clear, a deeper question will occur to heavy users of Microsoft products: Why would such a company wish to adopt a model which one can easily see has the potential to cut hugely into the profits it derives from packaged software?

 

To understand this one must look at the company which nowadays is regarded as Microsoft’s arch-rival: Google. While Microsoft could possibly ignore, or at least take its time in responding to, the web services initiatives of the myriad of smaller IT companies implementing this model (and finding no shortage of customers eager to use their services), it must react swiftly to the activities of Oracle, SAP, IBM, and the like, all of which are exploring it. It most certainly cannot afford not to respond to Google’s actions in this area.

 

Google, by its very nature, is set apart from these other companies and a much greater threat to Microsoft. This is because, unlike these other companies, and in particular Microsoft itself, it is a purely Internet based company with no existing shrink-wrap product range to protect and reconcile with the web services model which endangers such locally installed software. Although Google is smaller and less rich than Microsoft, it is younger and, as a consequence of its youth and smaller size, more agile and adaptable. Moreover it arguably understands the Internet better than any other organisation, as its success at both satisfying the customer and generating profit from its search-plus-advertising business has demonstrated.

 

Google is hungry to expand into new areas (as its acquisitions over the past 12 months demonstrate) and to cut into its rivals profits. The online delivery of business services is an ideal way for it to do this. Microsoft knows that it has to compete in this area, and to do that it has to change.

 

What does SaaS mean for the broader IT industry?

 

While the focus of this essay has been and will continue to be primarily on the larger IT companies, many law firms purchase products from smaller software houses, which may be producers of specialised or niche programs. Such smaller companies may not survive the turmoil in the IT industry that SaaS will bring about.

 

 

The problem facing all traditional software companies, big or small, is that they have ranges of established packaged software to continue to support, and this detracts from their efforts to innovate and invest in SaaS. The biggest software makers can afford the transition to online IT thanks to their ample cash stockpiles, while the new purely web services companies such as Salesforce.com or Google carry no such ‘legacy’ baggage. However smaller producers of shrink-wrap software between these two extremes may well have to give up or be swallowed up. This consolidation in the software industry is just one aspect of the SaaS revolution.[xiii]

 

What is Currently on Offer?

 

What is Google offering?

 

Google Apps Premier Edition is the company’s flagship product. Costing £25 per user per year it includes domain hosting, e-mail (10GB GMailbox), a shareable calendar, online word processor and spreadsheet tools, plus facilities to upload and share documents.[xiv] Google has assured business users that they will have 99.9 percent reliability and mobile Gmail access is now available for Blackberry handheld devices.

 

In June 2007 Google added online  folders to Google Apps and, with the addition of  these Windows-like folders, the service has started to feel much more like a classic desktop GUI, for example you can even move documents from folder to folder via drag and drop. Also noteworthy is Google CEO Eric Schmidt’s acknowledgement that the company will eventually add a PowerPoint-like presentation builder to its online Office programs. It has already added a PowerPoint viewer to Gmail.[xv]

 

Furthermore, Google recently addressed what some had regarded as the intrinsic weakness of web based services compared to a conventional desktop computer with locally installed software: What happens if the network is unavailable or unacceptably slow? Their answer is Google Gears, which allows web-based services to run offline, saving data to the local hard disk. This technology allows users to work when disconnected (which of course they may do out of choice rather than necessity) and when they reconnect to the Internet the local data will synchronise with the server copies. Microsoft’s Silverlight tool performs a similar function, as does Apollo from Adobe.[xvi]

 

All the above developments add weight to the view held by many that, despite Google’s continuing protestations, it is developing for business an online Office suite which, while lacking the sophistication of Microsoft’s Office suites, will offer enough features and be sufficiently cheap to lure away many who would otherwise purchase Microsoft Office programs. Although Google professes that it has little interest in the corporate market, saying its application services are aimed at individuals and small enterprises, one has to doubt its sincerity. It is, after all, trialling its Apps Premier Edition with no less a corporation than General Electric.[xvii] Further evidence of its true intent in the business world can be seen in its recent addition of a completely free version of Sun Microsystems’ StarOffice (that Sun sells for $70) to Google Pack, its free collection of downloadable applications. Thus, as one source puts it, ‘Google has given web users yet another reason not to use Microsoft Office’.[xviii]

 

And Microsoft?

 

The packaged software giant’s main service, Microsoft Office Live Premium, does not (in spite of the name) give you online access to Word, Excel or other programs in the Office suite. Rather it provides a hosted domain name and web site, company branded e-mail accounts, shared online workspaces and business management applications. The cost is £22.99 ex VAT per user per month.[xix]

 

Thus Microsoft’s current response to Google’s burgeoning catalogue of online ‘productivity’ tools might be viewed as somewhat ‘underwhelming’. However it is apparently testing a pay-as-you go version of its Office suite in South Africa, Mexico and Romania where users are running Office 2003 for $15 per month. The trial follows a similar scheme for Windows last year, called FlexGo.[xx] The Office subscription plan has recently been extended to include the latest version, Office 2007, and some analysts are predicting full online versions of Office applications within the next few years.[xxi]

 

But perhaps what is of greater importance is what Microsoft might offer in the realm of web services beyond its traditional product line. The comments of Peter O’Kelly, an analyst at the Burton Group, are interesting. He believes that Ray Ozzie’s keynote speech and other announcements at Microsoft’s Mix ’07 conference show that the company is making progress on creating a platform on which Internet applications can be built by third parties. O’Kelly’s view is that through its Live (web services) initiatives, Microsoft is creating something for customers that may have no interest in its largest product lines such as Office and Windows.

 

As regards its overall approach to web services, Microsoft tends to talk about ‘Software plus Services’, rather than SaaS. For most analysts this means that it would prefer a world in which everything on the desktop is augmented by, as opposed to replaced by, online services.[xxii] However other commentators believe that, in spite of this apparent current position, they detect a fundamental shift in the very nature of the company. They point to the expert personnel Microsoft is assigning to its Live endeavours, and its heavy investments in datacentres that will provide the backbone for the various Live services.[xxiii]

 

But more than that they see in Microsoft’s assembly of a high calibre Windows Live Core team of engineers its commitment to the idea of building services that run in the Internet ‘cloud’. This would involve not merely moving a desktop computer’s everyday tasks onto the web but a more comprehensive effort to provide operating system-like services from its data centres. This moves it towards the ‘Cloud OS’ or ‘Web OS’ aspiration, already being pioneered by Salesforce.com and start-up YouOS.[xxiv]

 

Small firm IT

 

Microsoft is very much targeting the SMB sector at present, an area it has previously largely ignored, acknowledging that ‘… SMBs don’t want their own IT, they just want access to services’.[xxv] Small firms should take advantage of Microsoft’s desire to grow in the SMB market by availing themselves of special offers and negotiating favourable deals, whether directly with Microsoft or via one of its partners.

 

In the UK, one major partner of Microsoft’s offering hosted versions of software products is BT. Take a look at the BT Applications Marketplace to see that the benefits of online services expounded here are not theoretical nonsense which will never see the light of day but today’s reality. ‘ … [S]mall business users  … can take advantage of using SaaS applications. This allows them to pay a monthly subscription for the software they need, removing the need for upfront capital investment, as well as upgrade costs. It also means that small businesses no longer need to manage and support the applications in-house, as that is taken care of by the company supplying the service.’[xxvi]

 

A Word of Caution

 

Of course there are aspects of SaaS to be cautious about, but it is worth commenting that SaaS is not an untried model of which you would be a vulnerable pioneer in uncharted waters. The potential deficiencies have already been identified and certainly the business world’s enthusiasm for the model is great, with uptake constantly increasing. ‘Software as a service represented approximately 5 percent of business software revenue in 2005 and, by 2011, 25 percent of new business software will be delivered as SaaS’.[xxvii]

 

Security and confidentiality of data are probably the principal worries expressed by users of this model on account of the data being held on a third party’s systems. However, dedicated service providers are probably better able to protect data against the menaces of the Internet than a firm could itself through its own part-time, in-house efforts. As regards protection against destruction or corruption of data and disaster recovery, once again few law firms could hope to match online providers such as Microsoft and Google. They replicate and mirror data across vast amounts of physically separate, constantly online, storage.[xxviii] If it is the vulnerability of data as they are transmitted between the provider and your machine that troubles you, remember that secure, encrypted links are now a standard part of everyday Internet business.

 

On the other hand the concealment of your data from the prying eyes of your host is something to seriously consider. Google has attracted considerable attention and criticism recently as regards its (lack of) respect for the privacy of the user data it holds. No matter what apparent concessions it appears to make, and it only does make concessions in response to the calls of the strongest bodies,[xxix] one has to question its commitment to the ‘spirit’ of privacy because its whole business model for expansion (and ultimately survival) is based on the idea of analysing the vast stores of customer data it holds to identify user interests etc. and using such information to attract advertising revenue and/or developing new services.

 

The recent article Is Google Too Big?[xxx] nicely summarises the privacy risks to which a business’ documents are potentially exposed if entrusted to a third-party hosting company. The article focuses on Google, it being the biggest and probably most invasive company currently operating in this area, but the points it makes are worthy of consideration whichever provider of online services is being contemplated. Another recent article suggests that there has been some progress regarding search companies (Google, Yahoo!, Microsoft, Ask, AOL) respecting the privacy of their customers since last year.[xxxi] It will be interesting to see how Google and its competitors address concerns such as those raised in these pieces as competition amongst them for customers of SaaS intensifies and those customers become more aware and vocal.

 

Conclusions

 

My focus has been on smaller firms. The recent Central Law Training survey results indicate a small firm sector apparently aware that IT could help them to better face today’s challenges but also claiming that the costs involved and obstacles of understanding and implementation present barriers to pursuing that path.[xxxii]

 

Firms in general, and smaller ones in particular, should be looking not only to the traditional methods of IT provision but also to what SaaS can offer them. The cost model can be vastly more satisfactory, and the whole aim of those now starting to drive this area, particularly Microsoft and Google, is the creation of easy to understand, easy to use, easy to implement, collaborative tools, that both the SMB and consumer can employ and even enjoy.

 

Of course everyone has to make their own assessment of SaaS, and whether what it offers is right for their needs. What I can say is that, while the Internet and the web in particular are in their infancy, this is even more the case for web services. We can expect rapid advances in the sophistication of what they offer over the coming years and ever greater competition to what is provided by traditional, packaged software. This can only be to the benefit of the end-user.

 

To close, I return to the title of the article I wrote back in 2003, Small Firm IT – a (better) service is needed. Better services are now available for the smaller firm. This is not due to any specific initiatives or endeavours by societies or other bodies specific to the legal sector, but due to general developments in the IT industry whose momentum, as with many advances in the business IT area, is being fuelled by the demands of the consumer market.

 

 

Alastair Morrison works in IT at Strathclyde University: alastair.morrison@strath.ac.uk.