State of Legal 2012: Tech Goes App-Centric

It’s day three of the state of the legal union. Someone asked me yesterday how long this will run and I replied that there are only 362 days left (yes, 2012 is a leap year).

Today we turn to legal technology focused on the enterprise (legal departments and law firms). Never before has technology been needed more. And maybe never before has some if it been too bloated, too costly and too late (on the install) for what customers really need.

Last year, I asked who will pay for developing the next phase of legal technology. I suggested that historically it was clients paying for it, if law firms were buying it. Not anymore.

In 2012, the price challenge will still be there. But I think there are new challenges. Because it’s increasingly an app app world…

More and more users of technology are spending quality time with iPhones and iPads. True, much of this is for personal use or entertainment. Yet at least ten things define the app experience for the user:

1. It does a specific thing. Well.

2. It does (1.) for a low price. Sometimes free.

3. You can find feedback and ratings from other users before you buy.

4. You can compare pricing with other similar apps, too.

5. It can be purchased quickly.

6. It installs itself.

7. It (almost) updates itself. For free.

8. You don’t have to read a manual to learn how to use it.

9. There are no long-term commitments beyond the initial purchase.

10. Getting something done can almost seem like a game.

At first blush, it may seem absurd to compare mobile apps to enterprise-class software. But what Apple is doing is training the current generation in something very different. And it is making the next generation look at software much differently. Like not at all.

For those still selling software, you have to understand that some companies would budget for software in year 1, get the approval and start scoping out options in year 2, and then purchase and install in year 3. No one can do that anymore, since their customers and competition are moving too fast.

I could tick through items above, but there are some obvious lessons for developers and buyers of legal tech solutions:

1. Most “software” will move to the cloud, and be sold as a service.

2. It can be explained in about 30 minutes, and a demo takes the balance of an hour.

3. It will be priced monthly, with discounts for semi-annual payments.

4. You can start using it within an hour of payment.

5. You can cancel at any time and get a refund of the service balance.

6. The ROI will be obvious in months 2 or 3, and will be at least 10-20x the cost. If not, see (5.), above. If you hit 100x on the ROI, you get rich.

7. Intuitive design means little or no training needed. Web videos explain all in the application’s online members area.

8. 365/24/7 response to outages, and live domestic-based support during business hours.

9. No service agreements required beyond the “software” itself.

10. No charge for updates. They happen in the cloud.

11. Easy to get data in, clear way to get data out.

12. Robust privacy and security, beyond the usual platitudes (key defense contractors got hacked, remember?)

I think I’ll stop there.

The bottom line for major legal software developers selling high-end, feature-rich, shrink-wrapped offerings into the legal market: prices may be going down and sales could be harder to come by. The good news is that incumbents have the resources to roll solutions out faster than new market entrants. The (likely) bad news is that many won’t because Finance will not look kindly on someone who comes forward and recommends transitioning to a new model.

Some people will go back to the drawing board; others will leave and start their own companies.

The conclusions on sales and pricing are really more of a hunch, based on anecdotal “research.” I will point out that late last year Oracle missed its earnings guidance. Oracle never misses. According to Reuters:

The fourth quarter is the crucial period of the year for many technology companies because corporations tend to spend most heavily on information technology during that time in what is known as a year-end “budget flush.”

So I’m thinking if Oracle is seeing weakness, they won’t be alone.

Change, though, breeds opportunity for new solutions from old companies and different solutions from new companies. Or law firms.

Which brings us to the next stop on the State of Legal 2012 express. Since it is leap year, I will take a day off from this series tomorrow and finish it up next week.

Update 6 Jan 12: The news broke today that the LexisNexis unit of Reed Elsevier has sold its Applied Discovery unity to a private equity firm (via @ronfriedmann). A bullish sign or a reality of the app-centric age? We’ll have to wait to find out. But know this: private equity doesn’t typically buy a company at the top of the market.