Chuck Davis, President - Adaptive Solutions, Inc.

Application Service Providers (ASPs), defined by Wikipedia as, “a business that provides computer-based services to customers over a network”, are not new to the legal industry. Many hosting companies moonlight as network support organizations and have been in business since the mid to late 90s; they are now just coming-of-age. While a number of law firms were at once quick to adopt this “hands-off” IT approach, firm administrators and attorneys, driven by demands for security and corporate governance, are revisiting their IT systems and carefully considering the ASP model for technology as it compares to an in-house system.

Do You Know Where’s Your Data Is??
In an age when critical business information must be secure and available, especially for law firms and other professional service businesses, the location of a firm’s data is critical to operations. The ASP model usually results in the removal all data and core technology components from an office, leaving a firm with only the essentials: computers, printers, routers, etc., and a reoccurring monthly bill. Items such as servers, document management systems, data backups and legal-specific practice applications are hosted at the ASPs datacenter. Where the ASP houses data varies with the company; while some ASPs chose to build their own datacenters, many other others place data at co-location facilities where they lease rack space from a local hosting provider. 

Why do some ASPs co-locate? Simply, the ASP is dependent on telecommunications services and they need to be in close proximity to POPs to deliver applications and services to clients. Connections to ASP datacenters may vary but usually include point-to-point T1 lines, long-distance MPLS circuits, Internet service, and ISDN dial-on-demand or DSL technology for backup purposes. However, service outages tend to be common with this model, ranging from intermittent user disconnects to extended outages caused by hardware problems or weather related issues. 

As all firms know, extended outages can be crippling to a law firm, especially mid-to-large tier firms that lose thousands of dollars each billable hour that the network is down. With an ASP, these outages are generally out of the control of the law firm, leaving firm administrators scratching their heads waiting for the outage to cease.

On the flipside, firms that use in-house networks have a lot less to worry about regarding connectivity. While uptime for a firm using ASP technology is completely dependent on the line connecting it to the ASP, i.e., if the line goes down, the entire network goes down, a firm with an in-house network is not solely reliant on a T1 line. Facing an Internet outage, a firm using an in-house network will still have access to Microsoft Office, interoffice email and the legal applications they need to get work done.

Flexibility and Space:
Flexibility is also a major concern for firms contemplating hosted vs. in-house technology. Application Service Providers pay for rack space so they may be hesitant to host third-party applications and/or time and billing packages, especially when they require a dedicated server. If an ASP does agree to host an application requiring a dedicated server, it will most likely pass on the added cost of hardware, software and rack space to the customer. ASPs may be hesitant to accommodate requests for special legal applications due to potential for conflicts with other programs or customer data. In the end, most ASP clients are forced to keep their time and billing and practice applications on-site at the firm, thereby creating a second system to access and maintain and creating an inefficient and fragmented IT system. 

Storage limits are also a big concern in the hosted world. Application Service Providers must account for disk space and data backups. The vast majority of ASPs include specific data and email storage limits in their base monthly fees (e.g., should an attorney exceed mailbox limitations, additional charges will be incurred at the end of each month).

Firms using in-house networks are generally not encumbered by the space and flexibility issues of a firm using an ASP. The nature of an in-house network provides a firm control over its applications, meaning that the firm can install and update applications when needed. The same goes for limits on data: a firm using an ASP is reliant on the space allotted but an in-house network can be customized to accommodate each firm’s specific storage needs.

The Name of the Game: Security:
When outsourcing IT solutions, security is a main concern for any company but particularly for law firms that must protect confidential client data at any cost. Therefore, the ASP model of spreading server hardware across multiple customers is a concern for many legal administrators who don’t want their firm running on the very same servers as its biggest competitor. To avoid this potential security breach, ASPs may segment accounts using “logical” separation, i.e., unique organization units (OU’s) within Microsoft Windows Active Directory. However, should a user be mistakenly placed in the wrong OU, he or she could be presented with another firm’s “confidential” information, opening the door to lawsuits and regulatory fines.

In-house networks on the other hand, when designed correctly, can offer a more secure technology environment than the ASP model. With an in-house network, technology and data remain on the premises, eliminating the possibility of competing firms accessing each other’s data. While some hi-tech ASPs are slowly switching to VMware® (virtual machine technology) to better segment and reduce operating costs, there is no safety net for human error. 

Build or Rent? The Cost of IT:
One perceived advantage of an ASP model is the elimination of daily maintenance on a firm’s IT systems, freeing up attorneys, administrators and staff to attend to the business of law. However, while it’s a fact that all computer systems require maintenance, today’s information systems are markedly more reliable than systems from just two to three years ago. Microsoft and other software vendors have developed numerous management tools to eliminate the need to visit desktop workstations, thus driving down on-site network support costs. 

For smaller firms or solo practitioners, the cost to buy vs. build may be in favor of the ASP model, provided they can operate effectively within the ASP confines. For a larger firm, the ASP model may not be as cost-effective when factored over the lifespan of an in-house system. The replacement cycle of a legal network usually falls between four to five years. With the ASP model, even if the cost of operations goes down the monthly, the cost to end-users continues to rise. Much like leasing a car, the ASP model means that a firm will always make payments without owning anything. And come renewal time, the firm can count on hosting fees increasing.

And Beware of Extras:
Application Service Providers generally sell based on monthly fees with the actual cost calculated on which particular applications and service they deliver to a firm. But firms should beware of what’s not included in an ASP’s base monthly fee. Anything from set-up costs to document management systems to exit strategies can mean additional fees from the ASP. Before signing a three year Service Level Agreement (SLA), it’s important for a firm administrator to get answers to key pricing questions.

Inside or Out? Do your Homework!
Whether a firm chooses an ASP or an in-house network typically depends on two key factors: available time and comfort level. Firms that are less tech savvy or considerably time stretched may have in the past chosen the ASP model to avoid any and all IT headaches. Now, while many leading system integration companies welcome clients to take ownership of their networks for tasks such as checking backups, creating user accounts, and applying security updates, most leading support organizations offer 24/7 support both on-site and via remote access. 

That being said, not all IT consulting firms are created equal. A firm that does choose an in-house network should seek out an IT partner with reasonable rates, legal-specific expertise, and enough hands-on-deck to respond in the event of a critical emergency. While an in-house network requires some care and feeding, in today’s world, the cost of unsecured data could far outweigh the time it takes to manage a secure network. 

In the end, the decision to build or buy will vary depending on each firm and its size and culture. Either way, the end result should couple best-of-breed technology with information access that is cost-effective, secure and available.

About the Author:

Chuck Davis is the President and co-founder of Adaptive Solutions, Inc., a provider of legal-specific onsite and ASP hosted network technology services.

Mr. Davis has over seventeen years of legal-specific IT expertise. Prior to founding Adaptive Solutions, Chuck held the Systems Manager position at Schnader, Harrison, Segal & Lewis, LLP and the Network Manager title at Wolf, Block, Schorr & Solis-Cohen, LLP. Both firms are located in Philadelphia, PA. In 1995-1996, Chuck chaired the Philadelphia (ALA) Association of Legal Administrators System and Technology Committee. Contact Chuck at: cdavis@adaptivesolutions.com.