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"Cloud Computing”, Solos and Small Law Firms, and 
Consumer Access to Affordable Legal Services

A common definition of “cloud computing” is the storage of an organization’s data on the Internet in a server provided by an independent data center that is a separate organization from the client organization. Law firms can now store client data, financial records, legal documents, and other information on the Internet, rather than house data in servers located on their premises, often at a cost which is much less than the cost of storing data internally. There is some controversy about this concept as it applies to the legal profession when the firm decides to store its date externally about whether it is “ethically” compliant, but a recent article in the this month’s American Bar Association Journal, explores some of these concerns to rest and concludes that there is no specific ethical prohibition against “cloud computing.”  [See generally: http://www.abajournal.com/magazine/article/get_your_head_in_the_cloud/

There is another aspect of “cloud computing” that is often over looked in bar association discussions about this issue and that aspect is the ways in which the “cloud computing” results in  increased access to legal services and enables solos and small law firms to become more competitive.

A  law firm, for example, that wants to offer “unbundled” legal services online at a reduced fee can only do so by creating an online “client portal” that enables a client to purchases legal services over the Internet.  Because of the nature of this web architecture, this “client portal” exists on the Web and data is stored externally and not within the law firm. Data that is transmitted between the secure client portal and the law firm is always encrypted in the same way as data that flows between your bank or stock broker to your desktop.  Like a person’s personal online bank space, the client portal provides a secure personalized legal space within which the client can consume legal services.

It is mostly solos and small law firms that provide legal services to solve the legal problems of individuals and small business. Large law firms may have the resources to create portals for their corporate clients, and to store data on servers located within the firm, but solos and small law firm do not.

In order to deliver online legal services, almost by definition, the law firm has to create a secure “client portal” which the client can access with a user name and password.  Within this secure  client portal,  online legal services are delivered, such as online document assembly, clients can pay their legal bills, and  the clients’  legal document can be stored online.  All of these activities involve the storage of the client’s confidential information online.

Because this online legal technology is capital intensive to develop, very few solos and small law firms have developed a virtual law firm technology on their own. Instead, they have looked to an expanding group of software vendors known as SaaS vendors SaaS stands for “Software as a Service.” – software that is delivered over the Internet through the web browser. This means that the solo and small law firm is able, for a relatively inexpensive monthly fee, may subscribe to a set of complicated software technologies that are provided over the Internet from a vendor who hosts both the software application and the firm’s data on a server that is not within the firm’s physical facility.  It is only in this way that these software applications can be delivered to solos and small law firms economically and at a price they can afford.

There are important strategic advantages to enabling law firms to adopt an online legal service strategy that is based on the concept of "cloud computing.". Here are a few of them:

  • Realistically, this is the only way that complex software applications can be delivered to solos and small law firms economically and at a price they can afford. Complicated software applications, normally beyond the capability of a small law firm to develop or use,  can be made available to class of law firms where it  would be cost prohibitive if each law firm has to develop the application by itself . This software, such as web-enabled document automation, enables the law firm to increase its productivity, increase its margins, and keep prices low and reasonable.
  • Law firms can more effectively compete against non-law firm legal service providers such as LegalZoom, which use the same “cloud” technology to compete against lawyers.  Non-lawyer legal service provides like LegalZoom have been eating away at the market share or solos and small law firms for years using the same internet-based technology that lawyers fear might compromise the security and integrity of a law firm’s operations.
  • Our research shows that a younger generation of clients want to do business with lawyers over the Internet. If solos and small law firms don’t respond to this demographic on their terms, they will forever lose this client basis to alternative providers.
  • Software applications that are offered as a “software as a service”, require that no hardware or software be installed and updates can be made in days rather than months. New features can be rolled out to all of the law firms who subscriber very quickly without waiting for annual releases. There is no in-house software installation. The attorney has access to data anywhere ny securely accessing the Internet.
  • Security and regular data backups of law office data is automatic. It is arguable that the data backups on the Internet are actually more reliable that data back-ups within the office.
  • In our evolving economy, where there are incentives to “go green”, it is not possible to implement a “go green” strategy without storing data in the “cloud.” Virtual law firms, wireless platforms, virtual law offices, lawyers visiting clients in their homes or places of business, all require a “cloud-based” data strategy.
  • A "cloud computing/virtual law firm" strategy can lower overhead costs, by reducing the need for law office real estate, and reducing the need for local software, storage, and server hardware, with the need often for an additional IT professional to run these systems within the office.

“Software as a Service” levels the playing field between solos and small law firm and the LegalZooms of the Internet world, enabling them to remain competitive in a changing legal landscape. The market for consumer legal solutions is changing in fundamental ways, primarily because of the ascendancy of the Internet. We have estimated that there is a huge latent market for legal service, approximately $20 billion annually.

“Software as a Service” offered in the “Cloud” is a major step towards innovation in the delivery of legal services in terms of increasing law firm productivity enabling law firms to serve a broader group of consumers at prices that these consumer’s can afford. This becomes, in fact, an access to justice issue for many individuals and small business owners.

There has been some discussion distinguishing between services that point outward towards the consumer, and cloud based services that are focused on the internal operations of law firms are which are limited to timekeeping and billing, case management, and other internal functions.  This distinction simply makes no sense.  Both kinds of “software as a service” involve the storage of client confidential information in the Cloud.

A recent article in TechnoLawyer, by Ross Kodner, a consultant to solo and small law firms, sums up the argument for “Cloud Computing”:

“The reality, in the absence of inevitable ethical opinions and updated rules of professional responsibility, is that the ethics issues are largely a red herring. There is a long tradition of permitting third party data access and control to confidential client information. The obvious example is using third parties to retrieve and maintain archived client files, or to process electronic discovery files. Even online data backup, with multiple state bar associations having vetted and endorsed various services, has become informally accepted.”

“So let's just all get over it — SaaS makes sense. The above issues will be resolved, likely sooner rather than later. If the world's largest corporations can place their trust in wildly successful and field-proven SaaS products such as Salesforce.com, legal SaaS systems will become just as trustworthy. Outside of the small firm sphere, we already see very successful examples of SaaS legal applications, including mission critical systems such as financial management products. Rippe & Kingston's LMS+ is a sound example.”

Moreover, there are well known examples of companies that store mission critical information for other companies in the “cloud.” Perhaps the most well-known is www.salesforce.com , which has brought modern sales and marketing technology to the smallest business enterprise. Another example, reported in this month’s  Fortune Magazine, [ April 12, 2010, P. 26, ] is a company called Workday that stores  a company’s human resources information online. Most recently Sony Pictures and Lextronics moved their human resources function online by subscribing to the Workday system Workday contends that it can securely lower customers’ technology costs (few servers to purchase and maintain) and improve efficiency (software upgrades take days, not months) by delivering complex applications and information over the Net. The information stored by Workday is mission critical and confidential information that contains the files of hundreds of thousands of employees. Oracle and SAP are also developing plans to develop “software as a service” models similar to Workdays.

The trend towards “cloud computing” is accelerating as organizations realize that this is lower cost method of accessing the benefits of enterprise wide computing, and that certain kinds of innovations will only be available to the smallest or organizations by adopting this approach.

Minimum standards for SaaS Providers should result in the protections that law firms need to be able to operate on the Internet without fear of violating current ethical standards. Standard setting by SaaS vendors, malpractice insurers, and bar associations can provide assurance that the costs involved in shifting to a new platform are minimized, while the benefits of “cloud” computing are realized.

Resources:

If you are a member of Linkedin, there is a Group Discussion on Cloud Computing for Law Firms. Another interesting Linkedin group is Future Automation, (Documents, Data, and the Cloud) ,moderated by Seth Rowland

Legal Ethics of Cloud Computing by Carolyn Elefant

Proposed North Carolina Bar Opinion on Data Security, Software as a Service, and storing data online.

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Copyright © 2010, Richard S. Granat