Google and Verizon recently put the net neutrality issue on the front burner by teaming up to advocate a lack of net neutrality in the wireless marketplace. People are up in arms over this approach because wireless mobile Internet access is expected to become the main way people will get online in the near future. As a result, the fear is that access providers will overcharge consumers for access to different content delivered via their mobile networks.

But instead of the current debate over net neutrality rules, I would rather see us focus on the underlying problem that drives the interest in net neutrality, which is the lack of competition in the Internet access market. Most people in the U.S. have only one or two choices for Internet access. Due to this near monopolistic power, the providers engage in rent seeking where they maximize fees that they otherwise would not charge if they faced significant competition. Even in the mobile arena, there are relatively few choices, especially if you own a particular phone that only works with certain networks. For instance, the iPhone only works on AT&T’s network due to an exclusivity contract, and your CDMA Verizon phone won’t work on a GSM network such as T-Mobile’s. Choices narrow even further because most people buy phones at a reduced fee and essentially pay for it on an installment plan via a two year network access contract with high early termination penalty fees.  So the transaction costs (buying a new phone or paying an early termination fee) of switching networks are high, further reducing competition.

I think we can all agree that services improve when thousands of providers compete with each other. The question, then, should be: how we can open up the market to more competition? If the market was truly competitive, providers wouldn’t engage in the behavior that net neutrality advocates fear, namely, overpricing access to specific content.

What do you think? Is net neutrality a red herring?

I would instead reframe the question as: “How can a firm define its knowledge management and litigation/transactional processes, then support them with technology innovation?” Spending on technology tools without a clear idea of exactly how they will be plugged into your biggest intellectual assets – the knowledge and processes you use to perform superior to the competition – will not result in a good return on investment. In fact, poor use of technology tools, no matter how innovative they are, can actually result in a negative result, compromising productivity.

Having spent years as in-house counsel at a Fortune 500 company, the client perspective is that we are under tremendous pressure to get our hands around our outside counsel budgets. At the same time, we often face pressure from corporate procurement departments who want to take over our management of outside legal services. A law firm can assert a leadership role here in business development by taking large clients by the hand into the world of legal services strategic sourcing.

This approach means that the client relationship focuses on supply management: defining the best in class performance for a law firm, driving out the waste and inefficiency that makes the cost and time lines of legal projects difficult to predict, and using flat fee arrangements (with protections to provide a comfort zone for the firm) to achieve budget certainty and overall annual savings for similar services. Once you’ve taken this approach by defining your knowledge management and processes, technology tools can be extremely effective in driving the highest level of productivity among your people so that the firm can reduce hours expended on a project and make an alternative fee arrangement highly profitable.

The failure of knowledge management professionals in most law firms is to closely align their work with business development, which is the lifeblood of any firm. In all my years as in-house counsel, only one firm ever touted their knowledge management capability, supporting technology, and alternative fee arrangements. That firm captured all of our real estate legal services needs.

Also, bear in mind that technology tools do not have to be expensive. Even using word processor macros (which are already built into the word processing software you already have) can result in a tremendous increase in productivity via document creation. Low cost “software as a service” tools exist as well and are offered at a fraction of the cost of traditional enterprise software.

In sum, the first challenge is placing someone in a leadership role to define processes and knowledge management from a business development perspective, the second challenge is finding the most cost effective, high quality technology tools to support that approach.

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WhichDraftConsulting.com

If you are not familiar with Six Sigma, here’s a quick primer.  Six Sigma uses a rigorous, scientific approach to figuring out why a problem occurs when the cause is not obvious.  The process requires you to define the problem, measure it, analyze your measurements, improve the process that was causing the problem to prevent it from happening, and control the process so that the problem’s causes don’t crop up again in the future.

Cary was kind enough to talk with us today and provide the following interview, which I think you’ll find useful in getting a better sense of whether decision tool software such as ChoiceAnalyst can be helpful to you.

Why did you develop ChoiceAnalyst?

“In sorting through decisions involving multiple criteria with many alternatives, people are becoming much more comfortable with using tools to assist in those kinds of decisions.  People often struggle with how to interpret multiple criteria in making a decision, and ChoiceAnalyst makes this much easier by automatically weighting criteria based on your rankings, presenting each criteria as a choice, and allowing you to then make an informed decision.  It’s very difficult for an individual to hold several different permutations in their head at the same time.  We make that possible.  The user still selects, judges, and chooses key criteria to make a decision, we just allow people to use a computer to juggle all of them and weight them mathematically so the user can decide what’s important in making a decision, and how much more important one issue is versus others.”

What would be an example of how ChoiceAnalyst can help in the legal arena?

“Wrongful discrimination lawsuits can be handled effectively by referring to documents that demonstrate a good faith basis for termination, such as written evaluations.  If you can make this decision using a decision tool, you can understand what processes you need to put into place to define this kind of problem, measure the rankings of the most important causes of the problem, print out a pdf report showing you all of the scoring for all of the criteria, and then have that for analysis, improvement and control, you can fulfill a Six Sigma approach in properly managing your employees.”

Give us a specific example of how ChoiceAnalyst can help your clients?

“We remove buyer’s remorse.  If a customer finds multiple products that meet their needs, how do they choose which one is the best?  By calculating a result based on key criteria chosen by the customer, the customer can then ensure that it has made the best possible decision using a methodology that provides a sense of confidence that everything has been considered in arriving at the best choice.”

How can ChoiceAnalyst help with more effective contracting processes?

“We can help salespersons sort through the most important contract terms that cause problems for their customers, and properly draft a contract that best alleviates customer pain and allows them to make the decision to buy with the least amount of contract review and negotiation.”

Thanks, Cary.

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Upside Software has a particularly impressive sales force because it operates in an incredibly challenging environment, selling to highly conservative customers who are lawyers, and facing very long sales cycles. Could you give us some examples of how Upside Software overcomes this challenge (e.g., return on investment analysis, business case examples, demonstrated productivity improvements)?

We use all of the above techniques. Upside Software typically sells into the general counsel’s office. We find that potential customers become particularly excited when Upside Software shows how use of templates can encourage internal compliance, and can demonstrate what clauses are used the most as well as which ones are red-lined heavily so they can best define their negotiating strategy. As a result, a customer’s return on investment reduces the outside counsel bill.

Can you share with us any exciting projects that Upside Software has in development? Building on UpsideRFX, will there be anything on the vendor side to accelerate sales?

We are focusing on this project in response to customer demand. I would also like to point out that Upside RFX is extremely easy to deploy with true integration because it comes with every purchase and is only turned on when licensed. We have also just launched UpsideLive, which will be a major entry into the software as a service (SaaS) market with pricing as low as $150/month for up to 3 users.

Who are your biggest competitors and what does Upside Software offer that is uniquely special in the marketplace?

Emptoris and Ariba are two of our major competitors. To our knowledge, we are the only privately held contract management software provider that is profitable, and have been so since our second year in 2001. Our breadth of functionality stands out, particularly in response to customer demands. We just finished our 2009 fiscal year in May and logged a revenue growth of over 25% and also a profit growth of almost 100%.

What would you like to say to potential customers as to Upside Software’s long term take on where software supporting the contract process will be going in the future and why becoming a user of this software is essential for business?

Organizations are under demand to do more with less. Without automating the contracting process, a company is “behind the eight ball” from a competitive standpoint. Upside Software spends a large amount of money on research and development, resulting in products that provide a return on investment in less than six months (based on published case studies). One of our customers, BNSF Railway, obtained a full return on investment in sixty-two days and went from fourteen to three employees in their contract management department.

How do you see the competitive challenge of ERP providers like SAP who have entered the contract management game? Given that it’s hard for a software company to be the best at a new application, do you think customers will accept lower functionality in return for the ease of dealing with their existing dominant enterprise software vendor, or will proper integration planning by providers like Upside Software ameliorate this issue?

Customers are finding a huge gap, with ERP providers typically only providing 10-15% of the functionality desired to obtain a full return on investment. Without this return, the value of dealing with an existing provider is reduced. We have a large number of customers that use one of the major ERP software vendors (e.g. SAP, Oracle, etc.) and as recently as two weeks back, these large customers continue to select us over the ERP vendor, due to the rich functionality we provide. Ultimately, the customer wants to get to a higher level of contracting excellence and is not just looking for a repository, so a best-of-breed solution like UpsideContract is required for that.

Could you tell us about Upside Software’s History?

The idea came to me in 1998, when I was running a systems integration company and was having trouble managing contracts, but couldn’t find any software to buy that would solve my problem. I met with a wide variety of companies who felt the same way. For that reason, we decided to start Upside Software. We quickly engaged BNSF and HP as early customers, which was a great help to our business. Today we have three hundred customers, and about one hundred team members.

Thank you, Ashif.

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“Never write if you can speak; never speak if you can nod; never nod if you can wink.”

Doug uses this quote as a jumping off point to smartly advise:

“Now every email is subject to ending up in a lawyer’s hand during a law suit.  Think before you hit that send button. Maybe a phone conversation will be better. Or a nod.”

This point is also well taken when thinking about the tremendous productivity drain resulting from email.  With the advent of word processing, people envisioned paperless offices.  Instead, word processing has been abused to produce more paper documents than anyone ever dreamed of decades ago.  Email operates similarly.  The convenience of near instantaneous correspondence drives people to send enormously greater volumes of messages, including “for your information” emails, requests without any context, demands without a signature line, and many vague, ambiguous and rambling remarks.

Not only does this behavior create a litany of evidence that can be used to paint an unflattering (and inaccurate) picture of a defendant, but the time spent deciphering all of these messages, as well the additional back and forth correspondence caused by doing so, takes many hours away from each business day.

This point makes me think about the massive cost of electronic discovery due to email. Many clients I’ve worked with over the years imposed sharp limits on the storage size of their employees’ email accounts residing on the shared server. Because employees are addicted to generating voluminous amounts of email, IT departments allow them to archive their email on their hard drive to get around the size limits. In a large, multinational company, with tens of thousands of employees, that means tens of thousands of hard drives would need to be searched and scoured to fully comply with an e-discovery request. The size and cost of such an effort (a completely preventable effort, bear in mind), is mind boggling.

A good guideline to follow with email is to use it mainly as an information extraction technique: define a goal as to what exact information you need from the recipient, clearly state the question, and send it.

Otherwise, don’t.

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I’m a big proponent of using out of the box thinking to reduce IT budgets, which are an incredible boondoggle at most sizable companies, including law firms.  In fact, Greg Lambert from 3 Geeks and a Law Blog has an intriguing post up on encouraging open source software use in law firms right now.  But pursuing budget saving alternatives is not as easy as it may seem.

There’s a fundamental internal political obstacle to surmount in encouraging companies (including law firms) to use open source software and other lower cost opportunities.  I remember attending a worldwide meeting once for an organization that employed me, and after a presentation by our senior technology expert, he asked for questions.  I asked whether we could radically reduce our IT budget by going to lower powered computers exploiting browser based software and open source applications.  He brushed off the question.  A number of our IT experts came up to me afterward and explained that, while they would love to pursue this approach, the IT department’s power base depends on the size of its budget, so IT leaders will oppose an approach that reduces the budget and thereby reduces this power.  Since then, I’ve paid a close eye to the organizational dynamics that can create perverse incentives which prevent efficiency gains.

What I failed to understand when I asked the question, is that when I said, “Let’s reduce the budget and save the company money,” the IT executive heard me say, “Let’s reduce your power base, stall your career, and let non-IT experts waste your resources.”  For that reason, he wasn’t interested in a good opportunity.

Instead, he was too focused on telling everyone that the chair was not my son.

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2. Newspapers, newspapers, newspapers.  An unsparing look at the “gasping for air” Boston Globe.  When will newspapers turn to new business models, like software as a service (SaaS) on their sites?

3.  Cramdown Shmamdown: Ah, respect for the sanctity of contracts.

4. “Cyberlibertarian”: first time I’ve ever heard the term.

5. Manufacturing Agreements: Everything you’d ever want to know.

6. The Consistency Factor: An amazing metric from baseball that could be used to evaluate any service performer.  Sabermetrics for lawyers, anyone?

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We’ve seen dozens of apps that are approved the first time, but later rejected for a seemingly small update. And we’ve seen others that are rejected, make almost no change, yet get in the next time they’re submitted. It would seem the the life or death of an app is entirely in the hands of the App Store inspector who checks it out.

Apple’s App approval process reminds me of a similar application system: applying for a trademark registration from the US Patent and Trademark Office.  When I used to represent clients in prosecuting their applications, I really had little idea what would happen, as trademarks that should have sailed through according to the law were rejected, and others that were “on the fence” might go right through.  For WhichDraft.com, our recent application had been approved, but was then pulled and sat on a supervisor’s desk for 6 months.  They couldn’t give me a reasonable explanation why.

Echoing TechCrunch, it would seem that the life or death of a trademark application is entirely in the hands of the U.S. trademark examining attorney who checks it out.

It’s not a good sign when a for-profit corporation’s performance mimics the quality level of the federal government.

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So color me surprised when I noticed one of my large clients insisting that it would only pay a bill within 45 days.  They also pushed back on the seller’s right to terminate the contract for late payments, requiring the seller to give up to 90 days advance notice before it could do so.  Floating your money for this extended time period gives you some great advantages when you’re the customer.  A customer can use its levitating dollars during the extra time to garner interest or invest the money, money which, in the past, the seller would have had.  Presto!  Like magic, the extra time means extra dollars for the customer.

What happens to the seller?  Think about it: 90 + 45 = 135 days to pay a bill.  Most salespeople will tell you that waiting over 4 months for payment will clobber their cash flow and make it very hard for them to pay their own bills.  The solution?  The seller starts doing the same thing to its vendors.  Now, when people negotiate the payment terms in a contract, they’re left in the rather disingenuous position of begging customers to pay within 30 days, then turning around and asking for much more time to pay when it comes to their own creditors.

Besides being a blatant violation of the golden rule (which we all want to follow, right?), the lack of reciprocity makes for an uncomfortable negotiating relationship and hits you with credibility and loyalty costs when it comes to your business partners.

A great example is playing out right now.  Apple appears to be taking longer and longer to pay developers who create iPhone applications.  Here we have a situation where Apple has tremendous power because it’s the gateway to the iPhone platform.  Apple takes all the money users pay for developer’s apps and then relays the developer’s cut to them (minus Apple’s share), per the Apple contract agreed to by every developer.  According to the copy of the Apple contract here, Section 3.5 requires Apple to pay the developer within 45 days after the end of the month that Apple received the developer’s payment from a user.

So if you buy my WhichDraft App (doesn’t exist yet, but I can dream, can’t I?) on March 1, Apple doesn’t have to relay your payment to me, the developer, until mid-May!  While waiting over 70 days for my money is bad enough, according to this report Apple might be taking even longer.  And since Apple controls access to the platform, the developer is left with a difficult choice: keep waiting while her own bills pile up, or threaten to sue Apple, which could provoke Apple into rejecting her apps entirely, effectively shutting the developer out of the entire platform’s market.

The situation makes me imagine Steve Jobs as the Soup Nazi: “No more millions of iPhone users for you!”  Sure, there are laws against this kind of behavior, but if you’re a small developer, do you really have the time and money to litigate this kind of dispute?  For most people, I think not.

That’s the power of a network access agreement.  However, at some point, the pain could be so great that developers just move to a different platform.

Palm Pre, anyone?

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