When a SaaS Chooses A Law Firm – Is Smaller the Better Way to Go?

So the dust has settled and Software as A Service Providers (also known as “on demand” software), are becoming known as the software delivery model of the land.  This is where software and its associated data are hosted centrally, typically in the Internet/Cloud. (Sometimes this service involves firm-specific, on-premises software.)  Wouldn’t you like to know what sort of law firm they’d be interested in using?

To flesh this topic out a bit, contemporary SaaS companies typically develop and manage their own software and provide them to “tenants”–as opposed to managing and hosting third-party independent software vendors’ software, as earlier application service providers did.   Used mostly as business applications, SaaS companies represent a large chunk of worldwide software sales.   By 2014, 16% of those worldwide software sales will be provided by SaaS applications.  


With all the disseminating of information that will be going on–as these companies seek to implement “best practice” scenarios in the field of software–there are bound to be some legal ramifications coming down the pike.  It might therefore be worth examining how these guys select a law firm and, similarly, how they view legal fees.   

OpenView Labs “invest[s] in and partner[s] with companies to help them become large, dominant players”.  They target “expansion stage software” and internet companies. Jeremy Aber, Senior Advisor, is a software licensing attorney who has also worked in-house at two software companies.  In a recent post, he explains that “one law firm might not be the right fit”.  He also likes smaller firms for SaaS groups.

Rather than hire a firm they’ve heard of through their social circles—or, for that matter, settle for an attorney who seems to know something about IP or software—the up-and-coming company should consider their attorney “the most outsourced function of any small business”.   At the beginning, that sort of attorney may be all right, but, as the company grows, they need to rethink their choice.  

“A better way to handle this is to hire several specialized solo or small firms,” he believes. Because of their specialization, these firms are able to provide better advice and, because of their size, cost savings. This, he explains, also applies to employment matters and intellectual property issues. 

Aber offers the one exception: if the company is looking for outside investors or venture capitalists, they’d be better off with a corporate lawyer in a medium-to-large law firm.  

As to litigation, the author recommends that, due to the increase in the hourly fee for partners in large law firms—from $500 to $700 in the last decade—small firms are better.  When it comes to larger firms, Aber notes that: “Those firms are, in essence, say­ing to the legal buyer of their ser­vices that they only want to rep­re­sent large com­pa­nies with large bud­gets.” He admits to generalizing, but says that, since some of the smaller firms are spin-offs of larger firms, you may, in hiring a smaller firm, even get a top-notch law firm lawyer at a much more affordable rate.  

He then goes on to suggest that, in litigation, you may not need the best attorney money can buy: what you may, instead, need is a good one with “reasonable hourly rates”—he mentions $200-something as a good fee—who is attuned to the results you are looking for.  This, he says, is because 90% of all such cases settle before going to trial.  “The tac­tic is to starve the oppo­nent of resources, to ensure a win.” 

To read more, go to: http://labs.openviewpartners.com/how-to-hire-the-right-law-firm-and-manage-legal-fees/ and  http://en.wikipedia.org/wiki/Software_as_a_service

Graphic courtesy of OpenView Labs

-EM

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