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Now is definitely not a good time to be a legal technology startup company. Wealthy 800-pound gorillas like Microsoft Corporation, West Group and Lexis Nexis still dominate a lot of the market. Venture financing has all but dried up. And law firms in mid-2001 are slashing their technology budgets. In this climate, technology startups had better be lucky or good. Gaithersburg, Md.-based Scout Solutions Inc. started in March 2000, just before the equity markets took their first big tumble. The company didn’t launch its flagship, a Web-based contact management system called Aptus, until last fall. But already, Scout has sold Aptus to more than 15 law firms, with more in the pipeline. “I’m not surprised the company is doing as well as it is,” says David Craig, a legal technology consultant in the New York office of Houston’s Baker Robbins & Co. “Aptus is a nice product.” Even in this bearish economy, a lot of law firms are spending money on relationship management systems (RMS). Think of them as giant, firmwide Rolodexes. Each lawyer dumps his or her contact information into a centralized database, which then organizes the entries and offers them to others at the firm. Give a little, get a lot, the theory goes. A litigation partner may give up the names of her hard-won contacts at Raytheon or Boeing but gain access to the address book of the municipal bond partner who’s tight with Richard Riordan and Gray Davis. “Making sharing part of law firm culture is what [RMS] is all about,” says James Dobrzeniecki, the chief information officer at Richmond, Va.’s McGuireWoods, a user of Aptus. “This is the first kind of product that’s forcing this type of change.” Or at least trying to. Lawyers at many large firms may all share a single letterhead, but not much else. They guard their phone and address books the way Coca-Cola guards its recipe. Software can only do so much in breaking through this barrier. Oak Brook, Ill.-based Interface Software Inc. sells a RMS product, InterAction, to large firms. It struggles with this cultural issue constantly. So does Scout. But company officials say that because Aptus is Web-based and easier to use than InterAction, lawyers will be more inclined to share their contacts. “Lawyers can input their contacts anytime, anywhere,” says Stuart Hall, Scout’s director of business development. “We think that makes a big difference.” “Sure there’s been some struggle trying to get our attorneys to use it,” adds David Worth, the IT director at Columbia, S.C.’s Nelson Mullins Riley & Scarborough, another Aptus user. “But it’s a simpler, more intuitive platform than InterAction, and our lawyers are really starting to take to it.” Worth says that his firm chose looked at both Aptus and InterAction. It ultimately choose Aptus because it was less expensive and easier. Because it’s Web based, technicians don’t have to install it on each desktop. Rick Klau, Interface’s vice president of legal markets, says that Scout mischaracterizes InterAction. Although InterAction started as a desktop program, there is now a “very versatile Web-based model,” he says. Many firms want both options. Says Klau, “we offer a choice where Scout doesn’t.” Klau acknowledges that Aptus is less expensive than InterAction. Aptus will generally cost less than $200 a seat, while InterAction generally costs slightly over $300. But, Klau adds, “Contact management is not about easy installations or saving a few dollars in a soft economy. We’ve been doing this for five years, and we know the market better than anyone.” Among large firms, Interface is Scout’s only substantial competitor. InterAction has a 50 percent share of the Am Law 100 market, with the nearest competitor being Microsoft’s comparatively lightweight Outlook, according to the most recent AmLaw Tech survey. In the mid-sized and small-firm market, both Albuquerque, N.M.’s ProLaw Software and San Francisco’s Cole Valley Software Inc. are players. ProLaw may be the big wild card in the market. On Aug. 23, ProLaw announced it would be acquired by West Group, the big gorilla of legal technology. If West decides to compete aggressively in this market, watch out. Scout’s founders didn’t just fall off the turnip truck. Two of the founders, a married duo named Brett and Janice Balmer, met a couple years back while working for the legal division of SRA International Inc., a large Washington, D.C., technology consultant. After SRA left the legal marketplace, the Balmers looked elsewhere. The pair has the knowledge and pedigree to have made a strong start. But the end game is a long, long way off. For now, the Balmers have to knuckle down and get used to moving forward slowly, seat by seat by seat.

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