The Long-Tail of the Online Software Industry

The long-tail concept of the long-tail was first coined by Chris Anderson, editor-in-chief at Wired magazine. In 2004 Anderson said: “The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers.”

Like other digital products, software is increasingly being delivered over the web. Until recently business software developers either distributed their product through a network of VARs (value-added resellers) or sold it directly, which required flying implementation consultants to client locations for installation and on-site training. Direct Sales were very costly due to staffing, travel and splitting revenues with VARs. When it came to doing business with resellers (who often only covered a small territory), only the best sellers which appealed to the widest possible set of customers, could be supported. This explains why customers have been getting one size fits all software that is then configured to their specific requirements.

Historically software implementation could often be characterized as putting square pegs in round holes. There are thousands of cases of failed implementations and numerous law suits against software companies for not delivering as promised. A veteran enterprise software rep once described getting a new name account like handing them a grenade and walking away with the pin. It was just a matter of time until the whole thing blew up. Delivering software online, it provides a greater opportunity for niche applications to be developed and sold. The costs of distribution are much lower as software developers can sell and support their software directly with little time and cost lost to travel.

Further as an online service customers always have the latest version of software which means the developer does not have patch and support past versions of software. Cost of ownership is also reduced for customers who do not have buy applications servers and software, and hire additional technical resources maintain them.This difference between configurable mass-market software (the enterprise model), and niche software can be found within the legal industry also. In an effort to meet software needs of the legal industry, established software vendors have released enterprise collaboration portals configurable to meet all legal workflow processes (like the old enterprise model). Not surprisingly many of these extranets have failed to live up to expectations.

Transactional law firms are a niche market. There are probably only 200-300 firms globally with a strong enough focus on complex transactions that would warrant using a specialized online transactional deal room. With the increased efficiencies of delivering online applications, businesses like Firmex’s Deal Room designed to specifically to manage transactional law business process, has emerge as part of the long-tail of new software products. Unlike other portal applications Firmex can focus just on transactional process to provide law firms with a powerful yet simple to operate private-label deal room at less cost than other alternatives.

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