Can law tech’s big beasts Lexis and Thomson stay on top in a changing industry?

So ubiquitous have two companies become in legal tech circles that they are rarely discussed directly, just accepted as facts of life, like gravity or air. Those two are, of course, LexisNexis and the legal division of Thomson Reuters, which have over the last 30 years positioned themselves as the dominant providers of the informational ‘plumbing’ law firms require to ply their trade.

For LexisNexis that key moment came in the 1970s when an arm of the Ohio State Bar Association commissioned a project to deliver an information service exclusively aimed at legal research, named Lexis. During the same decade West Publishing was Lexis’ main competitor, using a computer-assisted legal research project that would later be branded Westlaw.

Come the 1990s and The Thomson Corporation – which had retreated from national newspapers and broadcast media in the preceding 20 years – acquired Westlaw Publishing, marking its first foray into the legal information business. In 2008 Thomson acquired media company Reuters, leaving us with the two now familiar legal tech brands.

Such history remains apparent in the pair’s current business lines, though the interdependence of providing information with technology has seen both become as well-known as providers of tech-assisted tools as research.

Yet being accepted as unquestioned elements of the environment means the pair avoid much scrutiny or debate in the profession, at least outside the small circles of legal tech professionals. The duo have, after all, comprehensively repelled the only serious challenge they have seen, Bloomberg’s ill-fated foray into the legal information business during the 2000s.

Yet this status quo is puzzling on one level. At a time when legal technology and its ability to change business models has never more engaged the legal profession, the two dominant providers – both sitting on unmatched troves of valuable data – are rarely considered as direct players in the profession. But can a Thomson or Lexis retain their dominance in the age of start-ups and disruption? And could they – as sometimes rumoured – move from hawking the information backing legal services, to cutting out the middle men (the law firms) entirely?

‘Everything to everyone’

In 2018 Thomson Reuters completed a restructuring that saw it divide its wider business across five arms: tax, corporates, news, global print and legal. That same year law firms formed 68% of the company’s legal segment customers, with revenue in its legal arm increasing 3% to $599m. The revenue from legal dwarfs that of the other two major segments. The corporate arm’s revenues stand at $315m and the tax segment brought in $248m for 2018, albeit with both at higher levels of growth of 5% and 4% respectively.

‘If you had a diagram of LexisNexis and Thomson there would be overlap, but Thomson has practice management wrapped up, whereas Lexis has CRM more tied up.’

Within the company’s legal arm, Thomson offers several core product lines. Of these, it is the provision of legal, regulatory and compliance information that remains the bedrock. The Westlaw research service is its largest product, allowing users to search case law, journals and news sources for particular points of law and be provided with commentary. Westlaw is also used by clients within Thomson Reuters’ corporate segment, and has localised versions across North and South America, Europe and Asia. However, it is the US that absorbs most of Westlaw’s focus, with the latest and supposedly superior incarnation of the product, Westlaw Edge, only available in the US.

Practical Law, meanwhile, defines a second key product line. The acquisition in 2013 of Practical Law Company (PLC) was a major development of Thomson’s European business. PLC employed more than 750 staff at the time, generating around £50m in revenue. The business was set up in the 1990s by two former Slaughter and May lawyers. It was initially focused on legal publishing before it rapidly evolved into subscription products for law firms and in-house teams that produced series of document templates.

Though separately defined, the overlap between Practical Law and Westlaw is something Thomson has recognised and capitalised on, when in 2017 the company launched Practical Law Connect, which tied up the services of Practical Law and Westlaw.

‘For Thomson Reuters there has been a clear effort to refocus,’ says Bryan Cave Leighton Paisner director of innovation solutions Nick Pryor. ‘They’re trying to become less of a patchwork of different pieces and have a more global offering across different jurisdictions.’

The tying up of these offerings reflects the primary source of income for the company’s legal arm: subscriptions. Last year 75% of the legal segment’s income came from subscription products, and for a firm to use Practical Law Connect, a subscription to both Westlaw and Practical Law is required. In 2016 Thomson similarly connected its highly-rated contract automation offering, Contract Express, with Practical Law.

The latest product launch, Panoramic, follows this trend. Panoramic – which for months was developed under the Bond-esque codename Project X – is a pricing service that allows users to see how a case or transaction will be resourced. However, to get the most out of Panoramic, law firms will need pre-existing business management tool Elite 3E, which provides information on the required budget for a matter. Despite the grandiose codenames, not everyone was impressed.

‘For Thomson Reuters there has been a clear effort to refocus. They’re trying to become less of a patchwork of different pieces and have a more global offering across different jurisdictions.’
Nick Pryor, Bryan Cave Leighton Paisner

‘Panoramic was a slightly different service to the modular stuff they’ve done,’ one senior tech professional at a major law firm comments. ‘It appeared to want to integrate all the other stuff. But it relies on having three pillar platforms to get the most out of it, and it was the worst-kept secret they were working on it for some time, and when it came up there was a sense it might have more to it.’

But an idea of where Thomson is weaker needs consideration of where Lexis is dominant. Lexis, which is owned by corporate publishing group RELX, has a similar mix of product lines. Providing legal information too remains the bedrock focus for Lexis, with legal research; document drafting tools; compliance and risk tools and customer relationship management (CRM) services and products the primary business lines.

‘If you asked them they would say that you can get everything from one of them,’ says one City IT head. ‘If you had a diagram of the two there would be overlap with things like knowledge systems, but Thomson has practice management wrapped up, whereas Lexis has CRM more tied up.’

Two related product retreats from Thomson and Lexis respectively emphasise the subtle differences between the two. In January it became public that Lexis planned to step back from the practice management scene with its resource planning system, LexisOne, being sold to Dynamics 365 provider SAGlobal.

LexisOne provided a comparable package to Thomson’s Elite3, however, with considerably reduced uptake. London law firm Wedlake Bell in 2014 adopted LexisOne as its primary practice management tool, however, come February 2018 the firm announced a reversal of its decision and adopted Elite3. Meanwhile, Browne Jacobson also had difficulties implementing LexisOne. Elite3 had around 245 law firm clients in 2018.

However, also in January, Thomson announced it was going to sunset one of the products from the Elite3 suite – CRM platform 3E Business Development, also following a lack of uptake.

Lexis has enjoyed success with its CRM equivalent Lexis InterAction, which provides lawyer-to-client dashboards and aggregates the firm’s client data. In 2017 Eversheds Sutherland announced it would be using the platform as part of its business development following its US merger. National law firm Weightmans also announced it was using the product in January of 2018.

Lexis, meanwhile, has its parent RELX, which provides the company with considerable investment resource. RELX turned over around £1.7bn from its legal offering with Lexis in 2017 with an underlying growth of 2% on the previous year. Legal made up 23% of RELX’s overall turnover. Sixty-eight percent of Lexis’ turnover comes from North America, with 20% coming from Europe. Just over three quarters of Lexis’ income for 2017 came from subscription products, a comparable mix to Thomson. Lexis, meanwhile, employed 10,600 staff across 130 countries in 2017. However, unlike RELX, Thomson has a more blurred demarcation between its numerous customer segments, with many of its product lines available across its tax, legal and corporate lines.

However, in terms of client targeting and geographical priorities, both remain similar. ‘They’re both broadly the same,’ says one former Lexis employee. ‘In-house is increasingly important to both, they just want to sell everything to everyone.’

Old dogs, new tricks

The scale and scope of the two demonstrates how utterly dominant the pair are in legal information and related products. But while the companies are positioned as the big two of legal tech, the question amid a period of flux for the industry, in which providing information and legal services increasingly blur, is their ability to evolve.

‘The difference is agility and speed,’ says Eversheds Sutherland IT director Andrew McManus when asked of the comparison of dealing with the duo against smaller rivals. ‘If you get in contact with [AI-driven document review provider] Luminance, for example, they are very responsive. Some of the bigger providers find it hard to be that agile and quick on their feet.’

Undoubtedly there are drawbacks for clients when dealing with such large providers. Almost all the IT heads Legal Business approached lamented the speed at which Thomson Reuters and Lexis responded to approach. Lexis, in particular, was elusive and unresponsive even on providing any basic comment for this feature. With a law firm, such behaviour would be deliberately evasive, though Lexis-watchers put such attitudes down instead to bureaucracy and disparate silos.

‘They are sometimes frustrating to deal with,’ says one senior research librarian at a transatlantic law firm. ‘You end up dealing with products with local profit centres and accounts, and that doesn’t always make much sense. Sometimes it’s a pain trying to purchase something and a sales rep will redirect you, maybe it’s to do with their remuneration and they don’t want to step on the toes of others and take their work.’

Some law firms argue Thomson and Lexis can be overly ‘salesy,’ which can slow the communication between firms and the companies. ‘Their sales and accountants are basically all the same, very slick and very sharp,’ says another IT head at a City firm. ‘You approach them and they’re always trying to sell you another product. I find their technology officers and architects bright and very interesting. If I had the choice I’d spend more time with them, they’re clever and impressive characters.’

‘If you get in contact with Luminance, they are very responsive. Some of the bigger providers find it hard to be that agile.’
Andrew McManus, Eversheds Sutherland

Pricing remains a common complaint. Smaller providers prove to be more approachable and more fluid in regards to their pricing lists, which can often be changed from an annual subscription model to a monthly fee or a pay-as-you-go model. A client of both Thomson and Lexis said the cost of running both made up the largest proportion of their IT budget.

Thomson’s Contract Express in particular is considered costly. ‘It’s simply too expensive,’ says one technology buyer at a major law firm. ‘They are very expensive, particularly as they try to creep out more and more.’

One IT head at a top 20 UK law firm sums up the duo: ‘It takes a disproportionate amount of investment to make their products work. They have us cornered and it’s very expensive. I hope it changes.’

However, others adopt more nuanced tones: ‘It’s not that they’re expensive, it’s that they’re not flexible,’ says DWF ventures managing director and head of development Jonathan Patterson. ‘You pay one big lump sum per year, so if you use it a lot, it’s not expensive, but if you don’t, it really is.’

For Thomson most of its subscriptions rely upon terms spanning from one to five years but with renewal dates spread across the course of the year to maintain a steady stream of revenue.

Many feel as long as Thomson and Lexis have the legal information business sewn up, the pricing is unlikely to change. But Eliot Benzecrit, director of contract creation start-up Avvoka, argues there is a change at the top law firms. ‘The risk appetite is much higher than it was. For many firms in London if you can complete the due diligence questions, they’ll take a punt.’

And McManus agrees the large providers might not be able to rely on their historical association with reliability forever: ‘We’re a risk-averse industry and what happens when you go to adopt something is the first question is “Who else is using it?” and that makes for a solid bedrock of providers. However, I do think that is changing a bit, finance systems seem to be the last bastion of the truly risk averse.’

‘We’re not a threat’

Unsurprisingly, Thomson sees things differently. ‘We are totally committed to the transformation of the legal industry,’ says Thomson Reuters managing director Lucinda Case.

While smaller, more agile providers have made a tangible impact, over the last 18 months both Lexis and Thomson have made moves to partner with some smaller players who may be viewed as long-term rivals.

‘They have been impacted by the hunger of start-ups. It’s made them rework their process and models,’ says Patterson. ‘They have recognised that to offset that they have to change with things like the lab team at Thomson Reuters, which is a separate entity to the main product lines and they have more flexibility and freedom.’

‘It’s not that they’re expensive, it’s that they’re not flexible. You pay one big lump sum per year, so if you use it a lot it’s not expensive, but if you don’t it really is.’
Jonathan Patterson, DWF

Those looking for a sense of Thomson’s direction highlight the sale this year of its legal process outsourcing division, Pangea3, to Big Four accounting firm EY. Nine years ago Thomson’s acquisition of Pangea3 was touted in the industry as a highly significant move, signalling its shift from provider of information and technology to the legal industry into a legal services provider. Indeed, many at law firms have argued that Thomson and Lexis could be potent forces in using technology to directly shake-up the legal industry as New Law players.

However, a lack of synergy between Pangea3 and its primary business, alongside some uncomfortable realities, saw the technology giant offload the business to focus on its core offering. It also dealt with the obvious potential conflict of a situation in which Thomson started competing with its law firm customers.

‘Sometimes with the alternative legal services provision it created some very uncomfortable conversations with law firms,’ comments Case. ‘It feels a lot cleaner and simpler now. We’re not a threat.’

‘It has freed up a lot of cash for acquisitions,’ Case continues. ‘We have a focus on inorganic and organic growth. Acquisitions are a key part of the strategy and you can expect them. But we’re not buying casinos – or law firms.’

And acquisitions have proven successful so far, with the buying and rebranding of smaller companies, as was the case with Contract Express. Meanwhile, both Thomson and Lexis have expressed a growing interest in the legal start-up scene, focusing on partnerships as well as acquisitions.

‘Thomson Reuters in particular seems open to collaborating with smaller companies,’ comments Pryor. ‘They have a wealth of information, and we have engaged with start-ups that we have told would benefit from that.’

Acquiring start-ups and smaller companies can still raise other strategic questions. How integrated these companies become remains unclear, and observers are unsure if the aim is to acquire and fully integrate or to become an umbrella for disparate products.

‘With acquisitions it’s all really about protecting the value of what you’re buying,’ Case argues. ‘With Contract Express we integrated it really early, but strategically we want to protect the value of what we buy.’

Conversely after Lexis acquired Silicon Valley-based legal analytics provider Lex Machina in 2015, the brand has remained basically untouched. The bolting on of Lex Machina’s analytical capabilities to Lexis’ wealth of data remains an indication of how both companies might behave moving forward.

‘The larger providers have legacy parts of their businesses that hold a huge amount of data,’ says Jonathan Armstrong, partner at Cordery Compliance, which is partly-owned by Lexis. ‘If you look at something like litigation predictability and AI, you can’t make predictions without that data. Thomson and LexisNexis have the big pots of data, so they’ll always be part of the equation.’

One question is whether both Thomson and Lexis choose to provide a layer of analysis over that data. Through Cordery Compliance, Lexis created the joint venture Breach Navigator, which uses two algorithms on top of existing data to assess the severity of data breaches before then gauging whether the breach needs to be reported to regulators.

‘The risk appetite is much higher than it was. For many firms in London if you can complete the due diligence questions, they’ll take a punt.’
Eliot Benzecrit, Avvoka

Thomson, meanwhile, entered the congested incubator scene with its Thomson Reuters Labs. Even if such plays are partly marketing, many start-ups will see Thomson and Lexis as a potentially lucrative exit. Most recently Thomson partnered with Singapore-based knowledge management system INTELLLEX, which joined the company’s incubator in February.

If ensuring the position of the two giants in a fast-moving tech scene cannot be taken for granted, many believe their endurance will ultimately come down to the quality of their staff. Armstrong believes that Lexis has a calibre of individuals that provides a bulwark against malaise setting in: ‘We have two Lexis members on our board, and our interactions aren’t stuffy corporate ones, they’re lean, hungry and fleet of foot.’ Lexis managing director for the UK and Ireland Christian Fleck, likewise, remains highly-rated in law tech circles.

Thomson also has some prominent individuals. Bill Burke, director of product management, and Jim Leason, the company’s customer proposition lead, are both well regarded. Meanwhile, the architects behind Contract Express are all considered sharp operators.

Recent years have shown that the pair struggle as institutions to make the cultural leap required to materially shake up the industry, either with cutting-edge automation or in becoming themselves service providers. But, having endured for decades as dominant players, they have the resources, brands, data and staff to remain very formidable players. The forces of disruption are going to have to do a lot better at living up to their sales pitch if they are to become a genuine challenge to law tech’s reigning champions. LB

thomas.alan@legalease.co.uk

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