After the excitement of last night’s news about Litera buying Kira Systems, its 12th acquisition funded by the massive private equity fund, Hg, Artificial Lawyer paused to consider something: could we one day see just one legal tech platform dominate the market?
Building a Legal Tech Empire
First, before we go into this, we need to ask: is even the concept of a single dominant player for legal tech needs theoretically possible? The short answer is: yes, it is possible. Whether it’s probable is another matter.
Unlike law firms, there is no natural barrier such as client conflicts that prevents an organisation building something that is simply so useful, so convenient, so all-encompassing, that many law firms eventually decide to move over to it.
What Would You Need?
Now, this is where the challenges start. Litera, for example, with Hg’s backing, has done an incredible job building out a platform that goes from document production, to transaction management, to operational knowledge management. There is no reason why they cannot do another dozen acquisitions in the next two years. As long as Hg (and now to a lesser degree Insight Partners) are willing to keep supporting this expansion – and let’s face it, the platform strategy has very much been driven by Hg as much as it has been by Litera’s management – then it can keep expanding and adding on pieces to build the ultimate platform.
But, this is where it gets tricky. If you are going to build something that everyone wants, you need to work with what is already there, and that’s a challenge.
DMS – you’re going to need a very well developed DMS company onboard that a large part of the market already uses. Buying iManage or NetDocuments is not impossible – and who knows, maybe Litera is talking to them right now. But, you’d have to have one of these or something as good.
Legal Research – Then, if you’re serious about an ultimate platform we cannot ignore disputes. And if we do that then we need to cover legal research. This is an even bigger challenge because LexisNexis and Westlaw at Thomson Reuters, are very much not for sale. To buy those you’d kind of have to buy the entire legal division of those corporate giants, and even large PE funds might balk at that – not that these two giants have ever suggested they’d even entertain such an idea.
There are others out there, for example, vLex and Bloomberg Law, but again these would be massive purchases, especially given how rare large legal research groups are. It’s just a really consolidated part of the market.
There are other bits and bobs you’d want to add to help law firms, such as perhaps tools to help with expert system building and doing more of the data plumbing, but that should not be impossible for a platform with deep pockets. How you might in the future handle smart contracts, if and when they take off, could also be tricky, but not a show-stopper either.
What About the Client Side?
Another fly in the ointment is the buy-side. What about the clients? Their needs are a little different. They will have a strong focus on CLM, and on extracting data from contracts for the overall business, i.e. not just legal needs. They will want lots of support with compliance as well. And also, because the platform has a lot of tools made for law firms, some of those capabilities may not be of use for corporates, e.g. most corporates are not going to do their own due diligence reviews, so tools that help there are not something they’d want to pay for.
So, this complicates things, but if you were ambitious enough it should not stop the ultimate platform.
And People Too?
And would you then add in an ALSP division, lawyers on demand, consultants/legal engineers? That’s possible, but it would then no longer be a super-scaleable software company. It would be a mix of services and software, and that’s a harder business to run, and sell when one day whoever the current owners were decided to sell on their incredible asset, or if they wanted to do an IPO.
I’d guess that the ultimate legal tech platform would have plenty of close partnerships with ALSPs, consultants and others, but would not have them as part of its own business. They’ll have enough to manage as it is.
(And – see below – there would have to be some kind of product support service, but that is different to offering professional services in general as part of the platform.)
Pricing and Market Fit
To make this work you’d need a flexible pricing model that allowed all law firms and all inhouse teams to get involved, just as Microsoft can be used by a student, or by a global corporate giant.
An ultimate platform needs to have a way of allowing everyone onto it. A small law firm can perhaps use just 30% of it, while a global law firm may use nearly all of it for most of its many needs, and the same goes for the breadth of needs that SMEs and large inhouse legal teams will have.
You’d also need sales people and product support teams to work with this vast array of clients, often with different needs. But, again, the massive tech companies such as Microsoft have been able to create a system that can work with single users, offering them basic support, to mega-users who work with accredited consultants and handle really complex matters.
And, of course, it would all have to fit perfectly together, and work perfectly, whether you were a small user, or a mega-user of the platform.
These are all big challenges. But again, not impossible to solve, if you have the time, money and will to do it.
Is a single dominant ultimate platform possible in the legal tech world? Yes. Absolutely. Will it happen? That’s hard to say. Much depends upon the willpower of those involved and the depth of the pockets funding it. But, yes, it could be done – at least while several key components of this potential platform remain independent businesses.
Would this spell the end of all the other legal tech companies, especially startups? No. Microsoft pushed most other word processing systems to the fringes, but it hasn’t stopped innovation and startups. Smaller companies would keep going and would fill gaps, pioneer new niches, and some of course would then get Hoovered up. But more would arrive as tech and new needs evolved.
Last word: is Litera trying to be this ultimate platform? Perhaps not quite as extremely as explored above, but certainly the M&A project is not over yet. How far they can get will be fascinating. Moreover, what the likes of Thomson Reuters and other big players do in response will also be very interesting to see.
By Richard Tromans, Founder, Artificial Lawyer, August 2021.
Main pic: the Pantheon in Rome, commissioned by Marcus Agrippa during the reign of the Emperor Augustus, in what were the early days of the Roman Empire. Then it was rebuilt by the Emperor Hadrian.