The law firm of the future: Thomson Reuters

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Earlier this month, I wrote a blog post called “Destroying your own business” that explained why law firms, in order to adapt to the emerging marketplace, needed to blow up their own business models and essentially start over. I also lamented the fact that hardly any law firm was willing or able to do this. I asked, rhetorically: “Where are the law firms buying out LPOs and bringing them in-house?” As it turned out, it wasn’t a rhetorical question; I was just asking the wrong people.

Late last week, Thomson Reuters rocked the legal world (or at least, this corner of it) by announcing it was buying legal process outsourcing provider Pangea3. Coming on the heels of Norton Rose’s merger with/acquisition of firms in Canada and South Africa, it amounts to one of the most momentous weeks in recent marketplace memory. Neither side confirmed the price of the Pangea3 purchase, although sources estimated it between $35 and $40 million, and that would be a good price for Thomson. It’s difficult to overstate just how important this purchase is — it will transform at least two legal industries and quite possibly the whole marketplace. Here’s a quick summary.

1. The legal information market (formerly legal publishing) has been thrown for a loop. It’s been clear for a while that the end of “publishing” per se as a major product category was drawing near, so companies like Thomson and LexisNexis have been branching out into complementary areas. But bringing an LPO into the mix is a whole different story — it’s a gigantic gauntlet that other companies will have difficulty picking up. As Legally India points out, it’s difficult to find any trace of the LPO that Lexis set up in Chennai years ago. Thomson has taken a major step towards fully redefining the legal information sector, and everyone else will have to adjust and respond.

2. Equally, the LPO sector must be in some serious turmoil. This is still a very young industry — some of Pangea3’s original venture capital investors were among those Thomson bought out — and although several of the biggest are pretty well capitalized, Thomson is a financial colossus. If I’m an LPO competing for the same types of clients as Pangea3, I’m suddenly up against pockets much deeper than anything I’ve had to deal with before. This could drive a series of mergers within the industry (a consolidation process that’s already started with UnitedLex’s purchase of LawScribe) or a flight to find similarly global and well-financed partners or buyers. Pangea3’s founders were clear: they went looking for capital, but realized they needed a strategic partner.

3. The law firm marketplace cannot help but take notice of this: the company that used to sell lawyers their textbooks and caselaw databases is now, in effect, competing with them in the delivery of legal services. LPOs don’t need to exist in an either/or relationship with law firms — smart clients are using both, and smart firms and LPOs see each other as partners. But it’s also a fact that most law firms view LPOs, if they view them at all, as a threat to their ability to leverage billable junior work out of associates and “train” those associates (I use the word advisedly) in how deals and cases are structured. Law firms that thought of LPOs as a distant entity need to think again — especially because, with Thomson’s assistance, Pangea3 is going to open more offices in the US.

But for my money, the main event here is the transformation of Thomson Reuters from a company that provided legal support services to law firms and law departments into, well, something brand new. It’s not clear yet that we know what we’ve got on our hands here. Thomson has so many lines plugged into this marketplace that it is on the verge — it might already have tipped over — of changing from an information services company into a whole new beast.

Here’s a quick list of the companies, products and services that operate under the Thomson banner:

  • WestLaw: Legal research, legislative and case law resources
  • West KM: Knowledge management services for lawyers
  • ProLaw: Law practice management software
  • Serengeti: Legal task management and workflow systems
  • Elite: Financial and practice management systems
  • FindLaw: Website development and online marketing
  • Hubbard One: Business development technology and solutions
  • Hildebrandt Baker Robbins: Law firm management and technology consulting
  • GRC Division: Governance, risk and compliance services
  • IP Services: Patent research and analysis, trademark research and protection
  • TrustLaw: Global hub for pro bono legal work
  • Pangea3: Legal process outsourcing services

Missing from that list is BAR-BRI, the bar exam training and preparation company that Thomson purchased several years ago — and that, at the same time as it announced the Pangea3 purchase, Thomson also put up for sale. Above The Law drew some reasonable inferences from the fact that Thomson is getting out of the business of helping US lawyers enter the profession and is getting into the business of competing with the firms that would be hiring those lawyers. In terms of a clear signal about where Thomson thinks the marketplace is heading, it’s difficult to beat that.

Thomson has 55,000 employees in 100 countries worldwide, and although only a minority of those employees are in the legal area, that is still a number that dwarfs the world’s biggest law firms and is within shouting distance of the accounting giants that dominate the professional services landscape. Most importantly, Thomson is in the business of information and systems, and those are two of the keys to the future development of this marketplace. Peter Warwick, Thomson’s president and CEO, says that his company’s mission is “to help the legal system perform better, every day, worldwide.” Right now, Thomson is doing everything within that system other than the actual practice of law — and in a post-Legal Services Act age, Pangea3 is an awfully big step in that direction.

Something very big is going on, right now, in the legal services marketplace, and Thomson just became a major part of it. Get ready for a constellation of domino effects throughout the marketplace in response — and try not to stand in the way of any oncoming dominoes.

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7 Responses to “The law firm of the future: Thomson Reuters”

  1. Carolyn Elefant

    As you know, I am generally very bullish on solo and small firm practice, and positive about our ability to overcome hurdles. But I agree – this announcement is a game changer – and it scares me a little, particularly the part about Pangea opening up offices in the US. With offices in the US, why couldn’t a couple of Pangea attorneys get licensed here and set up a national, VLO for consumer services? The Pangea lawyers could create forms and processes that the LPOs would handle. They could charge rates competitive to Legal Zoom but with the added value of attorney involvement. If that were the case, I simply do not see how a solo or small, stand alone VLO-only (i.e., without any in-person presence) could compete. In addition, now that Pangea effectively has free access to WestlawNext top of the line products, they can offer higher quality legal research services at lower rates.
    Moreover, I don’t think it’s any coincidence that this merger is taking place right on the eve of the Legal Services Act effective dates. Even if Pangea lawyers aren’t barred in the US, seems that the Pangea/Westlaw combination can serve as the “contractors” for a Tesco Law model.
    Yet even as I am nervous about this (and I do have some thoughts on how to respond, always have to be a step ahead), I have to agree that this is an absolutely brilliant move. At a time when law firms are floundering, it is refreshing to see a large institution with a “why didn’t I think of that first” kind of idea. I just wonder where this new combination will find lawyers up to the task of providing advice. I can’t imagine that it will be in most of today’s big law firms.

  2. John Flood

    Excellent post, Jordan. I suspect many lawyers could read this and not understand the significance, thinking “This has nothing to do with me in my ivory tower law firm.” How wrong. I wonder how long it will take.

  3. Ronda Muir

    Great synthesis of a number of currents that this combination is setting in motion, Jordan (or is it Aric?). Another aspect to consider is what this combination will do to Hildebrandt’s legal consulting business. Hildebrandt will be in the position of advising law firms that are confronted with competition from LPOs, including one of Hildebrandt’s sister companies. Where will the loyalty lie? Will Hildebrandt be seen as a feeder to Pangea3? Will it be able to help clients find the weakness in LPOs’ approach/product and profit from outcompeting them? Stay tuned.

  4. Legal Aid Solicitors

    In Scotland, as legal aid lawyers serving private clients with criminal defence, we can see ourselves that the high-street law firm is no longer the same as it was twenty years ago. Although some business does come from word of mouth and people recognising our brand from our street presence and local advertising, we can foresee that in 5 years’ time, if a consumer is looking for a legal service such as legal aid work, at least in Scotland, they will search Google for relevant keywords in the first instance.

    In terms of the comments re communication and legal services other than the practice of law itself, some very pertinent comments. Something big is, indeed, happening in the legal services market, not just here in Scotland, or in the States, but globally with the advent of web 2.0 or perhaps web 3.0. In fact, I think I’ve seen law 2.0 and law 3.0 mentioned…

  5. Lawrence Atkinson

    Excellent post, well said. Anyone who cannot see what’s on the horizons for both Thomson Reuters and Lexis Nexis must not be looking too hard…
    Exciting times, exciting opportunities for those prepared to go forward..

  6. Beltrami Solicitors

    “Something very big is going on, right now, in the legal services marketplace, and Thomson just became a major part of it.”

    Some very interesting thoughts here – thanks for sharing. It’s important for every law firm to be aware of the best ways to obtain and distribute legal information.

    Looking forward to further posts.

    Best wishes, Beltrami Solicitors Criminal Lawyers Glasgow

  7. Patterson Law

    It seems that the drive to build mega Lawyer practices is continuing the world over. I can’t help but think that this isn’t always a good thing for the customer who must begin to lose the personal connection with their representation?

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