11/29/10

Thomson Reuters Competes With Its Customers?

Jordan Furlong brings up an interesting insight in his recent post, "Law firm of the 21st Century.” He notes “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.” He’s referring in large part to the recent acquisition of Pangea3 by Thomson Reuters (TR). I think he is sounding the right alarm bell here. I’ve been surprised we haven’t seen more of an out-cry over this. Maybe that is yet to come.
For years I’ve kept an eye on both TR and LexisNexis (LN), waiting to see if they will cross this line. In the past I even brought it up with reps from both companies. I suggested there must be some temptation to go around lawyers and sell directly to clients, cutting firms out of the middle so-to-speak. In the past, these comments were met with quick and decisive responses that such a move was not part of their strategy.
The Pangea3 acquisition noted in Jordan’s post deal got me thinking about a number of moves by TR that suggest this opinion may no longer prevail there. Some things to consider:
  • As posted on 3 Geeks, TR is cutting services to large firms. Laying off the people who sell and service law firms indicates, at a minimum, a shift away from them.
  • Last year I had to remind a consultant connected to TR that we were their client, not the companies we represent. I had seen too many reports, articles and comments from consultants on how clients can cut their legal fees using AFAs. In fact, I am still waiting for consultants to approach firms on how to deal with AFAs. Instead these consultants are going around firms, represent clients' interests against them.
  • In October TR acquired Serengeti. This is a matter management and e-billing tool for clients. I repeat – this tool is for clients not law firms. It serves as “a system that helps in-house counsel control legal spending.” Or in other words, cut law firm revenues.
  • This month, TR buys Pangea3 which sells legal services to clients in direct competition with law firms. Over 90% of the press I have seen on LPOs shows them selling to clients – not law firms. I understand some law firms are hesitant to be public about using LPOs, but either way, clients are the buyers right now. The best example is clients using LPOs for first review in discovery. Although this saves clients money – this also is work that used to go to law firms. In this instance, TR has completely crossed the line into competing with their customers.
Now – do I understand why TR is doing this? I understand there is money to be made. However, I also understand whose market they are taking.
I know all too well clients are trying to save money on their legal spend. An example is clients growing refusal to pay for online legal research costs. So this cost is now hitting law firms’ bottom line. With so many firms looking to save money, I wonder how they will chose which primary law provider(s) to use?
TR provides an excellent online legal research tool. But they may also be providing law firms with an easy decision on which duplicate subscription services to eliminate. Whatever happens, law firms should wake up to what's going on in the market and know who is there to help them ... and who is not.

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3 comments:

dbltall said...

The same thing has happened to accountants, when Intuit bought Lacerte (professional tax software) but heavily markets TurboTax which is in direct competition.

I now use Drake, which makes professional software only and has a stated policy of not cannibalizing their professional clients by getting involved with consumer software.

Marge said...

We've been trying to warn our law librarian colleagues for years that both Lexis and Westlaw exhibited long term strategies that compete with the services of law librarians to no avail. Our company provides library services to small to mid-sized firms that can't afford a full time staff but need professionals in some capacity. Over the past 5 years, however, both Lexis and Westlaw have been propagandizing to law firm administrators that trashing the library is something all firms are doing despite the fact that it isn't true. Once they've convinced firms to get rid of books, the next to go are the librarians. That sets them up as the providers of information to the firm. We felt that once they bought all the little publishers and digitized everything, the next step would be to provide legal services as well. Anyone who ignores this strategy is kidding themselves.

Nina Platt said...

Lexis has been competing with librarians for some time now. See http://corporate.lexisnexis.com/research-project-based-consulting/.

 

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