In a somewhat unexpected announcement, Clio, the giant practice management software company, has acquired vLex, the legal research and AI company, to the tune of $1 billion, according to a report in the Artificial Lawyer.
Coming on the heels of the recent announcement of the “strategic alliance” between Harvey and LexisNexis, it would seem that the legal tech world is in upheaval. That may indeed be true but it’s also true that there are some sound reasons for the recent developments. These reasons go to the heart of the needs and wants of lawyers and legal professionals.
When I wrote about the Harvey/LexisNexis alliance last week, I noted that Harvey had succeeded by correctly gauging the needs and wants of its customers. That may also be true of the Clio acquisition.
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Diverse Markets
First, it’s important to keep in mind that Clio and Harvey to some extent have traditionally served different legal markets. As I said in my recent post, Harvey began by focusing on Biglaw and only recently has been looking at the smaller firm market. Clio has long been the practice management platform for smaller law firms although, like Harvey, it’s now looking at moving into the midsize and even bigger law market.
Both companies have expansion in mind. That means they need more diverse sets of tools. Ironically, the deals could strengthen each company’s position in the market traditionally served by the other.
AI and a Firm’s Internal Materials
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But that’s only of tangential importance. Here’s the more important thing. As I have written before, so much of what law firms (and legal departments for that matter) want out of AI is the ability to access safely internal materials. To find best practices and prior works and leverage them. As said in a post last year:
Retrieval before AI technology, even if the material was housed someplace, was at best clunky and hit and miss. It took time. Now, it’s instantaneous. And the advantages are pretty significant, too, ranging from generating better quality documents, creating documents that bear the firm’s unmistakable aura and culture, and better associates’ training.
So the ability of Harvey’s AI and now vLex’s AI, Vincent, to access those internal materials and provide instantaneous responses is significant. Presumably, the Clio-vLex combination will enable Vincent to work with Clio’s system to access just these sorts of documents and materials not only across public documents but also across internal data bases as well.
Moreover, the Harvey alliance and Clio acquisition will provide customers with the ability to have the AI tools work on internal documents but also on an entire legal data bank that not only offers legal research but also drafting help and suggestions based on an even larger data bank of materials.
The One Stop Shop
More importantly, presumably the combinations will provide tools that will work seamlessly. The new combinations will thus create a one-stop shop for the tools and services a firm might need to leverage its own content and the more public legal universe both substantively and administratively. This one stop will enable things like case management, document summarization, and even brief writing in one single platform. The tools will also leverage content for administrative non billable tasks like billing and invoicing.
The key: the combined tools will eliminate the necessity to deploy separate tech solutions to solve various individual problems. A non-unified approach creates all sorts of problems and frustrations. Lawyers don’t like moving from platform to platform. It’s a frustrating pain point. Frustration means lawyers won’t use some of the tools for which the firm is paying. They disrupt work flows.
As I wrote previously, “Law firms don’t like selecting vendors to begin with. They aren’t good at it. Firms have trouble trying to make different vendors’ products work across various tasks. It’s clunky and time-consuming.” Waste of money, waste of time, less than ideal work product.
I wrote then that if or when a vendor could combine all these functions in one platform, it would be on to something because it would address a real pain point. It looks like that’s exactly what Harvey, LexisNexis, Clio, and vLex are doing.
The Cost
But of course, everything has a price. I have also written before about the perils of this kind of market maturation when I noticed consolidation trends, where justification of expenditures extracts a price over service. Paying a billion dollars for something places a lot of pressure for quick returns. I have also talked before about the consequences of moving products away from the lawyers/entrepreneurs who founded the startups that made the products and toward those who may not have the same feel.
I have noted the warning of commentator Cory Doctorow of what he calls “inshitification,” a process where, as a company grows, it focuses less on the users it originally served and more on monetization. That’s a real risk here. We now have two huge players in the space. (Well, one and a half if you consider that the Harvey/LexisNexis deal is an alliance not a combination. At least not yet.) These two entities will have considerable market power and make in much harder for others to thrive and break in. So, while the long-term impact is not yet known, there is reason for concern.
One Final Thought
There is one silver lining. The Harvey/LexisNexis deal is a little concerning because it creates such a potential advantage on the firms that use both sets of tools, primarily Biglaw. The Clio/vLex combination, though, may offer smaller firms similar capabilities, particularly for those who already use Clio. While the Harvey/LexisNexis alliance favors Biglaw, the Clio/vLex deal could help level the playing field for smaller firms.
What’s Next?
Predicting the future is never easy. But suffice it to say that the market pressure on other vendors is now stronger, especially for those who offer products that only fill a particular need. The move is toward consolidation, capitalizing on the desires of customers to have one-stop solutions. That’s probably not going to diminish anytime soon.
It Had to Happen
These deals were driven by the demand and desire for one-stop platforms to leverage AI tools. Recognition of this fact will no doubt propel others to do the same.
Stephen Embry is a lawyer, speaker, blogger and writer. He publishes TechLaw Crossroads(Opens in a new window), a blog devoted to the examination of the tension between technology, the law, and the practice of law.