As we explore how change is likely to unfold in the "slow-changing" part of our society, one clear theme is the stress point between the rapid way that management of information is changing versus the slower pace at which the way people-delivered services are changing.
This is especially true in the realm of professional services, such as law. This week we interviewed David Curle, a top analyst of the legal and professional information market. We were lucky to catch him in the wake of a week with several significant developments, including Google's introduction of Scholar for the legal market.
1. Can you give us some background on the professional information market? What is the size and scope? The law specific market?
Outsell sizes the entire information industry, covering 11 industry segments including Legal, Tax and Regulatory Publishing; B2B Trade Publishing; Scientific and Technical Publishing; News; and Search and Aggregation, among others. The companies in the industry have aggregate revenues of about $365 billion in 2009. Our preliminary figures show that the industry's total revenues declined by 8.4% in 2009. Only the search, education, and STM markets kept their heads above water with positive growth; the industry basket cases were B2B and News, which each declined by over 19%
Against that broader context, the Legal, Tax and Regulatory segment has about $14.5 billion in revenues. It was in the middle of the growth pack with a revenue decline of about 1.8 percent in 2009; the previous year, the segment grew by 6.5%, which was a fairly typical growth rate for recent years. Over 70% of the revenues in the segment come from three global information conglomerates: Thomson Reuters, Reed Elsevier's LexisNexis unit, and Wolters Kluwer.
2. Can you tell us about three key trends?
One macro trend worth watching is that in the business world, legal decision-making is moving upstream. By that I mean that corporate counsel are thinking twice about turning so much work over to the firms; they are using technology and collaboration to manage more legal work in-house. Companies are also using technology to embed more legal knowledge into the business workflow, so that legal decision points are resolved on the spot. They are reserving routine work for themselves and only passing on the specialized, high-risk stuff to the law firms. Compliance and risk management are becoming bigger fields; the idea is to prevent legal fires, not just put them out.
Another really interesting trend is that solo and small firm lawyers now have, thanks to technology, access to vastly better, and cheaper, set of tools than they did a few years ago. A firm can set up its entire practice management suite quickly and cheaply using Web-based services such as RocketMatter; it has access to a handful of cheaper legal research services such as Fastcase; it can practice law online using delivery platforms like DirectLaw; and it can market itself more effectively using the Web, search engine optimization techniques, and social media. That's a relatively big shift in the balance of power that I think will lead to better legal services for the consumers and small businesses that use those firms.
Finally, collaboration and peer-to-peer technology will help legal customers help themselves. Lawyers, accountants, and compliance professionals of all types have more resources available today to help them obtain the information they need from peers and colleagues, and a proportionately smaller need to rely on publishers for that same information. Peer-to-peer networking and collaboration will not replace published information, but it will become a more natural and integrated part of the professional's information environment. The opportunity for legal publishers is to make their content more interoperable with the collaboration platforms that professionals use.
3. Historically, folks used to argue that the legal information was "recession-proof". Has that proven to be true in the latest recession?
No. Game over. The legal information industry isn't recession-proof, because we now know that the legal service industry it serves isn't recession-proof. This recession will have some long-term effects on the structure of the legal industry. It has exposed some of the inefficiencies and, frankly, some of the really poor business practices that have characterized the law firm industry for a few decades, particularly large law firms in the US and UK.
Now, in some sense the law firms can be forgiven for not getting the memo about their inefficiencies; it's hard to think you're doing something wrong when you are raking in bigger profits every year, as they had for 10 or 15 years prior to this recession. So the large corporations of the world, which have continued to feed the law firms their legal work, are partly to blame for where things are at today.
One way that the legal information industry can counter this is to focus less on the law firms and develop better solutions for the upstream consumers of legal information - their customers' customers.
4. Can you describe the latest from Google in this market and it's likely impact?
Google shook things up a bit by putting a comprehensive collection of US court opinions in its Google Scholar collection recently. This is the first time a full collection like that has been available for free, via the most popular search engine around. It's revolutionary in the sense that the general public now has easy access to the law of the land, something that was surprisingly hard to obtain before. On the heels of that announcement, low-cost legal search provider Fastcase just put out an iPhone app that allows searching its database on the iPhone for free. So we're moving into an era where just access to primary legal sources isn't something you can charge money for.
Even more interesting than Google's move are the broader initiatives to get more of the government's documents and data online, such as data.gov and law.gov. Law.gov has the ambition of making all primary US legal material available in standardized, machine-readable formats that can be incorporated into new kinds of information products.
The availability of free primary law sources is not going to have its biggest impact on products and services that the legal profession itself uses, like the Westlaw (Thomson Reuters) and Lexis services, however. That market needs a lot of value-add beyond just access to the law (including advanced finding tools, secondary legal content, and workflow tools), and the existing players are well positioned to continue providing it. However, open access to legal sources will spur the creation of new markets for legal information among consumers, and even more so among non-lawyer professionals who need to understand a narrow field of that they work with all the time. Expect to see new products and services built on top of the free legal information that will make the law more accessible to those new markets.
5. Using the government's terror alert rating system, what is the level of fear among traditional publishers towards Google? What is level of interest in iPad?
Every time I go to the Minneapolis airport there is a sign that says the terror level is ORANGE. It's an electronic sign, it's designed to upgrade if it goes higher or lower, but it's always ORANGE. I guess that's sort of the way traditional publishers feel about Google - there's always a threat, but they've sort of gotten used to that constant threat. Certain parts of the industry like news have been much more affected by Google than legal and other professional publishers. But the news that case law was added to Google Scholar certainly is a watershed moment of sorts. For years the traditional publishers have said that the editorial work that they add to legal information, and the technology behind their research platforms, is what sets them apart from simple aggregations of content or access to legal content on the Web. As we inevitably move to a situation in which ALL primary legal materials are freely available in some way, that argument will be put to the test - we'll see how much the market really values those enhancements.
I think professional publishers are still scratching their head about what the iPad means for them. Certainly it has some applications, but probably mostly in the consumer market and perhaps education. To the extent that it's also used as a platform for delivery of professional information, suddenly high-value business applications will be competing for the attention of users with gaming, People magazine, and home videos on the same platform. It's an interesting platform but it's just one of many new platforms or media that publishers have to make their content work with.
6. What are some of the recent major innovations in this market?
Right now I like some innovations that are not so much technology breakthroughs, as innovations in ways of thinking about how legal knowledge is collected and transferred.
A UK company called Practical Law Company recently entered the US market. They take an approach to research that is more about practical questions - "how do I work through the steps of transaction X" - than about abstract legal principles or concepts. The PLC approach offers a response to much of the criticism that is directed toward the legal industry today, particularly regarding the expensive and wasteful way that young associates are thrown into legal research issues without sufficient experience, knowledge, or support. PLC essentially provides a way for lawyers to leverage the work and expertise of experts who have already worked through the type of task or transaction at hand.
A tiny little startup named Spindle Law has an interesting idea. They are building, in a kind of collaborative, Wiki-like way, a database of the legal rules that lawyers find in court decisions and in legislation. Their idea is that it's pretty inefficient to get to those rules by searching and reading long court opinions. They are extracting and organizing the rules with links to the legal sources. They have a long way to go to prove that the concept works, but I like the way they are trying to turn the research process on its head.
The big guys aren't standing still. Westlaw just did a major overhaul of its legal research system, that I think will significantly improve the speed and efficiency of online legal research. And Lexis has a new partnership with Microsoft that embeds content from Lexis right into the Microsoft Word or Office documents - sort of turning the normal work environment into a launching pad into relevant external content.
7. In general, the professional service industry hasn't been especially innovative, since it has been insulated from the global competition and technology substitution driving other industries. How do you see that changing? How will people deliver services and technology delivered information come together?
In the legal services industry, things will change pretty fast, as new players come in to take over parts of what law firms used to do, unless they can start innovating fast. We already see a lot of outsourcing, as clients wise up and see that there is a lot of routine legal grunt work that can be done cheaply by lawyers in India and elsewhere. And technology will also help to automate much of what goes into the practice of law. That technology can be provided by the law firms themselves if they innovate fast enough, or it can be provided by their clients who build their own technology-based tools, or it can be provided by new players we don't even know about it yet. The Achilles' heel of the industry is the routine work that's now given to overpaid, undertrained young associates. The focus of everybody in the industry should be on identifying what parts of their work could better be done by machines, by cheaper humans, or by better process management.
8. How are information, software and services likely to converge?
A great example of that convergence is in what's called the Governance, Risk, and Compliance (GRC) space. Big corporations have lots of people who scurry about looking for risks and making sure that internal and external rules, standards and processes are obeyed - but they typically work in silos, with the legal and finance people separate from the health and safety people, who are separate from the HR people, for example. A big trend is for companies to view all those risk and compliance activities as part of a centralized function.
An example of convergence in that space is the recent acquisition of two major GRC software platforms (Paisley and AXENTIS) by the Tax & Accounting information units of Thomson Reuters and Wolters Kluwer. Those publishers understood that their content increasingly will be embedded into that kind of software platforms, so they each just went out and bought one. And all of these GRC implementations are very complex, so these publishers will be working closely with professional services such as the Big 4 accounting and audit firms to make it all work.
We are very far away from the days when it was enough for publisher to simply crank out information; they now have to be masters of technology, services, and their customers' work environments as well.