The Legal Software Landscape
The legal software landscape for large law firms has changed significantly in the last few years. It’s way more interesting and dynamic than even five years ago. I recap here my current thinking and welcome comments.
Where We Were Five Years Ago: Stagnation
Five years ago, the legal software landscape, especially enterprise software for large law firms, seemed badly stalled. I wrote a blog post then questioning the future of law-firm specific platforms. At the time, Box.com had high share of mind. Several large law firms were using or evaluating it across multiple use cases. I wrote that the rise of Box.com
“should cause us to question the future of legal market specific software. I understand the need for customized software… But the market — both customers and vendors — must balance the need to meet legal specific requirements with economics and scale. Box and other cloud providers can potentially sell millions of seats to thousands of organizations. Contrast that enormous reach, which spreads development cost over so many users, with legal market scale. The large law firm market has no more than 400 organizations and 500,000 seats. The development and service cost per user is much higher.… Cloud providers may just have unbeatable scale benefits.… Of course, recognizing the full potential requires connecting to legal-specific software”
And five years ago, there were only a few interesting start-ups offering new types of software. As I wrote this, an old friend who started a legal tech company a dozen+ years ago reminded me that VC funding back then was very rare.
What’s Changed in the Last Five Years?
I no longer agree with my assessment of the legal software landscape from five years ago. Why? So much has changed:
- Some legacy providers have changed ownership or management, which renewed the companies and products
- New legal software start-ups went from rare to common (almost daily!). Beyond offering a bewildering array of choices, their rise spurred fresh thinking among established players.
- Readily available financing has enabled or enhanced many start-ups and newer companies. We regularly read articles about multimillion dollar financing rounds. And much larger sums are available as well, as the $200M investment in Onit recently illustrates. I’ve heard that last year legal tech obtained $2B in financing. Wow.
- Cloud and agile approaches have become common across many industries and more acceptable in legal than five years ago. The ability to spin up software quickly on a cloud service has lowered the cost of development for providers (and for firms that choose to develop on their own).
- In parallel with these tech changes, large law firm thinking has changed significantly:
- Many partners now want clients to see their firms as innovative, which drives a focus on technology.
- New security issues and privacy laws have spurred (forced?) changes in data management and software requirements.
- Some firms understand delivering real value to clients requires changing how they work. That in turn means both process and tech changes.
Where We Are Today: Dynamic + Evolving Software Options
In a single blog post, I can only touch on what I think are the most interesting developments in the legal software landscape. To illustrate and make clear these points, I name brands. I do so reluctantly for fear of omitting some or mischaracterizing ones mentioned. Comments and corrections are welcome.
The Rise of Legal AI and Legal Tech Start-Ups. Along with the rest of the economy, large law firms have caught the artificial intelligence bug. That paved the way for countless software start-ups, some now established providers. Most interesting has been the rise of machine learning to accelerate contract review and provision extraction. Providers here include Kira Systems and Luminance. Well-known blogger Bob Ambrogi works to maintain a list of legal tech startups. It’s long — way longer than one could have imagined five years ago.
The Resurrection of Document Management Systems (DMS). Large law firm DMS sprang back to life. Not only have iManage and NetDocs dramatically upgraded products, they are each building ecosystems that may take them well beyond the core functions of DMS of yore. I am especially intrigued by initiatives to incorporate AI into DMS.
Experience Management Emerges as a New Category. A whole new category of software for large firms — experience management — has emerged and already achieved good penetration. Five years ago, we focused on “experience location”, mainly trying to find lawyers with experience. Today Foundation Software, IntApp Experience, Prosperoware, and Neudesic The Firm Directory all offer platforms to manage experience, including for business development, pricing, finding experienced lawyers, league tables, and knowledge management.
Transaction Management / Closing Platforms Also Emerge. Also new: the emergence of several platforms for managing corporate transactions and the closing process. I sometimes call these deal management platforms. Examples include Doxly, Closing Folders, and Workshare Transact. A side note here: for many years, with eDiscovery so big, it seemed that all the action was in litigation. With the rise of contract analytics and deal management, that no longer seems true.
Three Questions the Current State Raises
Rather than an assessment, I offer three questions firms should answer:
What Software Does the Firm Need? I occasionally think about a reference model of software types law firms should have. It would include the full range: enterprise systems, practice support, mobile apps, general productivity, utilities, and more. Developing that reference model would take much work and likely require crowdsourcing. With the plethora of choices now available, such a list seems even more valuable. Any volunteers?
When Should the Firm Buy What It Needs? Law firms frequently struggle with timing of software licensing. Some of that turns on budgets and always will. But some also depends on the answer to “is it really ready and, on a related note, if I wait, will there be a better choice next year?” There’s never an easy answer and I suspect law firms have generally waited too long. Perhaps the current innovation mania will prompt earlier buys.
How Should the Firm Think About All-in-One versus Best in Breed? So many software choices raises the question, and perhaps false dichotomy, of best of breed software (with custom integrations) or all-in-one. Short term, I doubt all-in-one will meet all of a large law firm’s needs.
My treatment is necessarily incomplete. Other issues loom large: change management and adoption, shifting business models (both in law firms and software providers), future-proofing decisions, switching costs, and training are only a few.
Multiple buying options tend to bewilder. But I prefer the lush legal software landscape today to the arid one of a few years ago. And firms ought to be thrilled at the choice. At one time, software decisions hardly matter — clients would never notice the difference. Today, smart firms can buy (or build) software that differentiates their firm from competition. And that’s a good place for both firms and clients.
End Note: Just as I was finishing this, I read Dennis Kennedy’s blog post, Legal Technology Definition Quadrant Chart 1.0, which provides a succinct way of thinking about legal technology writ large. As of publication time, there is an active LinkedIn conversation about this post. So both Dennis and I have been thinking about how to characterize aspects of the legal software landscape.