If you’ve been paying attention to legal tech announcements lately, you’ve probably noticed a pattern: the legal tech industry is experiencing an unprecedented wave of consolidation. LexisNexis and Harvey recently announced a strategic alliance that will let Harvey and LexisNexis users have the benefits of both platforms. The practice management behemoth Clio last month announced the acquisition of the legal research platform vLex. And then just last week, the premier document management system provider NetDocuments announced partnerships with Harvey and Legora. NetDocuments also announced a greater integration with Microsoft.

Customer Desires and Expectations

Why all these combinations now? I think they are all driven by AI. Indeed, when you look at what these vendors are doing and saying, it’s all about expanding AI capabilities for customers.

So why all this activity? Quite simply, it’s because customers want this expanded capability. People experience the ease and time savings of AI one place and want it every place.

But here’s the other thing customers want: simplicity. The fewer tools and platforms they have to use to get things done, the better. They want their AI tools to work seamlessly as if they were all from the same provider. And finally, particularly in the legal environment, they need assurance that their work can be done securely.

But Why Combine?

But that doesn’t necessarily explain what we are seeing in the recent combinations and acquisitions. Those events are driven by two reasons. Legal tech vendors have to combine: they can’t do it alone and only other legal tech vendors can offer the requisite security.

Build v. Buy?

First, providing AI everywhere all the time ain’t easy. It’s particularly difficult if your business model is based on supplying good but limited products which almost every tech product maker does. NetDocuments is more or less limited to providing an excellent document management system. vLex is limited to legal research. Even Clio, large as it is, is primarily a practice management system provider.

So it’s a classic build versus buy decision. It would be tough for a document management system provider like NetDocuments to become an AI-based legal research provider. Or for Clio to develop an AI system similar to what vLex has. Harvey started as a legal drafting tool. While it has expanded its set of tools, it would be tough for it to develop its own legal research tool to compete with LexisNexis. Or a document management system to compete with NetDocuments. vLex is a great legal research tool but for it to develop a practice management system to compete with Clio would be well-nigh impossible.

And even if these companies could develop their own systems, by the time they got there, their competitors would be way ahead.

But the other option to meet AI demand is to acquire or combine with those who can provide what you can’t or can’t provide very well. Hence, we see these combinations: Harvey’s strategic alliance with LexisNexis to integrate the LexisNexis legal research and writing capabilities. Clio’s acquisition of vLex which gives both platforms something the other one lacks. And now the NetDocuments alliance to bring Harvey’s drafting capabilities and tools to NetDocuments customers. It’s all about expanded AI capabilities for customers.

What About Security?

The second reason for the recent activity is the need to better assure lawyers and legal professionals that their work will be secure so as to meet ethical requirements. By necessity, legal tech companies have to combine with other legal tech companies who understand the need for this kind of security and can provide it. An integration with a publicly facing company like ChatGPT might provide a tool that could theoretically do what customers want but it could not meet the security requirements.

As Dan Hauck, Chief Product Officer of NetDocuments puts it about ndConnect, the product that will integrate with Harvey and Legora, “ndConnect extends our unique document and AI capabilities to third party AI vendor, while keeping the full protection, findability, and productivity of their foundation platform.”

The NetDocuments press release reiterates this idea, “ndConnect is NetDocuments new interoperability program designed to securely and seamlessly integrate third party AI solutions into their NetDocuments environment”.

By the way, note the concept implicit in what NetDocuments is saying. It’s not just talking about partnerships with Harvey and Legora – NetDocuments is talking about combinations with other third party vendors. In other words, we will likely see more of this in future.

What Does the Future Hold?

Certainly, economies of scale may be part of these moves. But AI works most satisfactorily when it can be used everywhere for everything. And used securely. That’s what’s fundamentally driving this wave of combinations and why we will see more in the future.

Law firms should be aware of these combinations and scrutinize the integrations that AI providers offer to make sure they work simply and securely.

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.

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