NetDocuments opened its Inspire conference with a multiplayer keynote that sounded a little like “The Wizard of Oz.” It laid out its advantage (lions). Where it’s trying to go (tigers). How it proposes to get there (bears). And it exposed some challenges (oh my).

Most everyone in legal tech knows (or should know) what’s coming. AI is going to cost more as the industry shifts from subscription pricing to consumption pricing. As I reported at this year’s ILTA conference, NetDocuments, through its Legal Context Graph, is trying to show how managing and accessing a law firm’s data can reduce the cost of AI use and increase output accuracy. I didn’t realize at the time, though, how committed NetDocuments is to this whole concept.

Based on the opening keynote at its Inspire conference this week, the Legal Context Graph is central to NetDocuments’ marketing plan. And the keynote gave us a better idea of where NetDocuments is going.

NetDocuments basically built its business on cloud-based document management. To do this, it not only had to manage all of a firm’s data, but it had to do so securely to protect client and firm confidences. But today, there are multiple broader AI platforms that do more than just run on a firm’s internal documents. What happens to a document management company when the center of gravity shifts from managing documents to using AI to do things with them?

Follow The Yellow Brick Road. To The Data.

NetDocuments has concluded that the greatest advantage any AI provider really has lies in the data it can access. The bigger the database and the more it can be massaged, the better the AI results. NetDocuments runs on the internal data of law firms. And that data is a gold mine of material, institutional knowledge, and experience.

It’s something NetDocuments has that few others do. And it’s NetDocuments’ view that this data is what sets one firm apart from others. True enough.

So if you want to succeed among all the legal AI providers, you need to maximize that advantage by letting AI leverage it. It’s no surprise, then, that NetDocuments’s pitch is that it sits on top of this valuable data, which it labels context. That’s why signs saying “Context lives here” are everywhere in the conference space. It’s the linchpin of NetDocuments’ pitch.

At a media briefing following the keynote, Baxter provided some more context to the context concept. He said that the NetDocuments’ tools ground AI outputs in the expertise of the firm. That they can surface the thinking of the best attorneys in the firm. Not just what they ultimately produced, but importantly, how they got there. And NetDocuments already has this data.

He also made the point that firms are losing control over what he calls the “work surface.” Individual lawyers and practice groups use different tools willy-nilly. Some even create their own. According to Baxter, NetDocuments wants to provide the requisite stability and control by ensuring all these spaces access the same content.

But to hold that context, NetDocuments has to ensure its security. Law firms can’t simply throw confidential client information into whatever AI platform happens to be fashionable this week. As Baxter put it in the keynote, the “foundation of NetDocuments is its governance and security.” And where multiple platforms may be running at the same time, NetDocuments provides a consistent governance layer. Indeed, NetDocuments built its reputation on ensuring the security of the documents in its cloud, something all law firms have to have.

And At Lower Cost

NetDocuments is now pitching the notion that giving AI access to greater and more robust context will yield better outputs. And that improved accuracy can be had at lower cost. At a time when fear is palpable that consumption pricing and rising token costs are coming, NetDocuments is betting that this idea will resonate.

That’s why it created the Legal Context Graph, at least in part to prove just this principle. And to place its key advantage, that of holding the context, at the center of the legal tech and AI universe.

Ah. MCPs.

But NetDocuments is still dealing with only a segment of the market, management of the internal files of the law firm. So, NetDocuments is trying to broaden what it can provide through better and greater integrations with other providers. By jumping on the partnership bandwagon along with every other provider.

But NetDocuments goes a little further. We have all seen diagrams with a frontier model sitting in the middle and various legal tech providers arrayed around it. All connected with lines like spokes in a wheel. Baxter flipped the script. In his version of the diagram, NetDocuments is at the center. All the other legal providers, and, for that matter, the frontier models, are arrayed around NetDocuments. It wants to be the central hub through which law firms access and use their information.

NetDocuments now says it can integrate with all the providers on the wheel with MCPs. (MCP, short for Model Context Protocol, is an open standard that lets AI tools plug into outside data sources and applications in a consistent way.) Harvey, for example, can securely use its own tools on NetDocuments data to answer questions. Then the output goes back to NetDocuments where it’s safe and sound. Likewise, OpenAI and virtually any legal tech or frontier model provider can do the same.

There is another advantage here that Baxter at the briefing, “It allows us to not have to predict the future as to who among the various platforms [sic] will win.”

Not So Fast, Dorothy

But there’s a potential fly in the ointment that came to light even as Baxter and others were talking. Carolyn Elefant, a well-known voice in legal tech and AI, published an article highlighting what she perceives as restrictions being placed on the use of outputs from leading providers like Thomson Reuters and LexisNexis.

According to Elefant, these restrictions bar transferring any of their content to third-parties. She says the restrictions also bar the use of any of their data as a reference source. If she’s correct, that could put a squeeze on integrated workflows of the kind NetDocuments and others are promoting. Because the integration vision hinges, in part, on information being able to move between platforms.

Baxter and Dan Hauck, NetDocuments chief product officer, were asked about Elefant’s article at the media briefing. Either because they hadn’t heard of this possibility or because they weren’t prepared to answer, they didn’t provide much of a response.

But it’s an important question. If the future depends on integrations, what will happen if major providers don’t want their information moving freely between platforms?

Pollyanna Makes An Appearance

Another interesting moment from the keynote. Phil Tow of OpenAI appeared on stage and was asked what he sees happening in the next year. Not surprisingly, he’s optimistic. He believes there will be more interoperability. There will be closer collaboration between AI providers and frontier models. The way of working with all these systems will become seamless, increasing capability.

Then he said something that caught my attention along with that of a few others: he foresees that outputs will get faster and cheaper.

Wait. Cheaper? If outputs get cheaper, how will OpenAI or any other frontier model provider make any money? And how does that square with what many, including Baxter, see as inevitable: a move to consumption pricing that will make AI more costly? Tow shrugs all that off by relying on the Jevons Paradox, which holds that as price comes down, demand increases. And that increased demand will make up for thinner margins.

It sounded a little weird. First of all, a lot of us are paying flat subscription fees for AI now, so I’m not sure how it gets cheaper. And here you have NetDocuments planning for rising token costs by saying context will bring costs down. While the frontier model provider says don’t worry, be happy, costs are going down anyway. Tow gets my Pollyanna Award for the conference.

Makes Sense. But …

By emphasizing the advantages of its context and reduced costs, along with its traditional secure platform, NetDocuments hopes to remain a key player in the AI and and tech marketplace. I couldn’t tell you whether that will play out as NetDocuments hopes, but it is the logical place for them to go. There’s no doubt that a law firm’s internal confidential materials are golden. And being able to take advantage of those materials will be critical.

But there’s a lot of competition out there right now. Thomson Reuters, LexisNexis, and even the frontier models aren’t about to cede control of the market easily. If Thomson Reuters and LexisNexis wall off their content, the wheel gets a lot smaller. And the specter of higher costs from those who hold the tokens looms over the entire market. Oh my.

So who will win? Too early to tell. But NetDocuments has placed its bet. Just don’t hand over the ruby slippers quite yet.

Full disclosure: NetDocuments paid my way to Inspire. And my old firm was one of its original users, so I’ve known the product a long time. But nobody tells me what to write. Just ask any vendor who’s paid for my travel.

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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