Software has consumed the world. Now, AI is cannibalizing software and, in the world of legal technology, Thomson Reuters is about to be taken off the menu.
The company manages one of the largest treasure troves of legal data on the planet. The company combines this treasure trove of information with generative AI to deliver new products, such as Westlaw Advantage and CoCounsel, that help automate legal operations.
The strategy was popular with investors earlier this year, but new rivals have grown in size since the summer, raising questions about Thomson Reuters’ AI future.
A potentially more thorny question: Can CoCounsel generate better legal intelligence than what ChatGPT and existing large-scale AI models can already provide? In short, is Thomson Reuters working on a “model wrapper” or something of more lasting value?
enterprise edge
The company made the pitch Tuesday when it reported quarterly results, but the reaction from Wall Street was lukewarm at best. Thomson Reuters shares have fallen more than 6% and have fallen more than 30% since mid-July.
The Toronto-based company said its legal division’s organic revenue rose 9% to $700 million, up from 8% growth in the first half. AI capabilities have enabled “double-digit growth” across CoCounsel products.
Thomson Reuters CEO Steve Hasker told analysts on a conference call that virtual “agents” are taking on more of the work of lawyers. He argued that the company’s advantage is its one-two punch of legal library and editorial content.
“It would be difficult, if not impossible, to replicate,” he added.
Related articles
Business Insider tells the groundbreaking stories you want to know
Business Insider tells the groundbreaking stories you want to know
new challengers
These days, Thomson Reuters is playing both offense and defense in this lucrative part of the technology industry. The company has been a legal tech powerhouse for decades, but the rise of generative AI has opened the door to challengers, and a wave of new entrants is pouring in as venture funding piles up.
In June, RELX’s LexisNexis division entered into a strategic partnership with AI legal tech startup Harvey. This partnership brings together another of the world’s largest corpus of legal data and a technology team that can apply generative AI to this treasure trove of information. Currently, when a lawyer starts the Harvey service, the output includes content and citations from LexisNexis, but a LexisNexis login is still required.
A new challenger emerged in late August when legal services platform Clio acquired legal data specialist vLex for $1 billion.
Thomson Reuters’ Hasker dismissed AI startups’ frothy valuations and bold growth claims as “volatile” in a call Tuesday. He also said CoCounsel’s adoption is outpacing its competitors.
Co-advisor Hori
The CEO framed Thomson Reuters’ moat as a powerful combination of Westlaw’s legal data and human editing and verification, which he argued is essential in an industry where accuracy, timeliness and security are paramount.
“Litigation is a high-stakes business, where there is no room for error, and where there are serious consequences,” Hasker said.
The company’s Westlaw products ingest more than 300 million documents annually from hundreds of court systems and tens of millions of judgments. Our in-house lawyers and editors transform this mass of data into court-safe guidance, creating headnotes, fact-checking, and tagging issues to make content easier to find. Approximately 85% of Westlaw’s core documents, including cases and statutes, include these editorial upgrades.
The current strategy is to move beyond search and summarization to promote more generative services that allow lawyers to do more valuable work. This includes agent workflows.
OpenAI questions
The question on everyone’s mind in the legal tech industry, including Thomson Reuters, is whether OpenAI will get in. The AI giant could potentially sell vertically packaged apps to law firms and in-house teams, but there is currently no clear indication that that will happen. Still, concerns were heightened recently after the startup posted a demo using its own model and in-house AI software for contract review, a staple in the legal tech space.
If OpenAI gets in there, it risks cannibalizing customers who are already paying to build on that model. In fact, CoCounsel uses a large language model, including OpenAI’s GPT product. (OpenAI is also an early investor in Harvey, which only adds to the tension here).
Even without a bespoke legal product, OpenAI is already a strong competitor. Lawyers are already using ChatGPT, both formally and informally, and other businesspeople are increasingly turning to chatbots for legal input as well.
Harvey’s CEO said buyers are benchmarking the company’s legal AI solutions against the latest general-purpose models. This comparison means that OpenAI can shape the market by shipping upgrades and keep other areas on guard.
Husker’s counterargument is that depth wins. Specialized AI tools that leverage unique and accurate legal data can have an advantage over more general-purpose AI services.
“Customers are starting to understand the difference,” he said, before adding his honest predictions. “Anyone who says they know exactly what will happen in this environment is probably being a little deceived.”
Any tips? To contact this reporter via email, please specify the following address: mrussell@businessinsider.com Or send a signal at @MeliaRussell.01. Use a personal email address and non-work device. Here’s a guide to sharing your information securely.
