Exari, the well-known document automation platform and contract lifecycle management system, has been bought out by US-based and NASDAQ-listed business spend management company, Coupa Software.
Importantly, Coupa works across all sectors. The key thing for the California-based Coupa was not the legal bit, instead it was the connectivity between its data analysis strategy and Exari’s focus on contracts. And that has some interesting implications for the potential future consolidation of the legal tech market.
Business Documents, Not Legal Contracts
For companies such as Coupa – and many others – contracts are not ‘legal’ documents specifically. They are the DNA of the business, or as the founder of AI company Eigen Technologies, Lewis Liu, once said to Artificial Lawyer: ‘A business is just the sum total of its contracts, plus some people.’
And when you start to see contracts as not legal documents, but just business documents, then for companies that deal in anything that relates to business data, then the many hundreds of legal tech companies out there that also handle contracts suddenly become an interesting prospect.
For example, a legal tech company develops an AI platform, let’s call it eBrevia, which can read and analyse corporate documents, i.e. contracts. Many people see this as ‘legal tech’. But, the big tech and advisory companies that work across all sectors look at it and say: ‘Hey, that thing fits right into how we help our clients understand their business! We should buy it.’
This of course happened. Donnelley Financial bought eBrevia for $20m in December 2018. Donnelley provides businesses with data insights. It didn’t see ‘legal tech’ when it bought eBrevia, it saw ‘that’s useful to our clients who want data insights’.
But, will we see a roll-up of other legal tech companies beyond eBrevia and Exari? It’s not impossible. One reason why it’s very doable is size.
Have a look at Coupa, for example. It’s publicly listed, it has 1,300 staff, and it’s been on a growth spurt for several years: (via Wikipedia) February 2015, it acquired the assets of ZenPurchase, an enterprise procurement software company. In July 2015, it acquired InvoiceSmash, an e-invoicing vendor, and TripScanner, an open booking vendor. In January 2016, it acquired Contractually, a cloud-based contract management solution. And now, Exari.
The list will no doubt keep growing. If other legal tech companies look useful then they will perhaps be on the menu too.
Now, let’s look at Exari. The company, started by a law firm associate in Australia back in 1999, is now 20 years old. Despite the brand name Exari being well known – probably because it has been around for so long – it has not been able to grow that large.
According to its LinkedIn profile, Exari had in the low hundreds of staff. Given that it had been around for 20 years this is not huge growth.
Much as the old adage goes that large armies usually beat smaller armies, tech companies that see the world in terms of business contracts and business data, are usually going to be larger than legal tech companies. And that gives them a big market share advantage.
Why? Because they have an exponentially larger customer base. If they can extract insights from business data across the enterprise they won’t just be working with a General Counsel, they will work with the CFO, the head of procurement, the head of sales, the head of logistics, and HR….and so on….all the way through the business.
And this approach will always tend to put ‘legal-first’ companies at a size disadvantage, as well as a client touch-point disadvantage.
For example, think about what the Big Four are doing. They don’t see legal in isolation to the rest of the services they offer. And why should they? The CEO of a company who is looking for business advice and support doesn’t see legal as if it existed in another dimension, totally outside the economic rationale and cost focus that governs the rest of the business.
(Of course, that CEO may not have the stamina or desire to grapple with bringing down costs in terms of legal spending, given that this will be hard work, but if it were easier – or there were better solutions offered – they no doubt would do it more often. As one senior lawyer said to Artificial Lawyer recently: ‘It is a lot easier for a CEO to save a dollar in other parts of the business than save a dollar with legal.’)
At present legal tech as a sector is a rich coral reef community of hundreds of companies, most fairly small, a few medium to large, and a tiny handful (e.g. LexisNexis etc) of the giant size.
Big Tech, or ‘multi-sector business data-focused tech companies’, are usually far larger, often better funded and have a far larger potential market because they don’t view the world through the prism of legal work. They see business activities, they see spending, they see costs, they see contracts, they see data of all kinds that connect across all parts of the enterprise.
The surprising thing is that these companies have not all charged in already and bought up the best legal tech companies that can add to their firepower.
One reason they have not is as explored above, they are too busy making money via a generalist, multi-sector approach to data and analysis. But, we could be seeing the first signs of a shift in attention. The Empire of Big Tech may be finally turning its attention to the rebel alliance of legal tech and its army of startups and SMEs.
Clearly, a few acquisitions do not guarantee a major change. But, it’s interesting to consider what might happen in the years ahead.