The fate of a previous wave of acquisitions in the U.S. legal market may shed some light on the recent spate of acquisitions by LexisNexis in England and the Asia Pacific countries.

It can provide some background when trying to project what the future may hold. The following is a summary of four posts over the last several months in my blog “Does It Compute?” They contain the background and documentation for what may appear here merely as bald assertions.

Starting in 2004, LexisNexis acquired a significant number of companies in the Legal / Practice Management field in the U.S., including TimeMatters, PCLaw,Concordance, HotDocs, and Juris, as well as a few others. These were all private companies essentially run by one visionary leader. Within two years, the top leadership of virutally all these companies (with the exception of HotDocs) was gone. (See “Acquire, Merge, Destroy”)

This scenario is hardly unique to LexisNexis, and is common when larger companies acquire small, private companies that have grown successfully due primarily to the founder. (See “Big Fish Little Fish”).

Since then, various “reorganizations” have decimated these companies: half the programming staff of TimeMatters quit; the entire second level support department at PCLaw was disbanded and a limited number of senior people forced to re-apply on an individual basis (hardly a recipe for good employee morale!). Tech support generally has gone downhill and is now regarded by many consultants, who relied on second level support for advanced troubleshooting, as essentially worthless.

The bottom line is that LexisNexis is a publishing/research company that has never really broken from its origins as book salesmen, and is ill-suited to running software companies. Research services are fungible: that is, if you don’t like one, you can easily switch to another one that is less expensive or offers superior service. Software that contains and manages a firm’s critical data is fundamentally different: converting from one software program to another is a wrenching and very expensive proposition. Further, whereas privately owned companies tend to have longer-term priorities other than the next quarter results, this is certainly not true of large companies such as Lexis. The visionary founders of these software companies are committed to the product; large public companies are slaves to quarterly results.

Since the acquisition, Lexis has pushed a strategy of yearly updates. Given that there is not a software company in the world (including Microsoft) that has the manpower to do this successfully, it has predictably led to increasingly buggy software. In addition, this has led to substantial blow-back from TimeMatters customers who resent being charged for BOTH support and yearly upgrades. Note that PCLaw always had a different model, so that upgrades were included in the price of maintenance.

Secondly, LexisNexis, like much of the software industry, has been pushing hard for a Software as a Service model (“SaaS”). This allows it to bundle software products such as TimeMatters or PCLaw with research services and is much more profitable than selling standalone products. However, it does raise a number of questions around the general topic of “who owns the data” which tends to make law firms exceedingly nervous, whatever formal assurances they may be given. In addition. Lexis is extremely unlikely to negotiate the terms of a Service Level Agreement (SLA) with an individual firm. It seems likely that within 3 years or so, Lexis products will be available primarily, if not solely as internet-based services.

In addition, consultants have been subsumed under sales, and the “Certified Independent Consultant” program is likely to become unrecognizable (if not totally disbanded) in roughly the same time period. Consultants are not book salesmen.

Meanwhile, Lexis is working on consolidating overlapping products, such as BillingMatters, PCLaw and Juris, reportedly so that all the programs will have a single integrated code base. While this is a rational goal, it will also be extremely difficult to accomplish. In the interim, look for LN to stop selling BillingMatters, at least as an independent product, within the next several months.

Finally, the recent spate of acquisitions in England, Australia and New Zealand, and the fact that Kate Holden, the new head of the Global Practice Management division, is headquartered in England, lead one to speculate about the future of Lexis’ interest in the US market. The software market is likely to look substantially different 3-5 years from now, and firms in the US would do well to upgrade to the latest versions of their programs, which will give them a stable platform for the longest time into the future.