Consolidation is a normal part of a corporate heavy economy. We have seen it time and again just in the United States alone. Everything from telecom to retail and automotive manufacturing has undergone large-scale consolidation. Some say it is about to hit legal tech. If it does, will the results be good or bad?
The thought of consolidation doesn’t tend to produce warm and fuzzy feelings among people who already have a negative view of the corporate business model. It doesn’t tend to sit well with regulators either, if for no other reason than the fact that they are tasked with protecting consumers against corporate greed. And yet there are plenty of examples showing consolidation actually working to the advantage of the man on the street.
What it all means to the legal sector is another matter entirely. Law is unlike most other areas of the economy. Just because consolidation may have been good for one sector doesn’t necessarily make it good for legal tech. Likewise in the opposite direction. A bad experience in one sector doesn’t mean consolidation will be bad for legal tech.
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Why It Even Happens
The things that actually facilitate consolidation might give us a bit of insight into where legal tech is headed. We can use telecom as an example. The telecom sector began as a monopoly, went through a government forced breakup, and eventually followed with a second round of consolidation.
Consolidation occurs when there are too many players in a given industry. Think about Ma Bell and the amount of smaller companies that grew out of its forced breakup. By the mid-1990s, there were so many telecom companies providing both residential and commercial telecommunications services that it was nearly impossible to keep up.
All of the smaller players meant a duplication of services throughout most of the US. This created systemic inefficiencies. It also created a dog-eat-dog environment that left far too many smaller telecoms exposed. Meanwhile, the most successful companies had no markets to expand into organically. The only way to increase their market share and revenues was to buy up smaller companies.
This is why consolidation happens. It is a combination of too many players within a limited market and the need for corporate players to somehow expand market share in order to keep shareholders happy. These two things create a perfect storm that sees bigger companies swallowing up their smaller competitors.
Good and Bad Consequences
Over the years we have seen both good and bad as a result of consolidation. Sometimes consolidation leads to better quality and lower prices. Sometimes it generates just the opposite. What will it create for legal tech is anyone’s guess.
NuLaw is a Florida company competing in the legal case management application space. They are among a growing number of companies offering cloud software as a service (SaaS) to individual attorneys, large law firms, and corporate law departments alike.
Will NuLaw and other companies like it become victims of consolidation? Will the largest law firms in the country start snapping up these small companies in order to get their hands on the technology behind them? It is quite possible. Then again, it might not happen at all.
The point of this is to say that it is too premature to start making predictions. It is possible that consolidation is coming to legal tech. But it is still too early to say what kind of impact such consolidation would have. There is no point worrying about it. It isn’t helpful to start predicting the sky is about to fall, either. We just don’t know.