2 companies ruled legal tech for decades. AI is blowing that wide open.

The landscape of legal technology is undergoing a significant transformation, as new players emerge to challenge the longstanding dominance of industry stalwarts like LexisNexis and Thomson Reuters. These two companies, which have historically controlled the market for legal software, are now facing unprecedented competition fueled by advancements in artificial intelligence. LexisNexis, founded in 1973, has long been a cornerstone for legal professionals, offering a comprehensive research platform for document analysis and drafting. In the first half of this year, its parent company, Relx, reported a remarkable $1.2 billion in revenue from its legal division, driven by a 9% increase year-over-year, thanks to law firms investing heavily in innovative tools. As Sean Fitzpatrick, CEO of LexisNexis' North American group, noted, law firms are allocating more resources to technology than ever before. However, the once unassailable duopoly that LexisNexis shares with Thomson Reuters is now encountering fresh competition. Startups are entering the market with promises of next-generation solutions that could disrupt traditional budgeting for legal technology. One such startup, AndVlex, is making headlines with its recent $1 billion acquisition aimed at integrating its tools into existing legal operations platforms. Thomson Reuters CEO Steve Hasker has acknowledged the shifting landscape, indicating that the company is now facing a wave of new competitors and revitalized incumbents. Despite this, he believes that Thomson Reuters maintains a competitive edge through its proprietary data and integrated solutions that merge content and workflows. For decades, both LexisNexis and Thomson Reuters have invested heavily in creating vast, searchable databases that are critical to legal practice. However, the release of OpenAI's GPT-3.5 has accelerated the urgency for these companies to adapt. David Wong, the Chief Product Officer of Thomson Reuters, recognized the existential threat posed by advanced language models that can perform tasks similar to their existing products. In response, Thomson Reuters swiftly acquired Casetext, a pioneer in automating legal processes, and expanded its research team to enhance its offerings. As the legal industry continues to invest in technology, the question remains whether these emerging legal-tech startups can siphon off spending from established giants or if overall budgets will simply grow. Fitzpatrick, however, remains unconvinced that new entrants pose a significant threat to LexisNexis, asserting that success will not come from technology differentiation alone. The traditional legal landscape, built on established precedents and citation norms, heavily favors LexisNexis and Thomson Reuters. As former litigator Shlomo Klapper put it, "If it's not in Wexis, it doesn't exist." Yet, there is a potential challenger on the horizon: Harvey, a startup aiming to create a comprehensive operating system for law. With significant venture capital backing, Harvey is focusing on integrating with existing systems, including LexisNexis and ChatGPT, to enhance user experience. In a strategic move, Relx has increased its stake in Harvey through a $300 million Series D investment, reflecting a desire to keep close ties with innovative firms that could complement its offerings. As the legal sector evolves, it appears that traditional firms are not only competing against each other but are also adapting to a rapidly changing technological landscape, merging the worlds of law and technology more closely than ever before.