I started interviewing Ed Walters, Fastcase co-founder and CEO, well before the COVID crisis started. This crisis will last a while and what happens after it remains uncertain. Early signs, however, point to large law firms cutting costs or taking other steps to conserve cash. As I noted in my post last week, Rethinking How Lawyers Work Post Crisis, now is the time law firm management needs to plan for what comes next.
Unrelated to the crisis, firms have been considering reducing online legal research expenses by choosing Westlaw or Lexis but not both. My interview with Ed here is helpful information for any firm that wants to consider sole sourcing digital legal research as we all adjust to the crisis and whatever comes beyond it.
Original Intro: In the last few years, many large law firms have moved to sole-source for legal research. That is, they select one and only one of Westlaw or LexisNexis. I recently talked to Fastcase co-founder and CEO Ed Walters about this trend. He shared that it was creating opportunities for Fastcase in large law firms. This intrigued me so I interviewed him to learn more. I start with a brief background before turning to the interview.
Until recently, almost all large law firms subscribed to both RELX LexisNexis or Thomson Reuters Westlaw. Both provide comprehensive legal primary and secondary sources via proprietary online systems.
In the 1990s and aughts, the legal research market seemed a virtual duopoly, mature, and staid. Almost all large law firms used both services. During that time, the change in the market seemed slow and limited. Developments I recall included moving to natural language queries, acquiring other providers, adding new data sources, and offering fixed price contracts.
Though I was not directly involved in the small law market, I saw a more dynamic market there for online research. In 2001, a mutual friend not in law introduced me to Ed, a fellow Washington-area resident. Ed and I have stayed in touch since.
Over the last 20 years, Fastcase has captured a significant portion of the smaller law market, both by direct marketing and by arrangements with state bar associations. In the interview below, I ask Ed about the how and why large firms now license Fastcase.
How did Fastcase get started?
We started as a bar benefit for small firms to get good online research for the first time, at an affordable price. That turned out to be a winning formula. We were relentlessly responsive to their needs. Our agile development allows us to constantly improve and make Fastcase smarter, more powerful, and easier for people to use. We release a new version monthly.
Where are you now in the small law firm market?
Fastcase has the dominant share of online legal research in firms of 1 to 50 lawyers. More than 900,000 lawyers have access via state bars and/or direct subscriptions. That’s out of 1.3 million US lawyers – and not all do research. There are about 300,000 users, and they run more than 1.5 million searches per week.
Why are large firms now interested in Fastcase and how many Big Law firms now subscribe?
Many firms want to drop one of Lexis or Westlaw but retain leverage for future negotiations. By licensing Fastcase, which is about 10X less expensive than either, they retain that leverage. Large law firms have to make an economic decision: buy both Westlaw and Lexis at, say $3M on average each, or buy one and then pay $300k for Fastcase as the second service, for leverage. More than 40 of the top 200 firms subscribe to Fastcase. In some of those 40, the subscription is only for a practice group, but most are firmwide.
How can large firms drop Lexis or Westlaw? That is, if for so many years they subscribed to both, were they just wasting money, honoring lawyer preferences, or is there some other explanation?
In the past, it was not just about lawyer preference. For years, most Am Law 250 firms had to subscribe to both Westlaw and Lexis to get the content they needed. There was enough non-overlapping content that using both was a practical necessity for most firms. Over time, however, as part of the two companies’ battle to win share, each added content. With the march of time and both constantly adding new sources, the two now have largely overlapping content. That makes it much easier today than in the past for a firm to go sole source.
How is it that you can be 10x less expensive?
Let me start with an analogy. In the early days of the Internet, we navigated Yahoo menus to find websites we wanted. Nested menus worked but someone had to read every website and catalog it. That was fine when the web just started and there were not many websites.
As the number of websites exploded, the Yahoo approach of building menus did not scale. Google’s big insight was to develop an algorithmic approach to finding webpages, initially using the number of links to a website as a “vote” on its relevance.
Fastcase also took an algorithmic approach. We replaced human-intensive work with very fast and precise software. Because we have automated the tedious work, especially in writing abstracts and human cataloguing, we can deliver at 1/10th the cost. Westlaw and Lexis each have some 10,000 people writing headnotes and abstracts. We don’t. Instead, we use software. Not only does using software dramatically reduce our costs, it also means that we can regularly improve results. That’s not possible with an army of humans. All of our software development is in DC, none is outsourced. And our software development team is incredible, person for person -yet still a small fraction of our total headcount of 120 FTE.
I like to think that we have turned the Lexis and Westlaw paradigm on its head. For Fastcase, the value comes not from data (content), which by now is virtually a commodity. The value comes from the architecture and design of the system, from what we do with the data – the analytics and the user interface. In contrast, for most of their existence, Lexis and Westlaw behaved as if they viewed their value as tied to data.
When we got started, people said, “You’re trying to compete against some of the largest companies in the world. I’m not sure that’s a sustainable business model.” Today, more firms are saying, “Incumbents are trying to get us to pay a premium for access to public domain law via software that doesn’t work very intuitively. I’m not sure that’s a sustainable business model.”
Firms saving money is one thing. Getting lawyers to switch another. How do firms address the change management and adoption challenges?
Even though we make Fastcase as intuitive to use as possible, you are right that adoption remains a challenge. We have an outreach team of reference attorneys, headed by a law librarian. They provide reference support and actively reach out to client firms to offer training. It takes a long time – but that’s okay. We’re not in a hurry. We’ve been driving adoption for 20 years, and people are now coming around.
As the trend to sole source continues, how do you see competition playing out?
My read of the market is that Westlaw is winning against Lexis in sole source deals. Westlaw has stronger brand preference in large firms, and, in talking to many smaller law firms, I see that they like Westlaw or Fastcase better. Westlaw is moving up market, and Fastcase is a runaway preference in the small firm market. Now we need to see how sticky a full-freight, all-you-can-eat, two-service solution is in the middle market. Especially if clients start to pay attention to costs, we’re going to see a rush to value, and nobody can compete with Fastcase there.
Though we are the value player, the idea of Fastcase is not to be cheaper. Rather, in Clay Christensen’s theory of disruptive innovation, we are designed to innovate quickly, appeal broadly, improve fast, and to disrupt incumbents. (Other examples of disruptors are Salesforce, Netflix, and Amazon.) The chart below illustrates the concept. Our goal is to innovate along the steepest line:
So yes, Fastcase costs less – but the idea is to be much better, and you can see that with the validation in the market. As of March 2020, Fastcase’s Net Promoter Score (which measures the loyalty that consumers feel for a product), even on the classic Fastcase 6, is 52 on a scale of -100 to 100. There’s always room for improvement, but 52 is very high for a software company, and especially high for a legal research company. (Hubspot reports that the average NPS for software is 28.
You can’t sell Big Law via bar associations. What’s changed at Fastcase?
People used to think of Fastcase as primary law only. But today, it’s a much more diversified offering that appeals to large law firms. We have one of the best state and local docket tracking services in Docket Alarm — which also offers amazing analytics, research databases of briefs, pleadings, and motions, and new tools that extract deadlines from dockets and sync them in your calendar.
Fastcase includes more than 400 expert treatises now – some we have licensed from leaders like state bar associations, Wolters Kluwer, and the American Bar Association. But others we’re creating directly through our own print imprint at Full Court Press. And of course Fastcase has acquired and rebooted the legal news service Law Street Media, so we’re not just primary law anymore.
It was hard for large firms to subscribe to a research-only service. But now Fastcase has all of these interesting new products beyond research, and the largest firms in the country are taking notice.
You know Big Law from selling to them and as a former Covington associate and regular attendee at conferences appealing to large firms. Now that Fastcase is squarely in Big Law, does anything surprise you about legal research trends there?
Yes, a surprising number of firms are starting their own data science divisions and innovation labs – these are the groups using data streams, sandboxes, and APIs from Fastcase. And our data science offerings are really taking off in large law firms – APIs with direct feeds of regulatory, legislative, or case law data. Firms are working on their own data science projects in AI Sandbox. It’s really a very exciting time for makers in law firms, and great fun that we get to be a part of that.
Tell me about the Fastcase roadmap. I know you acquired Docket Alarm for access to court dockets and Law Street Media to offer legal news. Plus, you’ve had an AI lab and even a print journal. What else can we expect?
In talking to a lot of Am Law 200 firms, we learned that they are not happy with incumbent online legal research services. We asked why they could not switch providers. They said: secondary treatises, public records search, reliable docket service to get briefs, pleadings, motions, and citators. We’ve been addressing each of those issues one by one.
For example, I mentioned our print imprint, Full Court Press. For years, we thought it was too hard to build the missing elements. About three years ago, we hired a COO with extensive experience in online research. He told us building out these missing elements was not as hard as we had thought (at least for someone with his experience). For treatises, it turns out there are many lawyer-authors who want to write. We now have about five treatises in publication, and 20 more in the pipeline. We have also licensed 600 treatises form Aspen, CCH, Wolters Kluwer, James Publishing, the American Bar Association, and ALM. And that’s all in the first two years.
And one other example: on public records, we partnered with an established provider for a people finder. Fastcase partnered with industry leader TransUnion and their TLOxp product, for skip tracing, credit reports, and people finder. There were only a few things that firms were looking for in a replacement for Westlaw or Lexis. Now they’re all in Fastcase.
To close, let’s look further into the future. In the 1990s, I thought we had seen “the end of history” of legal research. Boy was I wrong. And now, after so many new providers and dynamics you discussed above, I wonder what the future holds. Any prediction of where the market will be in 10 years?
I’m generally optimistic – law firms are already starting to use data to create new and better legal services for clients. There is a great opportunity for document design and automation to help more people get the benefits of legal help. (Our NextChapter team is working on a document automation engine that will do just that.)
My co-founder Phil Rosenthal and I are really proud to be a part of that change. I think we’re about to break through. Fastcase has become the #1 service for a great number of lawyers. And even though we’re #3 for the AmLaw 200, we’re breaking through there, too. In 10 years, large law firms will move from 2 enterprise legal research services to something like 1 ¾ services, with Fastcase in that mix.
We’ll still be nerdy, and we’ll still be optimistic. But people won’t talk about the “big two” anymore – maybe they will talk about the “big three.”
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