Saturday 18 May 2013

Generic Widgets: Musings on a library budget

It has been said that ‘information is the lifeblood of law and the legal profession’. And to this I would like to add, law firms continue to be the flesh and muscle of the body of knowledge which they make available to clients; good lawyers turn that information into business knowhow. Anatomical analogies are a personal favourite and perhaps to stretch this one, everyone is trying to extract a pound of flesh from the legal corpus as a whole. From clients expecting discounts, lawyers squeezing suppliers and suppliers driving hard bargains, everyone is at it.

This comes home to me every time I put together the budget for my small/average sized library and information service (LIS). However this year’s figures have been under scrutiny like never before which is a fair response to what has been an interesting few years in the economy. 

Though business remains plentiful, firms are finally looking to improve profitability by other means. They are capturing and billing more work in progress, writing off fewer hours and chasing bad debt, as well as looking to reduce supplier spend. Some might say that firms are merely catching up with what should be good business practice and indeed, some of these processes seem to be obvious to me.

If a piece of legal work is done under agreed terms and conditions, the bill should be sent out. And if it isn’t paid promptly, then you chase it. An example of the traditional ‘we don’t talk about money’ law profession playing catch up with the hard hitting commercial focus of the business world.

But my focus is on the information supply; the library is the pump ensuring that the incoming information runs smoothly and efficiently around the firm. For this I rely on a combination of sources which take the form of the ‘big two/three’ that is to say, LexisLibrary and Westlaw/ PLC. Other information providers are out there, such as Justis, Informa and Jordans, for instance, but it is acknowledged that those three-to-become-two are the market leaders. 

Over the past 15-20 years, the legal market has seen quality information suppliers emerge only to be subsumed into either one of the duopoly, for example, Lawtel was taken over by Sweet & Maxwell in 2002, PLC in 2013, with Lexis concentrating on risk (KYC) data, practice management and precedent development software. Though the OFT has investigated the market at various times they are not concerned. They said in relation to the Lawtel/Sweets deal,
Competition in the industry has been duopolistic for some time [they acknowledge Butterworths/Lexis as market leaders] and customers appear to have some concerns regarding the nature of the existing competition. However, this merger will have little impact on the industry structure and Sweet & Maxwell remains the second largest supplier in the UK. 
Presumably the customers that voiced concerns were treated in the same way as information professionals tend to be treated by law firm management boards, that is to say, amused tolerance and then totally disregarded. In any case the OFT report on the Thomson/Reuters-PLC takeover have continued with this unconcerned view of the duopolistic marketplace, stating that
There is insufficient evidence that the Acquisition gives rise to a realistic prospect of a substantial lessening of competition in the provision of legal research and legal know-how in the UK through coordinated effects. (p25-26) 
The problem is explaining this impossible situation to finance directors and managing partners. For instance, we are expected to negotiate deals with Thompson/Reuters and Lexis without knowing what the next law firm is paying, without any transparency on pricing and knowing that we are helpless in the face of price rises. The question we all face is, 'if abc department can negotiate a x% cut with xyz supplier, surely the LIS can achieve a similar result?' 

This puts the LIS in an impossible situation for a number of reasons, 
  • The law firm needs to put a realistic value on the raw data coming in;
  • The law firm needs to appreciate that legal information is different from computers, office supplies, archival/storage and other types of generic widget where there are more than 2 suppliers; 
  • The legal industry needs to take more of an interest in where it is getting its raw data from and when a legitimate legal information competitor comes along offer support when the big two cast greedy eyes over it. Clearly customer concerns need to be amplified so the OFT can take note. 
However what struck me was the question of client impact; what effect does this have on the ultimate consumer of the raw data, value added legal advice and services of the lawyer? The law firm purchasing these expensive research tools are obviously going to pass on these massive costs in their hourly rates, fixed fee or however they're charging. The legal industry has been tearing itself apart in a drive to become more consumer friendly, following the Clementi Report, Legal Services Act etc. So in accepting the duopolistic status quo, the OFT/Competition Commission is actually undermining the efforts of the legal industry to offer reasonably priced quality services to consumers.
Lack of market transparency 

Of course legal publishers are constantly investing in R&D which has to be paid for and it certainly isn't cheap. It is they who are pushing the technological boundaries, enabling nimble law firms to embrace new markets and new ways of working. And I'm all for this because antiquated, expensive ways of working no longer cut the mustard in this increasingly business focused industry. They are part of the solution to the more open legal industry and there will be increasing tensions between all the players. Which is an entirely different blog.

But in my case, whilst finance and management remain in talks with publishers, it is the dedicated information professional who takes the role of mediator. It is an extremely uncomfortable and unfair place to be, especially for those who take pride in knowing that they are the information heart of the law firms they serve.

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