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

There’s never been more money in legal software — or more ways to burn it.

Ask LexisNexis. Founded in 1973, the company sells a legal research platform that lawyers use to draft and analyze documents. Its parent company, Relx, posted $1.2 billion in revenue for the legal segment in the first half of this year, buoyed 9% year-over-year by firms paying up for its “intelligent” new tools.

“Law firms are spending more money on technology than they ever have,” said Sean Fitzpatrick, chief executive of LexisNexis’ North American group. The question is where those dollars go next.

The duopoly LexisNexis shares with Thomson Reuters, which also provides accounting and media services, is no longer unchallenged. Startups are muscling into the same budget line, promising next-gen alternatives. And Vlex, a distant third in the legal research race, has agreed to a $1 billion sale that would bundle its tools into a legal ops platform many lawyers already live in.

Spending is soaring, competition is swarming, and for the first time in a long time, the outcome isn’t obvious.

“What we’re seeing is a new era of competition,” Thomson Reuters chief executive Steve Hasker told analysts on a recent earnings call, citing “a bunch of startups” and newly energized incumbents. He insisted Thomson Reuters has the edge: proprietary data and a “single integrated solution” that combines content and workflows.

Breaking up a duopoly

LexisNexis and Thomson Reuters invested billions over decades to create comprehensive, searchable, citation-linked databases. The duo’s early head start created a moat that’s almost impossible for new entrants to breach.

In 2022, OpenAI released GPT-3.5, a set of models that could understand and produce plain language and code. At the time, David Wong was two years out of Facebook and settling into his role as chief product officer of Thomson Reuters. It didn’t take long to connect the dots between what large language models could do — retrieve information and produce written work — and what his company sells. “That’s what all of our products do,” Wong told Business Insider.

Suddenly, the threat felt existential. “If Thomson Reuters doesn’t do something with this tech to either enhance or replace our products,” Wong recalled, “others will, and we’ll be obsolete.”

Thomson Reuters moved fast. It acquired Casetext, an early mover in automating legal workflows. It pulled veteran machine learning researchers out of the lab, said Joel Hron, the chief technology officer of Thomson Reuters, and put them to work on shipping product. And the company doubled the size of its applied research group to 260 people.

Its legal segment, the largest of its three main businesses, is growing healthily. Legal “organic” revenue, which strips out factors like acquisitions and divestitures, grew 8% for two straight quarters.

If you can’t beat ’em, join ’em

Big Law is lavishing money on software.

It’s yet to be seen whether legal-tech startups — unburdened by legacy code and built on the latest models — can shift spend away from the incumbents, or if total budgets will simply expand.

Fitzpatrick, for his part, doesn’t see any of the new entrants as a serious threat to LexisNexis. “To be successful, you’re not going to be able to differentiate on technology alone,” he said over Zoom.

The bull case for LexisNexis and Thomson Reuters is that even if firms buy new tools, their legal research subscriptions are nonnegotiable.

Law is an industry built on precedent. Judges, law schools, and citation norms all orbit around Lexis and Westlaw. As the former litigator Shlomo Klapper put it, “If it’s not in Wexis, it doesn’t exist.”

If any startup is positioned to challenge “Wexis,” it’s Harvey. The company, with backing from venture capital giants, wants to make an operating system for law. This year, Harvey’s roadmap has been all about meeting lawyers where they work — inside systems like iManage, LexisNexis, and even ChatGPT. It’s now piloting a feature that allows customers to search Lexis content directly inside the Harvey interface.

Fitzpatrick described the LexisNexis-Harvey relationship as symbiotic. “Most firms are going to want both,” he said.

Winston Weinberg, who briefly worked as a lawyer before starting Harvey with research scientist Gabe Pereyra, believes the pie is expanding. Law firms are becoming more like tech firms, and chief innovation officers are becoming “more like CTOs” in terms of having to build, buy, and manage large tech stacks.

In February, Relx joined Harvey’s $300 million Series D through its corporate venture arm, Rev Ventures. Four months later, it increased its Harvey stake in another $300 million funding round.

The fund typically backs early-stage data and analytics startups across industries, but this bet signaled something more strategic. That LexisNexis, half of the duopoly, is keeping its friends close and its fastest-growing frenemies closer.

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