The comment was made in the Toronto legal tech company’s earnings announcement
Mid-sized law firms could be among the hardest hit by the recent economic downturn, according to an executive at Thomson Reuters.
In a call announcing the Toronto-based company’s corporate earnings, CEO Stephen Hasker said he hasn’t seen signs of pressure on mid-sized firms yet, but that he is monitoring it “very, very closely.”
“Certainly, the heads of the largest global law firms and the largest accounting firms predict that they are going to take share. I've certainly heard that from many of them,” said Hasker. “I think another point of view is that it's actually the middle that will suffer. So the small, very, very nimble firms that have great customer relationships will be okay and will adapt. And the biggest of the firms have the buffer and the diversity of the lines of business to weather the storm, and it will be the middle that will suffer.”
On May 5, the date of the call, the company cut the guidance it gave to Wall Street analysts, announcing that sales would grow more slowly than originally expected this year. But despite the economic ripple of social distancing and the COVID-19 pandemic, Thomson Reuters executives expressed optimism about the outlook for the legal field — a segment that made up 41 per cent of the company’s sales last year.
“Within Legal, as I said, most of the managing partners have sort of gone through the last month to 6 weeks and realized that over time, they spent too much on real estate and not enough on information and technology. That is to our advantage. And we think coming out of this, as I said in my remarks, we're going to see more demand for accurate, timely, useful information delivered digitally and accessible 24 hours a day,” said Hasker.
The company reported sales of $626 million to legal professionals in the first quarter of the year, compared to $600 million this time last year. In Canada, legal sales jumped to $13 million, from $10 million a year ago.
“Lawyers have been willing to pay a premium for solutions like Edge that give them a competitive advantage and improve efficiency, particularly in the virtual environment in which they're currently working,” said Hasker. “Prior to COVID-19, law firms recognized the need to invest in technology solutions in order to compete. But now they recognize they must do so in order to operate effectively if they're to properly serve their clients.”
While law librarians aren’t on campuses, ordering books, law firms are turning to technology, the executives said. One analyst pointed out on the call that in the 2008 crisis, the legal sector was slow to bounce back. But chief financial officer Michael Eastwood said that at that time, the company had not launched WestlawNext.
“[We] see products like Westlaw Edge continuing on the same trajectory, in the same path as they were before the crisis,” said Hasker.
“And very importantly, our products and solutions are a source of efficiency and cost reduction for our customers across their entire cost base. That's how we're increasingly selling this, and that's how they're increasingly being viewed. And so we're not obviously — we're not ignorant to the pressures that our customers are facing and are going to face, but we're part of the solution, not the problem.”
Editor’s note: Thomson Reuters was previously the parent company of Law Times.