November 30, 2010
The Sun Never Sets on the Thomson Reuters Empire: On Restructuring for the 21st Century's New Normal
Thomson Reuters adjusts to 'new normal', a recent Minneapolis-St. Paul Star Tribune story, paints a far less rosy picture than the local Citypages did in its April 29, 2009 story, Westlaw rises to legal publishing fame by selling free information:
[When Thomson acquired West, people] "doubted that Thomson would be able to squeeze more profit out of West, which was already posting 25 percent returns. But since its takeover, Thomson has consistently managed to attain 30 percent or higher profit margins. Legal information seems to be the sponge that won't dry.
But as Outsell's legal publishing industry analyst David Curle said back in January of this year, “The party is over for our industry.” Curle was referring to the US law firm market sector.
According to the Minneapolis-St. Paul Star Tribune story, more than 425 employees were laid off from the Thomson Reuters legal and editorial services group between Jan. 1, 2009, and this past Oct. 31. "The recent headcount reductions ended a decade-long employment surge from 4,000 in 1998, when Thomson acquired West Publishing, to a peak of about 7,400 in early 2009. Part of the hiring resulted from information technology jobs added to support the legal division, as well as Thomson Reuters' globe-spanning tax/accounting, health care and financial information businesses."
In the article, John Shaughnessy, TR VP of Communications, explains:
We have moved some content-production work to our global service centers in India and the Philippines. It's primarily keyboarding, data entry and some software testing. We're not just serving lawyers in the U.S., but in different parts of the world. We're trying to follow the sun in updating legal databases. We have Westlaw service in China and Japan. And we just acquired a legal publisher in India.
The New Normal Dictates Moving into Growth Markets for Global Legal Publishing. I believe Shaughnessy's reference is to the Company's July 2009 acquisition of the Indian legal database vendor IndLaw Communications. (Correct me if I'm wrong, John. I don't mean to be putting words in your mouth.) About the acquisition, the aptly named PaidContent.org reported:
With the recent global meltdown, financial information services companies have been suffering from loss of clients globally. The acquisition of Indlaw by Thomson Reuters is an example of how large information companies are looking at fast growing markets like India for expanding their footprint.
Other more recent legal publishing acquisitions not mentioned in the article include TR's August 2010 acquisition of Canada Law Book, a division of the Cartwright Group Limited [Press Release], and, much more significant, the May 2010 acquisition of Revista dos Tribunais, one of Brazil's major legal publishing houses that employs nearly 300 staff members throughout the country and has 43 branches. About the Brazilian acquisition, TR explained in its Press Release:
The acquisition of Revista dos Tribunais presents a strategic opportunity for Thomson Reuters to lead the move to advanced information, software and online services for the Brazilian legal information industry – one that remains dominated by print resources until now.
Strategic opportunity indeed. Brazil is the largest national economy in Latin America, the world's eighth largest economy at market exchange rates and the ninth largest in purchasing power parity according to the International Monetary Fund and the World Bank. Brazil's economy is considered one of the world's fastest growing major economies and has been predicted to become one of the five largest in the world in the decades to come. The Pesquisa Nacional por Amostra de Domicílios estimated the country's population in 2008 at approximately 190 million. According to the UN, Brazil's projected population for the year 2015 is almost 202 million. All of which leads up to this quote from TR's press release: "The legal profession in Brazil is significant and growing – the country has among the highest number of lawyers per capita after the U.S., with a growing base of medium and large law firms."
Restructuring for the New Normal by Expanding Beyond Legal Publishing. The Minneapolis-St. Paul Star Tribune story mentions TR's widely publicized recent acquisition of Indian legal processing outsourcing firm Pangea3 but failed to mention two other very significant recent non-publishing related acquisitions.
Regulation is a major driving force shaping financial services globally, and every indication is that this trend will only increase. Complinet, which is based in London and has more than 200 employees, brings a leading market position, powerhouse brand, strong management team, and assets across the entire global regulatory compliance workflow to Thomson Reuters.
“Across the globe, our customers are increasingly focused on information and software solutions that address their needs in governance, risk and compliance. The acquisition of Complinet, when coupled with the deep resources of our existing legal and financial services businesses, will take Thomson Reuters to a leadership position in this fast-growing market,” said Thomas H. Glocer, chief executive officer, Thomson Reuters.
In October 2010, TR acquired Serengeti Law. With over 300,000 corporate customers and 21,000+ law firms in 180 countries (including 100% of the Am Law 200 and the Global 100 law firms), Serengeti hosts the largest legal e-billing network in the world. For now, one might say, all 50 Serengeti employees will join Thomson Reuters, and will remain based in the Seattle and Chicago metropolitan areas. From the Press Release:
[Thomson Reuters] has acquired Serengeti Law, the most widely used and highest-rated matter management system for corporate legal departments. The business will be aligned with the Corporate, Government & Academic business unit within Thomson Reuters Legal, under the direction of Mike Suchsland, president. Terms of the deal were not disclosed.
“Corporate legal departments around the world are rapidly adopting software and services that solve legal workflow needs more simply and more efficiently,” said Suchsland. “The acquisition of Serengeti Law provides us with the bedrock for building a leading suite of offerings for the corporate general counsel. Serengeti brings to Thomson Reuters a broad and rapidly growing client base, as well as the profession’s most widely used legal project management workflow tools for corporate legal departments.
The Sun Never Sets on Thomson Reuters in the 21st Century. Having acquired about all the US legal publishing houses it can without having to defend itself from antitrust charges in a duolopy, Thomson Reuters continues to acquire major foreign legal publishers in fast growing markets across the globe while moving forward with its global strategy of being a leading provider of information and workflow processing for professionals in the legal, compliance and financial services markets. The synergy here is that the Company can integrate its growing global content inventory into some of those services while expanding by way of strategic acquisitions its international client base. It's clearly a very smart move. Like ... ah Enron but without the dirty-dealing implication, anytime you find yourself in a setting with TR executives, they are likely to be some of the "smartest people in the room."
"West" is just a local brand name. We law librarians simply must stop thinking of TR Legal as a US legal publisher, accept the reality that it is global legal professional services vendor, and monitor and assess the consequences as impacts on our institutions. US legal publishing is just one of many components in Thomson Reuters' global business strategy. While larger US law firm CIOs and BigLaw firm librarians are exposed to some of TR Legal's workflow services, the rest of us in the law library community only see the tip of the iceberg. As the Company continues to restructure for the New Normal of the 21st Century, "West, a Thomson Reuters business" will likely become increasingly less significant in the Company's global objectives.
This is just the beginning. Like we saw with the integration of US legal publishing houses, TR still has to assimilate and repackage its acquisitions. I personally think workflow processing will be the dominate model for globalized offerings appropriately structured for individual national markets for its market base -- the private sector -- when it comes to online legal search. We will know whether I'm right if the already deciminated librarian relations program ends up being replaced by a full-scale assault on private sector legal administrators.
The Minneapolis-St. Paul Star Tribune story reports "Thomson Reuters says it has sacrificed short-term profit margins to invest in the global legal-services business." Well, despite TR Legal's operating profit decline of 9 percent in the first nine months of 2010, it remains the corporate cash cow. For the first nine months of 2010, TR Legal's $803 million profit represented 42% of the Company's 9-month consolated underlying operating profit of $1.891 billion. Here's one consequence US law libraries and our professional assocation should focus on -- US legal institutional buyers are helping finance TR's global restructuring and expansion of product and services in a not inconsequential way and not necessarily for our benefit. See 3 Geeks' Thomson Reuters Competes With Its Customers? This is corporate mercantilist theory put into action. Like the empire building nation-state version of the 16th-18th centuries, mercantilism leads to inflation and alienation in the colonies. We are a colony in the Thomson Reuters empire.
Oh, BTW, Anyone Want to Buy BAR/BRI? It "no longer fits [Thomson Reuters'] long-term strategic vision, which is to provide intelligent information and workflow solutions to professionals." Quoting from this LLB post. [JH]