Jun
7
If Its a Service, Outsource It…
Filed Under B2B, Big Data, Blog, data analytics, Financial services, Industry Analysis, internet, news media, Publishing, Search, semantic web, Thomson, Uncategorized, Workflow | Leave a Comment
Time to look again at “law publishing”, or whatever it is we call it now. Twenty years ago a wonderfully insightful commentator, Professor Richard Susskind, began the business of redefining the relationship between the processes of the law and the work of law practices. He pointed out with inevitable truth that the things done by law practices were mostly not concerned with decision-making around the meaning and scope of the law: they were usually administrative processes that required little more than high quality oversight, or business and social decisions which lawyers were not uniquely qualified to make. Lawyerly fee structures pre-2007 took little account of where the expertise lay – users were charged by the time elapsed – and charged a lot. As a not very proficient law publisher myself in the 1980s I thought that the law market in regard to the way lawyers worked would never change – and all my contempories assured me that law was a wonderful area for publishers since it never suffered recession and just got richer.
So I followed the Susskind Thesis over the years with a kind of fascination. Having helped with the early acquisitions that built the Thomson Law Empire, it seemed preposterous that the practice of law which supported our efforts. These were the years of investment in “have to have” content and we gloated about the prices we were able to charge to law firms whose margins were such that we never dented their cost base. Yet change seemed inevitable once it became necessary to look at that cost base of law practice and wonder whether cheaper people somewhere else or algorthymic processes managed by third parties might not be the answer to maintaining law practice margins in the first recession ever when lawyers took a hit. I have written here several times about the forces that seemed to me to make it inevitable that Lexis should begin to build practice process software, that Wolters Kluwer in Germany should begin to develop semantic web architecture to create process engines for law practices, or that, true to its innately acquisitive culture, Thomson Law would buy PLC. So you could say that law publishing (and, even more quickly, tax and accountancy publishing) was moving, albeit slowly, to build the sort of workflow service environments that lawyers will need as they move from their traditional posture towards this agile, lower cost service solutions style of business. Most lawyers here in London now agree that a huge proportion of their client services will be outsourced, and most are very wary of the outflanking possibilities of firms like Axiom. This US major plays directly to corporate counsel, using its own law staff to modularize and customize processes and forming an effective back office for even the largest corporates, who formerly gave this work to commercial law practices. Add to this picture the rise of “Tesco law” – the provision for UK legal services to be licensed as a service to the public arm of non-law office activities – and the increase in land title (conveyancing) activity in the British house boom going via licensed conveyancers and not lawyers and you can see why some lawyers feel ever so slightly depressed.
But hold on a minute. If Axiom, who recruited the director running Lexis law practice work, can do it, why not Wolters Kluwer or Thomson or Lexis themselves. They could dis-intermediate, as we used to say in the old days, the lawyers and offer their service solutions directly to the lawyers’ clients. Quickie divorce? Let Thomson do it for you! Problems with statutory filings ? Let Lexis handle it! Of course, there may be small difficulties around holding onto a sustaining revenue flow from the people you are trying to replace while you are trying to replace them. But you could always change your name in the new business and hope that the new play was seen to be “different”. Which brings me to last month’s announcements about Cordery. Cordery Compliance Ltd (http://www.lexisnexis.co.uk/en-uk/media/lexisnexis-uk-launches-cordery.page) is targeted at general counsel in all business verticals. It has ABS status – in other words it is licensed by the Solicitors Regulation Authority in the UK to run a compliance business “combining content technology and advisory services”. It has recruited Jonathan Armstrong, formerly a partner in the London office of the US law firm Duane Morris to act as CEO. And is this another independent start up like Axiom? No, it is owned by LexisNexis.
Not of course that this is entirely unprecedented. Thomson bought Pangea3 (http://www.pangea3.com/news-events/press-releases.html) some years ago, though any organization that issues two press releases a year hardly seems very high profile to me. But they are certainly into automated document handling systems and services, though for Thomson Reuters as a whole it may be that the big push came in compliance, with the launch of their Accelus Suite of software, now recently presenting itself with WorldCheck fully on board. The so called “big” data surge and the increasing emphasis on compliance in all its many forms speeds the way. Outsourcing law and tax practises expect very smart technical solutions: having removed their traditional high staff to client ratio they want answers which still leave them with a saving, but which also promise better solutions for their clients. And increasingly they will want to go to one source for complete solutions. The relaunch of PR Newswire’s long-standing document filing system, Vintage Filings (http://www.thevintagegroup.com/), as Vintage last week is a reminder of this – compliance needs to be seen in the round and not just as a series of niche service offerings. But the PR Newswire announcement also shows that very many different types of former content companies are all growing in awareness at the same time: this will be a highly competitive space, it may be easier to start with a clean sheet of paper like Axiom, and it is certainly not true that former law publishers have a right to this emerging market space.
As in the database service developments in law publishing in the late 1970s (Lexis, Westlaw, Kluwer etc), publishers will agonize about how and particularly when to react. In the law market last year people like me were writing about the acquisition of BNA by Bloomberg and the possibility of a new third force in law publishing. Today, it looks as if by the time that third force consolidates, it will be competing in declining markets for law texts and book and newsletter style publishing. When Bloomberg Law/BNA steams into the station to supplant Lexis, that company and Thomson may already have left for a new destination from a different platform. In law, as in education and in B2B in recent years, the cry goes out to acquisition teams – “please do not buy any more books or magazines or newsletters!”
Apr
2
Portfolio Power Down
Filed Under B2B, Big Data, Blog, data analytics, Education, Financial services, healthcare, Industry Analysis, internet, mobile content, news media, Pearson, Publishing, Reed Elsevier, Search, Uncategorized | 2 Comments
In the days when everyone did everything, few people did everything well. But I loved it. Editors in magazine companies moved from the Meat Trade Journal to the Retail Jeweller in a moment. I myself was transmogrified in a 3 line memo from running educational publishing to leading the charge in building a law publishing empire. We were in Publishing, we were Men (sadly, mostly) for All Seasons. “These are just businesses” we used to say. “You don’t need to be a lawyer to run publishing for lawyers”. And part of me still believes that, except nothing can now forgive how arrogantly little we knew about the needs and behaviour of the good people buying our publications.
These thoughts came to mind two weeks ago while reading this press release: “The company plans to complete its portfolio rationalization by exploring strategic alternatives for McGraw-Hill Construction, a leading provider of essential data, news and insights to better inform construction professionals’ decisions in the United States. McGraw Hill Construction has approximately $170 million in annual revenue and stand-alone operating margins approaching 20%. The business has shifted away from legacy print products to new, innovative data and analytics offerings, which are generating double-digit growth. Evercore Partners is acting as a financial advisor to the Company in this matter” (www.biia.com). It reminded me why we built these curious portfolio companies in B2B in the first place, as well as confirming my view that most press releases mean the opposite of what they say (“complete” in the context of the above note must be taken in the context of a complete review having broken the corporation into two and divested Education!).
We reached this place through a long experience of periodic recessions – at least that has not changed. We got here because we argued that a balanced portfolio gave us assets which would not all go down at the same time, and a balance of early first-in, first-out victims, recession proof activity (that is how we saw law publishing in the 1980s!) and quick recovery vehicles would proof us against all eventualities. Add in a blend of other qualities – some selected for high growth, others for cash generation, a few for high margins and we convinced ourselves that we could really get “balance” in a portfolio. But all of those traditional craft became waterlogged in a recession which was like no other in information marketplaces. As we emerged it became clear to all but the recidivist publishers that publishing, as experienced in the previous 50 years, was just about over. When we could pry people’s compulsive attentions away from their smartphones in order to ask them what they wanted, people did not generally say “book” or “newspaper” or “magazine”. In other words we were left asking Format questions which did not satisfy answers expressed as “solutions”, or “excitement” or ” learning without teachers” or even, “answers”.
Last week I was at a European Union workshop in Luxembourg on what we are going to do about stimulating the Creative Industries in Horizon 2020, the Commission’s workplan for 2015-2020. Only the nice lady from FIPP used the word “publishing” on any of the sessions that I moderated or attended, and even then with a sort of apologetic bashfulness. So it does not surprize me that the great portfolio conglomerates built in the publishing space of yesteryear are crumbling away, but it is worth asking why, and what may replace them. Companies change mission over time – think only of Pearson, a late Victorian builder’s merchant from Yorkshire which exploded into growth as an oil explorer in Latin America before, in late cycle, using the accumulated capital to become a brand portfolio in the post – war years. Now it is a single market entity once again, with just one of its brand acquisitions, Longmans, the eighteenth century bookseller/publisher, becoming the path to a remarkable twenty-first century market leadership. This is an odd story but not an unusual one. Portfolio is part of a cycle.
So what did Pearson need when they went single market in education? Well, specialist educational expertise is part of the answer. The single market specialists do seem to have a layer of market expertise which is very different from the jack-of-all-trades tradition that I noted above. And managers can talk tech talk and know what they are saying, while technology investment has become the key marker for many. Can you put a portfolio on a single platform is the “how many angels can you get on a pinhead” question for the industry rationalist schoolmen. Truth is, I believe, that new platforms and greater data concentration and increasing semantic analysis and domain ontologies increase specialization. For the portfolio players this raises a problem of choice and investment. Sometimes the answer, and this may be the case at McGraw-Hill, is not to invest further but to dispose. You could call this the D&B Gambit, as it retreated from portfolio ownerships over the last decade onto a core specialization. Sadly the pieces it sold are now worth more than the bits it retained, which is another warning to portfolio dismantlers.
Pieces of stucco have broken off some of the best regarded frontages in the industry in recent years and gone crashing to the pavement. Think of Penton Media in the US, now mercifully under management with a new plan. The McGraw announcement along with the break-out of Axios, itself a mini-portfolio, from UBM tells me that this is speeding up. And the units going now are not unprofitable, just not investable in the holding group context. And they are going to market now because markets are receptive to this kind of M&A in a way that we have not seen since 2008. So put your head back into the portfolio dominated world of 17 April 2008, when the market leaders included UBM, Informa, McGraw-Hill, Reed Elsevier, Wolters Kluwer, and Thomson Reuters, which was created on that day. Now, tell me which players will specialize in what as the ice thaws and the Big Portfolio Break-Up begins. Answers on an email please to david@davidworlock.com.
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