NetDocuments CEO ジョシュ・バクスター氏が語る、DMSが事務所の「インテリジェンス層」になる理由

Today on Lonex, I am here live at the NetDocuments Inspire Conference in Orlando, Florida, where I've just interviewed Josh Baxter, the CEO of NetDocuments. This is the first of three interviews I'm going to be recording here and posting over the next couple of weeks. Josh and I talk about his vision for the company in the age of AI and how document management is evolving into intelligence management. We'll get to that in just a moment, but first, please take a second to hear from our sponsors. This episode is brought to you by BriefPoint, the discovery governance and automation platform used by more than a thousand law firms. BriefPoint just launched Discovery Playbooks. Here's the idea. You respond to discovery like you always do, save it to your playbook in one click. And the next time a matching request shows up on any case,

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where I am doing another in what's been a series of interviews I've done here during the conference. This time I'm going straight to the top with the CEO, Josh Baxter. Josh, welcome. Thanks for having me, Bob. It's always good to visit with you. I think it's been a few years since we did a podcast together, so I'm excited to share my diff. Yeah, we were just talking 2022. I sat down with you and Alvin Tejimulia, who was CTO, who retired, what, two years ago did he retire? Was it just last year? Three years ago, actually. Three years ago. Yeah. Time flies. He was great. Always fun to talk to him and always good to talk to you. We had a press briefing earlier today, and you were talking about the fact that you started with this company in 2017. I think you started as president and became CEO the next year. And how things have changed since then, not just at NetDocuments, but in this industry overall. So given that, what's kind of the story that you want customers to take away from this conference about net documents and about where we are right now?

Yeah. I think for the first time, we've always believed that we were doing things that were going to help legal professionals be their best. I think that for the first time, technology is enabling legal professionals to practice law in ways they never imagined before, where they truly have access to the most important knowledge of their firm at any time. In the past, like there was this hall walking that had to happen in order to find the expert on a particular thing. But today, with our document intelligence and with our semantic embeddings and what ultimately like creates our context graph, we had the ability to surface the most important knowledge, who the experts are, and even things like how did we arrive at a particular conclusion? conclusion. How did we negotiate something in order to get to this outcome and do it even after maybe the partner who worked on a matter has retired? We can still expose it through the

knowledge that is stored in our platform. Yeah, sort of like storing those AI generated images of deceased relatives or something like that. It sounds like when you said that. Not quite, but morbid, I guess. But how does that change, if at all, the mission of NetDocuments? I mean, you were obviously started as a document management system. You now much more kind of talk about positioning as a legal intelligence system. Does that fundamentally change what you are trying to do for customers, or is it just a natural evolution of what you're doing? Yeah, look, our vision and purpose has always been to help legal professionals do their best work. And ultimately, that's about helping them deliver outcomes for their clients or their organization that is the best possible outcome for them. Well, with the advent of generative AI, our ability to now create intelligence that is just ambient in everything a legal professional does, we're enabling them to serve more clients.

We're enabling them to get to an outcome faster than ever before. We're enabling them to ramp up on a new matter in ways that they never could before. But it's all still in that same service of helping them get the best outcome for their organization or for their client. Yeah. We talked, there was a press briefing this morning with you, and one of the topics we talked about was this, I don't know what you'd call it, a convergence in a sense of technology companies within legal, both the frontier models coming into legal, but kind of this greater, deeper levels of cooperation in a sense and integration among companies that are already in this space. You talk about that from that document's perspective. I mean, why is it important, if you think it is, that you adapt to this, that your customers adapt to this? We've always believed that an open ecosystem of all of the different software vendors was important. We've had, I don't know, 150-plus members in our ISD program for a long time.

But I think that those were like light integrations for the most part. But today what we're seeing is that the number of work surfaces is really expanding. It used to be that media, a legal professional where they worked really meant Word, Outlook, and a browser. But today it could mean – Which we do. Yeah, which we do. Exactly. But today it could mean Claude. It could mean Harvey. It could mean OpenAI's codex or just chat GPT Enterprise. It could mean something from Lagora. It could mean something from a whole host of other either legal-specific players or horizontal vendors that have built capabilities that allow a legal professional to interact with their work product or with the documents and the matters that they're working on. We truly believe that what we should be doing is focusing on building context, building that organizational memory and brain, and then be able to surface it and make it accessible through whatever interface an end user chooses.

And increasingly, it is the end user making that choice versus the organization saying, here's the one you get. Yeah. Does that brain become increasingly headless in the sense that the UI matters less and what the sort of the core underlying technology is what's most important? Yeah, this is something we think a lot about. We really do think that there is potential that it becomes headless over time. I was talking to one of our biggest customers, one of our biggest corporate customers, and that person said that he had two attorneys who had literally built an interface in Claude that was interacting with NetDocuments, and that's where they were doing most of their work. Yeah. That's the beginning. We're still in the early stages of that. Yeah, but I hear that increasingly. I think I mentioned that earlier this morning, but I've been talking to a lot of lawyers who say, I start my day in Claude, and that's what I do. And I'm doing, you know, I'm reaching out to maybe Lexus or Thompson Reuters for legal research or maybe one of the open source models for legal research, which I know you're already, I think you're partnering with Court Listener already in terms of bringing.

Yeah, we're partnering with Court Listener. We bring some content in there. But we also have close, I mean, we have great partnerships. And, you know, part of our ND Connect program or MCP program with Thompson and Lexus as well. But all of those players, like you need to be able to access all of those different resources from whatever painted glass you're choosing. Yeah. But does that mean that I mean as you think about it I realize you in the early stages of thinking about it But does that mean that you potentially get to a point where a NetDocuments customer is kind of never in the NetDocuments environment directly at all I think that's possible. I think never is probably a strong approach because the reality is that as somebody starts to maybe build their own interface and clawed and that sort of Those are really hard to scale across an enterprise and things like that. And large enterprises are still going to look to folks like us to not just have the organizational brain or the organizational context layer, but also to provide interfaces with that context.

So my view is that it will be a combination of the two. Yeah. Do you worry? Well, you're not really building your own AI at this point, right? I mean, you're building on top of frontier AI models that are out there. Yeah, the way that I think about it is that we are going to – there are really kind of three layers to any effective AI, whether it's software development or in a legal world. And those three layers are that you have a large language model, and, like, we're not in that business, right? We're partnered with OpenAI. We're partnered with Anthropic. We're going to continue to be partnered with those folks. And, by the way, our application is built so that over time maybe we'll be using, you know, some of the open weight models or whatever it might be. But we're not a model. That's not our role. And then, of course, there's the harness. And the harness is Claude, is Harvey, is Legora, is NetDocuments.

And my view is that end users are going to choose which harness they use. And they might use multiple harnesses. and those harnesses are going to be interchangeable over time. And then the third element is the organizational data and how you expose the organizational context and whatnot. And that's where we're going to infuse that entire process with AI, doing things like putting it through our document intelligence pipeline, doing things like creating semantic embeddings, and profiling things at scale where, you know, hundreds of millions of documents, emails, et cetera, start to shape the way that work is done, capturing things, not just like what type of document is this or key information from the document, but also be able to marry up the communication on a matter. And, you know, maybe you and I went back and forth and negotiated to get to a particular outcome. Well, what was that thread? And how did it shape the outcome of the matter?

And that context is going to endure. And how it relates to another matter. Yeah, exactly. It's going to inform future work. And, you know, the thing is, is like I think the models will be swapped, right? You're going to choose the most effective model for the thing you're doing. The harnesses are going to be interchangeable and end user choice will be involved there. But that organizational intelligence that we're building inside of the DMS, that's going to be the thing that lasts. and, you know, it's going to always need to be infused with AI without us having – like we're not building our own models, but absolutely we're building AI into the platform. Yeah. Does that in any way impact our traditional notion of what a DMS is? I mean, obviously it impacts it insofar as it's adding this intelligence layer, it's enriching the documents in a number of ways. But do we start to get to a point where we don't even think about it as a DMS anymore? It becomes something different or a different kind of a platform? That's a great question. I think that if you look at the roots of the DMS, we were making things, we were giving you a single place to store, secure, organize, make findable all of your content.

Right. And, you know, that was an important part of the evolution of the practice of law. Well, today, what that is, is like we need to take these millions upon millions of documents. And literally, our biggest customers have 300 million documents, emails, et cetera, inside their DMS. And we need to find the richness that is there, the intelligence that is there. And we need to structure it, take all this unstructured data because it is all unstructured, structure it in ways that it will inform the work that you're doing going forward. So I guess the answer to your question is yes, it does start to – like it moves away from just like this is a DMS to this is my organization's intelligence layer. Yeah, yeah. and speaking with josh baxter ceo of net documents in a conversation recorded live

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the full trust and operating accounting system built directly in Practice Panther. With Panther Accounting Plus, your firm can complete three-way reconciliations in just minutes, produce bar-compliant reports, and flow all financial activity into your firm's ledger in the same platform you use to manage cases, bill clients, and get paid. Visit practicepanther.com today to book a custom demo and discover the difference Practice Panther can make for your firm. Welcome back to my interview, recorded live with Josh Baxter right here in Orlando, Florida. Josh is the CEO of NetDocuments. This is the NetDocuments Inspire Conference where I'm here live on the conference floor. Let's get back to my conversation. I know what you're going to say to my next question, because I know that you're a gentleman,

you don't like to talk about your competitors, but probably you're, I think, not probably, your biggest competitor is iManage out there in this space. There have been a lot of kind of similar developments announced by iManage to many of the kinds of things that you've been developing in terms of trying to, you know, develop the context layer and other features that you've been introducing. And I have to believe that when people from NetDocuments go out on sales calls to law firms, there's some conversation about why us versus why them. So what is the answer? I mean, again, I know I've asked you before, you say I don't like to talk about my competitors. What's the argument for net documents over any generic DNS that may be out there? Yeah. What I would say is that it's threefold. One, like this has not changed. This is like the DNA of net documents. I inherited this. The way we engage with our customers in a true partnership way is very special.

The second is that our platform was built for this day from the beginning, right? There was no, like, evolution from, like, or revolution, frankly, from, like, it was on-prem to it's hosted in the cloud to it's multi-tenant. This thing has been multi-tenant, built for this moment for a long time. And we've got all the most modern technologies underneath it, right, Elastic, AWS, et cetera. And then the third is that, like, I think history matters. And if you look at this industry and look at who delivers on their promises over and over and over again, you'll find that the answer is no documents. All right. Again, looking to kind of sales, market growth, where do you see your biggest opportunities for growth as a company? Honestly, this is a window that's so special. In the last two quarters we signed multiple Fortune 100 corporations We signed a top five firm in Singapore a top five firm in Brazil

I think that we have signed five AMLA 200s in the last two quarters. And if you look at, like, the long tail of customers or, like, of the industry, like, the number of mid-market law firms that need these technologies, that need it all built into a platform that they just need one technology they can work within, they're choosing NetDocuments. We continue to grow in that space at an incredible clip. So honestly, the most important thing for us is knowing where we're focused because there is so much opportunity. Yeah. I would think, and again, for people who may not be familiar with NetDocuments or might be watching this, you kind of span the entire legal market. I mean, you have small firms, you have big size firms, you have big firms, you have corporate legal, as you said. I would think that the need for technology that's going to help create that intelligence layer

is perhaps even greater among some of the down market firms a little bit from the big firms. I mean, big firms have had KM departments for years, and now they've got innovation and advanced IT departments, whereas a lot of the mid-sized firms maybe haven't been able to manage that knowledge that they have very well. And to the extent they have, it's probably not well-structured. It's probably kind of a mess. It's probably a little bit of a chaos. Do you see that at all? I mean, are there opportunities for those firms to get a better handle on their data? And obviously, you provide that opportunity. Yeah, I think the reality is that it is important in every segment of the market. You're spot on, Bob, that those small firms, those 20-user firms, they don't have anybody that's thinking about knowledge. They're walking into their neighbor office and saying, hey, have you got the latest, the best in class master service agreement or whatever the type of matter that they're working on? But the reality is even the biggest firms, the ones that have been spending millions of dollars on KM, it's very manual, and they're deploying revenue-generating resources against KM when what they could be doing is deploying technology against it, deploying things like net documents and our document intelligence and basically curating it for them and surfacing that knowledge so that they can be at their best.

I think that if a law firm, a corporate legal department, a big public sector legal organization isn't doing this in the next two to five years, they're going to be in trouble. Yeah. It's like it's necessary. Again, just kind of thinking about the market out there, a lot of the – I've been noticing some of the programs I've been to here, a lot of the demonstrations I see often tend to focus on the transactional side of law practice, which is, of course, is a very document heavy and where there's a lot to be learned from the history of deals and documents a firm has worked on. But does all of this also apply to the litigation side in terms of building out a context graph and building out that knowledge? Is that true on that side? Certainly think about like the amount of, I mean, like whether it's, you know, pleadings or depositions or whatever it might be, and be able to just like take all of that, turn it to text and make it organized in a way that can help me think through how am I going to work on my next case

or maybe expose some facts that I'm like hunting for inside of my matter or inside of the content that is available for a particular matter. But now it's going to expose it and make it easier for me to make informed decisions, negotiate more effectively. I mean, there's plenty of negotiating that happens inside litigation cases, maybe more so than transactional, I guess, at the end of the day. And I think it's relevant in every practice of law. Yeah. Again, talking about the market a little bit, you had a major rollout with Aiken earlier this year, I think, that you announced. and I'm sure you're in your role talking to customers all the time. What are you seeing in terms of actual adoption and implementation of AI? Not just whether firms are buying into this stuff, but whether the lawyers are actually beginning to realize and use it. Yes, we were looking at our usage of our assistant, of AI profiling, of semantic, et cetera, recently.

And what we're seeing is like 40 to 50% gains every single month, which like extrapolate that over a year. And you're talking about like 10 X's, 15 X's kind of thing. Gains in product. In usage. In usage. In usage, yeah. And the way that we've kind of observed the industry is like 2024 was a lot of like, oh, what have I got to do here? A lot of like, oh, scrambling. 2025 was a lot of experimentation. And in 2026, like the rubber is on the road and people are making real progress with these technologies. And it shows in the usage on our platform. How do you – what have you seen in terms of what makes a deployment successful at a law firm versus what doesn't? Yeah. The thing I would say is that, you know, having a team that is committed to doing the work to implement the ontology and things like that, because that's going to shape how the document intelligence pipeline is, like, creates the context.

That's an important part of it. And then the second is just, like, being willing to go through the change management. And, like, at no time has there been more change in the industry. And change needs to be managed. And, like, people need to be trained. People need to be, like, worked alongside of. So we've got a – I think you're spending some time with Heath, Harris. Yes, yeah. You know, we have a team in Heath's organization that goes and partners with our customers and helps them to, you know, figure out how are we going to train end users, how are we going to go and engage end users so that they can be successful here. And what we find is that inside an office or a practice group, if they get two or three folks using it, pretty soon, like in the hallways, it's spreading like wildfire. Yeah. What about the economics of this for your customers? I mean, NetDocuments published some research last month, two months ago, I think it was, you know, on showing that NetDocuments can help users get to answers more economically than just using a maybe a straight using a frontier model or something like that for the same kinds of processes.

But at the same time, law firms are facing all sorts of new costs. We were talking at a program earlier today about the fact that some of these costs are still unpredictable in terms of how they're going to phase out, in terms of how they're going to evolve. What are the economics for law firms? What's the ROI for law firms on all of this? Yeah, I think that, you know, for the last couple of years, there's just been a lot of subsidization that has been happening. and what we're starting to see is that, you know, people are really starting to ramp up usage, which means that they're using more of their AI credits and things like that. The work that my team did is we basically took a set of matters and a set of prompts and then we created a context graph for a law firm, you know, with real matters, right? These were real matters from real organizations using all of the content, all of the emails, all of the documents, et cetera. So we ended up creating about 800 matters across this.

And then we started doing legal work. And we did it. And we literally – we launched the model. We launched the harness. and then all we did is we started running these tests and sending prompts in, you know, trying to draft documents, et cetera. We were testing for one thing. We were testing for how much does it cost in terms of cost of tokens to get to the right answer or get to a quality answer. And what we found is that if the context graph wasn't there, the cost was X, and if it was there, the cost was 50% of X. And I was talking to our head of product, Scott Kelly, recently, and he told me that as we've continued to enhance our context graph, that today it is 55% more cost effective. And, like, he's seeing that tick up every single month. And the thing that's interesting is that the more advanced the model is,

the higher the savings are. So if you using the most expensive models we seeing more like 70 cost improvement whereas the cheaper models the cost savings are not as much It drives the point even farther that if you doing this work and you using AI to produce documents to produce work to help you as a legal professional the cost effectiveness of doing it while having the context graphed from net documents is significantly better. And over time, what we're going to see is the dollars associated with using these models is going to get so expensive that firms are going to care a lot about doing it cost-effectively. Yeah. Do you think it's headed toward more predictable pricing or more consumption-based pricing? I think it's going to a combination of the two where you have, like, some level that is predictable, and then from there it's consumption-based.

And, I mean, the reality is it almost has to go that direction because there are real costs associated with using these models. Yeah. How does it affect how NetDocunist thinks about its own pricing? This is something we debate a lot. You know, there is real value in the platform itself. And then, like, the AI capabilities that, you know, have more direct costs for us is something that we're working through. Our expectation is that over time we work to kind of a hybrid model of a fixed cost plus a variable. but we'll do it in ways that help our customers have as much predictability as possible. And as you can see from the context graph work and the benchmark work, we're going to do everything we can to hold those costs down so that, you know, that our customers get the best ROI possible. Yeah. We talked earlier about this concept of whether we're someday moving toward a more headless model, but of course you've just rolled out a whole new user interface.

You spent, I think, a couple of years working on talking to customers, trying to come up with the right design, figure out what matters to them. Why did you want to do that? Why was it so important to work on that at this point? Yeah, the reality is, so we've got something like 350,000 users that log into NetDocuments every single day, and we have wanted to give them the same experience across mobile, Mac, PC, et cetera. So that's where the research started, was giving them the same experience. And then as the technologies have evolved over the last couple of years, there was this – the reality was that it gave us the ability to infuse the entire experience with AI. So that end users aren't thinking, oh, I should go and use AI to do this job. But they're just doing their work and it's being enhanced by artificial intelligence. and they're getting better outcomes, they're getting faster outcomes, et cetera, all while having this very seamless experience across any user interface,

a very similar experience whether they're in a browser or whether they're using Word or Outlook. It just feels the same. And, you know, we just felt like that's an important part of being a great partner for our customers. Yeah. You said earlier in our conversation that you truly believe this technology is changing the way lawyers practice law. What does that look like for lawyers? I mean, put on your turban and get out your crystal ball and tell me, I mean, what do you think is going to happen? Where it's where we came in particular is happening in six months. Sure. But five years from now, how will law practice look different and what will NetDocuments role be in that? Yeah. I was talking to a friend of mine who is an estate attorney. He was telling me how much of his career has been spent drafting and doing things that are not rewarding for him and are low value. Now, they're necessary.

Like, to be clear, they're necessary, right? And how much joy he gets from the consulting part of being an advisor and helping his clients. And I think that you're going to see a shift to where, like, the reason that somebody went to law school was to be able to help somebody, you know, help their clients get a great outcome. And so much of that is in advisory and helping them to think through a problem and how to structure it, et cetera. Now they can go do the work on the docs, but that work on the docs and submitting things to the courts, et cetera, all that mundane stuff is going to go away. And it's going to be automated in ways that enhance the lives of legal professionals and deliver better outcomes for their clients. Yeah. So will that be the biggest change is less focus on creating the docs, more focus on refining and advising and consulting? Spot on. Yeah, I think you've got it exactly right.

Yeah. What about for net documents as you look ahead to the next five years? What worries you about where this is all going? Do you see threats on the horizon to net documents? I mean, the reality is, like, if you think back to January of this year and we had the whole SaaSpocalypse moment, I would say that every software CEO on the planet was feeling a little bit bipolar in that moment. Yeah. Like, the entire world is going to change. All software is going away. That's not happening. Right? But in the same moment, we've also been feeling this moment of incredible excitement. And that's – so for me, it's been that. We're able to develop products and deliver value to our customers faster than we ever have before. We had a project that we were going to launch earlier this year, Tabular Review. We had it scoped to have two to three teams working on it for three quarters. Then all the processes to actually get it production ready, et cetera, was going to take us 12 months.

We delivered that thing in three months with one team of engineers, and it is significantly more advanced than it otherwise would have been. This is a moment where we're able to take – we're growing our engineering team, and most people are being like, no, you don't need to grow your engineering team. Just get more efficient. We're growing our engineering team, and every engineer is producing more, better quality, more adoptable product than ever before. I've never been more excited. This is a moment where we can deliver value to our customers in ways that we've always been able to dream of, but we couldn't produce it fast enough. But now we're going to be able to. Yeah. And is every engineer using code or using Cloud Code? Every engineer in our organization. Yeah. I think you said earlier you deployed Cloud to everybody in the organization also. Yeah. So we've been using AI to develop software for about two years with varying levels of effectiveness. Yeah. And then as Claude Code really started to mature, and by the way, the same is true of Codex.

Like they really started to mature over the last 12 months, and every quarter they get more and more mature. Like we look at our engineering effectiveness today. I mean we've got many engineers who are 10x more productive. Our smallest step-ups are two to three times, and it's amazing. you know the great engineers want to deliver value to end users they don't just want to write code they actually want to produce something that end users use and they're able to do it faster than ever before it's really it's really cool yeah well Josh what what else is on your mind anything else that you wanted to bring up that we haven't talked about here we've covered a lot of grounds But the thing I would say is that our customers are so leaned into this moment. I think that a couple of years ago there was like, what do we do here? And, like, there's really been this turning point. I was talking to one of our customers earlier today, and they went live on NetDocuments earlier this year.

And what she said is they rolled it out. She said this is better than Christmas. The end user said this is better than Christmas. like that's the kind of impact we're having on end users and the kind of impact we're having on on a legal professional's abilities to do their work. Yeah, it's it's a pretty fun time to be in in this industry. I'm sure it is. I'm sure it is. Well, Josh, thanks so much. I really appreciate you sitting down during a very busy conference to chat with me. And always always a pleasure. Yeah, I always enjoy it, too. Thanks, Bob. So I've been talking with Josh Baxter, the CEO of NetDocuments here at its Inspire conference in Orlando, Florida. And as I said, I've also been doing a series of interviews, so watch for all of the interviews coming out of this show. Until then, this is Bob Ambroji. I hope you enjoyed it. If you're watching us on YouTube or listening on a podcast channel, please leave us a review if you like the show. And until next time, thanks for watching.

Thank you.