How Fast Technology is Changing the Business of Law
I spend most of my time in the UK and internationally, engaging with law firms and advising them on future plans; opportunities, risks, challenges, transformation, and growth. I often remind my clients that I am no ‘techie’; I have no background in developing, deploying, or maintaining systems, and I still grapple with personal IT glitches like everyone else. However, my journey through the legal world has been intensely focused on future strategies and changes, and inevitably legal technology found me. My role is to sit alongside firm leaders rather than with technologists, helping them answer questions like, ‘What does this mean for our business model?’, ‘How different will our firm look in 3 to 5 years?’, and ‘How will this change what our clients want and are willing to pay for?’. From these discussions, some themes have emerged regarding how – and how fast – technology, including but not limited to artificial intelligence (AI), is changing the legal world. These thoughts will evolve, be evidenced, and sometimes disproved many times in the coming years. But right now, here’s what I’m seeing.
Technology has been transforming the Business of Law for Decades already
The promise and threat of AI have loomed in the legal tech space for a long time. Decades ago, we saw the deployment of machine learning at scale in litigation discovery, followed by AI-based contract tools. Throughout, we’ve been reading and hearing predictions from experts like Professor Richard Susskind and Josh Kubicki about what’s around the corner. In other sectors, AI was being used in ways that law hadn’t yet contemplated. Lawyers thinking about what AI could mean for the future of their work is not new. More importantly, a bundle of technologies has been altering almost every aspect of our working and personal lives over the past 30 years. We’ve had long enough to understand, apply, and adapt to them. Your personal and firm philosophy should recognize that we are in the middle of a multi-decade revolutionary era of massive change, rather than facing a sudden surprise assault from AI.
Generative AI is already having a real impact on Law and will explode in 2025
A defining moment of the 2020s was the launch of ChatGPT in 2022, introducing Generative AI to the world. The hype has barely let up. I curate, chair, or speak at around 20 legal business events each year, and AI has been featured at all of them since then. Legal technology consultant and co-founder of 3Kites Consulting, Paul Longhurst, uses a great image of a breakfast cereal packet emblazoned with ‘NOW with added AI!’ amusingly reflecting what we are seeing in the legal IT marketplace. Indeed, try finding software that doesn’t claim to have AI inside. Legal industry giants like Microsoft, LexisNexis, and Thomson Reuters have developed specific generative AI tools that I predict will see massive sales as firms conclude they are the easiest, maybe safest way to dip a toe in the AI water. All this has happened within 18 months.
Let’s pause there. By legal business evolution standards, we’ve become surrounded by Generative AI in the blink of an eye. What we read, the events we attend, the products we are offered, and the decisions we make regarding investments, business plans, and tech infrastructure upgrades are all influenced by AI. As firms approach the new financial year and finalize their budgets, AI-enabled tech in 2025 will be as inevitable as a Tamagotchi on a kid’s Christmas list in 1997. The legal world is already changing at speed from the inside, with unprecedented shifts in where we place our investment dollars and the development of our core IT infrastructure.
It is the People dimension in Firms, not just IT, that is already being transformed
We are already buying tech tools designed and built by large tech companies or nimble start-ups backed by substantial investors. There is also a people revolution underway in large law firms, gradually spreading to the mid-tier. I routinely meet with law firm Innovation, Transformation, or LegalTech Heads; these roles are becoming standard in larger firms. Talent is being head-hunted, offered partnership or C-suite status, and increasingly influential inside the firm. Many trained and practiced as lawyers, in fact some moved directly out of fee-earning Partner positions, while others have impressive tech and product development backgrounds outside the law.
These new-model Innovation and Transformation leaders are building large multi-disciplinary teams comprising legal engineers, legal ops specialists, developers, design thinkers, and product owners. Many team members trained as lawyers but chose this career path due to disillusionment with the soulless grind of being a fee earner in a big law firm resistant to change. Others come from tech or business college courses or sectors where these functions are already established. This novelty status is receding in law; another example of law firms being transformed almost imperceptibly from the inside out. In the UK market alone, several firms now have 30+ people in these teams, with many more client-facing lawyers learning new digital skills and taking on part-time innovation roles. Firm leadership is starting to grant these teams ‘trust-busting’ rights to deliver innovative apps, platforms, and solutions to key clients, even if that might cannibalize existing hourly-billed revenue streams. Essentially, these firms are applying hard lessons from other industries and know that no industry ever transitioned to a new model without breaking some elements of the old. ‘No pain, no gain’ will likely be the watchword over the next five years.
Generative AI is the Second Transformational Tech Revolution this Decade
Picking up the ‘no pain, no gain’ theme, I need to reflect on the COVID-19 pandemic lockdown and its long-term impact. Medically, societally, educationally, and economically, we are still learning month-by-month about the long-lasting implications of this genuinely global crisis. In responding to the pandemic with lockdowns and remote work, the world underwent a massive social experiment, at scale and with minimal preparation. The impact, good and bad, is emerging over time. However, we can already see that technology saved us in many ways, allowing us to get through that dark period in better shape. It kept us connected to our friends, colleagues, and the world, and enabled us to get food, goods, and medicine relatively quickly and easily. At the organizational level, technology investment and tools built up over the previous decade were crucial. Without the money spent, sometimes grudgingly, on laptops, mobile connectivity, cloud, and video conferencing tools, many more businesses would have had to shut down. Partners were often amazed that their firms, which they felt had not changed much over the previous decades, could pivot in days to a wholly remote digital working model and then to an agile hybrid basis when offices reopened. Various commentators believe that COVID accelerated the digitization of legal services by 5-10 years compared to the trajectory we were on back in 2019. Many firms have since doubled down and applied the lessons from lockdown, investing heavily in completing their digitization across all offices and jurisdictions. These programmes, seen as top strategic priorities by those firms, have been impressive, as I’ve seen from my judging of many legal technology awards. Did your firm drive a major technology investment to fully digitize in the last three years, or did you instead focus your effort and energy on trying to cajole your staff back to the office?
The Digital Doom-Spiral: Why you might only have three years to save your Firm
The rapid digitization in response to the pandemic highlighted the critical need for firms and legal departments to build on a completely digital platform. As we face the next wave of next major disruption from Generative AI, completing your digitization is even more essential. AI is fuelled by and monetizes data – to maximize your return, your data should be clean, accessible, and digital. Utilizing new AI apps and tools requires your existing technologies to be running on the latest versions. Firms that have not fully digitized and are running old versions of apps will find themselves unable to use the new AI tools effectively and that means the existing disadvantage for firms lacking a fully digital infrastructure will increase at pace year-by-year. I refer to this as the digital doom-spiral, and my estimate is that firms have just a few short years left to pull out if they want to still be in business in 2030.
I am already seeing successful – but not fully digitized – firms recognizing the need for a big push in terms of basic IT upgrading, digital skills development, and process re-engineering, just to get to the start line for the Generative AI era. I have faith that those firms have just enough time to pull out of the doom-spiral, prioritize investment, and fend off the new and intensifying competitive threats. There are some red flags that indicate a firm is in this last-chance saloon and I’ve outlined those, at a very high level, below.
Red Flags
Does your firm:
• Maintain paper rather than electronic matter files as your default standard?
• Use wet signatures internally or with clients, where not mandated by law or expected by the client?
• Have important data or documents that are not accessible electronically and shareable?
• Operate any widely-used applications or databases that can only be accessed onsite in an office?
• Have a substantial number of people (lawyers and support staff) who are unable to work easily off-site?
• Run core IT applications that are still on pre-2020 versions?
• Have nobody responsible for innovation or transformation of how legal work is delivered?
• Offer no digital skills training program for partners, lawyers, and support staff?
If that does sound like your firm, especially if you’re approaching your 2025 planning and budgeting cycle, make this issue a top priority on your agenda. You may only have a few years to address the ‘final mile digitization problem.’
Clients Are Going to Drive the Pace of Change Ever Faster
It is, of course, crucial to consider the perspective of law firms’ clients. Clients are already asking how firms use AI, posing what may sound like a ‘no-win’ question: using AI raises concerns about information security, quality, and accuracy; not using it implies a failure to innovate and offer the savings AI can deliver. Firms will have to navigate these concerns for years to come, but as AI quality and accuracy improve, clients will expect improved services at reduced costs. Competing legal products and services are already in development to meet these expectations. Over the next few years, every firm will need to respond; is your firm horizon-scanning for competitive threats and spending management time working out how to address them?
Pricing and Billing legal Work using billable hours in the age of AI
Pricing and billing legal work just using billable hours has been in steady decline as technology and client expectations have changed, but that process has been slow and patchy across different practice areas and jurisdictions. There is now a widespread belief that Generative AI will finally break the default use of billable hours. Smart tech, which can accomplish tasks at scale in seconds that a lawyer might take hours to do, will force firms to change their charging model in order to avoid a significant reduction in revenues. In most parts of the business world productivity means achieving output with less time and resources. Clients will expect law firms to adopt this premise and price their work accordingly as AI becomes more prevalent.
Your People want tools that make their lives easier and more productive
As clients press firms to show the benefits of new tech, new hires and your existing workforce will ask whether your firm has the tools and tech that can help them work smart. Automation and AI can make lawyer lives easier, allowing them to focus their time on their highest and best use. Over the next few years, AI has the potential to slash administrative burdens on lawyers and support staff, liberating them from time-consuming and low-value activities. It will also reinforce the hybrid work revolution, enabling people to work flexibly regardless of place or time. Firms without these tools or the skills to use them will be at a significant disadvantage in the talent market.
Are we already past the Tipping Point?
Tech has been a driving force in re-molding the legal business model for a long time. Generative AI is the latest and perhaps the most significant wave in this process, already beginning to transform parts of the legal world. As described by Malcolm Gladwell in “The Tipping Point,” few people recognize the tipping point where irreversible change has kicked-in until much later.
My advice is always to not wait until the tipping point where AI has transformed legal practice is 100% proven and universally acknowledged; that will be much too late. Like addressing climate change now based on scientific warnings, you don’t need to wait for all the evidence to be certain. Ask yourself and your colleagues; ‘are we ready for tech to change the legal business model forever over the coming years?’ Do we understand what it is that is changing and the emerging new competition? Finally, and crucially, if you might only have a few years to get your digital house in order, what is your plan?