New Trends in LegalTech

How artificial intelligence-powered software tools are helping legal teams reduce cost and increase efficiency.

Artificial intelligence is showing up in more and more places these days, driven in large part by the mass consumerization of smart-device-based personal assistants such as Siri and Alexa. AI is now poised to make its mark on the legal profession, helping lawyers and companies reduce cost and improve work quality by performing routine low-level work such as contract review. This article describes the top five trends in LegalTech and how it stands to benefit lawyers and companies. 

Trend #1: LegalTech has matured

LegalTech, once considered a nice-to-have, is now a must-have for every legal team. The benefits of LegalTech are many, including increased automation, lower cost, and higher productivity. Technology can perform routine tasks faster and more accurately than workers, freeing legal teams to focus on more complex work that requires higher-level expertise. As a result, legal-team budgets now include allocations for software on par with those of other departments, such as human resources, marketing, and sales. As the demand for software increases, investment in LegalTech is growing rapidly. According to Forbes, 2018 saw a record 713% increase in LegalTech investment, with a concomitant proliferation of software purchases and development of legal tech roadmaps. This has also affected the organizational structure of in-house legal teams as they retool their processes to take advantage of the new technologies.

Insourcing is expanding

In the past, whether for lack of tools or technological savvy, companies delegated many tasks to external companies or outsourced clients. Companies needing additional legal resources paid dearly to outsource their legal tasks and began to question the value of such services. As an alternative to expensive law firms, some companies began outsourcing to LPOs (legal process outsourcing) or paralegals. According to Market Study Report, LLC, the 2018 global LPO market size was valued at  $4.55 billion and was expected to reach $35.9 billion by the end of 2025. 

Organizations began to see that LegalTech solutions are affordable; are easy to learn, implement, and deploy; and can help in-house teams work smarter, faster, and better. The Corporate Legal Operations Consortium’s (CLOC)  2019 State of the Industry Survey identified “moving more work in-house” as one of the primary techniques companies are using to control costs.  More effective LegalTech and tools are allowing in-house teams to insource, improving performance significantly in the bargain.

Trend #2: AI is going mainstream

Increasingly, artificial intelligence (AI) has become part of our everyday lives, as evidenced by AI assistants such as Siri, Alexa, and Cortana. This consumerization of AI has paved the way for its rapid adoption by corporate users, including LegalTech. Many LegalTech tools incorporate AI or at least claim to. Lawyers now understand that AI can be a tremendous benefit to them rather than a threat. They’ve realized that AI can automate a variety of routine legal tasks, including minimizing mistakes and maintaining consistency and defensibility, thereby freeing lawyers to focus on more impactful work. 

Delivering faster and more accurate results

As early adopters of LegalTech began realizing the benefits of AI, they spread the word to their more traditional counterparts. Moreover, lawyers have seen the benefits that their counterparts in other departments have gained and are eager to leverage these tools so they can deliver faster, more accurate results to their own stakeholders and customers.

Trend #3: Legal is becoming a more responsive business partner

No longer “the department of no”

Increasingly, legal teams are expected to take a service-oriented approach to their internal clients. This is particularly relevant because lawyers have a unique perspective from working with nearly every department in the organization.

What’s necessary to implement change

To combat the image of being bottlenecks to deals, lawyers need to demonstrate their value to their teams. Simply identifying risk is not enough. They need to eliminate the bottlenecks so they can focus on the strategic issues that they were hired to handle. LegalTech is a viable solution for lawyers wanting to make time to focus on deals rather than paperwork.

Business people need to be able to automate administrative tasks and yet maintain control of processes. LegalTech enables them to do just that—structuring and delegating workflows while lawyers gain visibility as to what has been completed and what still needs to be done.

AI-enabled LegalTech allows legal professionals to delegate a variety of routine tasks to machines. Moreover, by integrating new LegalTech services into existing systems, organizations can gain visibility into their overall business operations. The past year has seen a willingness to change among legal professionals.

Trend #4: The coming of age of legal ops

Measuring, reporting, and optimizing legal performance

As in other departments, such as marketing and sales, legal departments are now mandated to measure, report, and optimize their performance. Increasingly, they’re adding a legal operations function (aka “legal ops”). Legal ops is responsible for a variety of activities designed to increase the efficiency and effectiveness of legal, including, but not limited to, knowledge management, data analytics, vendor management, communications, and technology support. Companies that cannot afford or do not require a full-time legal ops specialist can seek assistance from the burgeoning legal operations consultant industry.

Supporting business goals

Legal ops sets goals and key performance indicators (KPIs) for their legal departments, which can range from financial costs to service quality to turnaround time. They evaluate options for addressing efficiency, such as LegalTech solutions and allied professionals such as paralegals and contract managers.

EY’s Reimagining the Legal Function Report 2019 states that rising business costs and high lawyer salaries are some of the reasons why a majority of in-house legal teams surveyed will be forced to cut legal spend over the next two years. The report also refers to the challenge of recruitment, given that lawyers want to do meaningful work rather than mundane tasks.

This tendency aligns with one of the core benefits of LegalTech: freeing lawyers to concentrate on strategy and niche skills rather than routine tasks. ­Technology also allows work to be measured, to be more efficient and effective, and to be delegated to paralegals and support staff. Today’s legal profession includes a new class of allied positions, such as contract managers and paralegals. The role of these consultants is to strike a balance among teams, making sure that the right people are doing the right jobs.

Low-risk work does not always require a lawyer

The ranks of contract managers and paralegals are increasing, in response to the need for low-cost resources for low-risk, routine work. Trained paralegals and contract managers alleviate the pressure on more experienced lawyers and niche experts, and can reduce companies’ reliance on expensive billable hours.

Trend #5 Law firms are adopting LegalTech

Pressure from clients and competitors

As more companies shift from outsourced services to LegalTech, law firms are also turning to LegalTech to justify or address billable hours and resource allocation.

One example is contract review, specifically for NDAs. In the past, law firms generally either didn’t charge for NDA work because it was part of a global retainer (in which case they lost money), or they billed clients for NDA work at their regular hourly rate, which made clients unhappy and opened the door for low-cost competitor incursions, placing major accounts at risk. LegalTech can help law firms maintain their competitive advantage while expediting more tedious tasks rather than lose out to lower-cost alternatives. 

Insourcing has the advantage of greater trust, lower cost, and greater familiarity with the company. Law firms need to keep up with these changes or lose their business to insourcing or competitors that have succeeded in adopting technology more rapidly. Expediting work with automation and AI can help law firms retain their existing customers and attract new ones.