LegalTech: Opportunity or Risk?
There is a lot of talk of digital technologies transforming the legal sector – but is it really being transformed? Are traditional law firms changing the services they offer? Are new entrants to the market shaking up the sector? Are innovative billing models and increased customer engagement being offered?
There is no doubt that the opportunity is there for these things to happen and there are also risks associated with digital change (just as there are with choosing to continue with the status quo).
There is a lot of conflicting information out there but as a Quality Engineering services provider for the legal sector, we at Roq have a view on the shape of the current landscape and what the future might hold.
Are you prepared for LegalTech? (H2)
For example, a recent Wolters Kluwer report found that only 33% of lawyers believe their organisations are ‘very prepared’ to keep up with technology changes in the legal market.
Interestingly the lawyers perhaps have more confidence than their technology teams as according to similar research conducted by Gartner, only 19% of law firms in-house technology teams are ready to move forward with enterprise-level digital strategies.
In an industry that has significant opportunities for increasing speed and reducing cost by using technology, these stats don’t provide confidence that those opportunities can be realised by traditional Legal firms. However, the growing LegalTech offerings are well placed to help (or perhaps even take some market share for themselves).
According to a Tableau report, the big opportunities include automating the estimated 23% of lawyers’ tasks that are currently done manually but could be automated by existing technologies. Technologies that the legal sector has been slow to adopt.
This needs to change as these automatable jobs, such as research and other tasks is not the best use of a lawyers time and these inefficiencies are taking their toll on the sector. Thomson Reuters tells us that 43% of partners reduce a bill because elapsed time exceeds the client’s expectations. With this being a common occurrence, exactly how much time and money is being lost through poor manual process? The solution is to use more LegalTech, either in house or via partners.
Innovating for LegalTech (H2)
Happily for partners, the cadence of adoption is predicted to increase with LegalTech firms expecting their innovative products and services to be leveraged up to 40% more over the next three years than today.
These innovations include AI-driven legal research tools and document reading and comparison solutions that can reportedly achieve 36,000 man-hours of effort in a few seconds, according to results released by JP Morgan. A huge saving in time for legal firms allowing for more accurate and competitive billing for their clients, increasing competitive advantage.
On the face of it, you can understand the historic reluctance of the legal sector to embrace new technology. They are a sector steeped in tradition and process and are very risk averse. Now the risk is that they are being left behind by more tech-focused competitors and even by the LegalTech firms themselves that can offer some services directly to clients using their tech-first approach.
How can the traditional legal sector combat ALSPs? (H2)
This challenge is real and the Alternative Legal Services Providers (ALSP) – LegalTech firms and other challengers that don’t sit in the traditional law firm bracket – are moving to direct-to-client models at speed.
Their market share is growing and they threaten to be a real disruptor for the traditional legal sector. Thomson Reuters recent report showed that ALSPs are expecting to grow on average 24% per year going forward — that’s huge growth.
The reason they’re becoming such a popular alternative is largely down to price and flexibility, as well as their keen adoption of the latest technologies, which makes them a very user-friendly alternative for clients giving them a potential advantage over traditional firms.
For example, Olive Communications recent study states that 70% of clients would rather use an automated online system or “lawbot” to handle their legal affairs instead of a human lawyer because of three important factors—cost, speed, and ease of use. Such a service needs to be of the highest quality to ensure accuracy and of course, adherence to the law and ‘tech first’ ALSPs are well placed to achieve this.
The Thomson Reuters report concluded that “the next decade is not going to be plain sailing for UK law firms.” So Legal firms will need to embrace change more quickly than before and there is evidence that they are, with the American Bar Association reporting that only 8% of legal firms were likely to move to the cloud in 2019 – but this jumped to nearly 60% by 2021 – most likely driven by the pandemic.
Given the stats mentioned about technology departments and lawyers not being confident that they are ready for transformative digital change – though it appearing to be a strategic focus – in my view, there is a clear need to concentrate on mitigating that risk and working to ensure investments in technology work as intended, the first time around. Otherwise, the ALSPs will likely gain even more direct-to-client market share.
Although, this might be just what the sector (and importantly clients) want to see.