No one can have failed to notice that technology is top of mind across the legal sector. In her keynote address to the International Bar Association conference in Washington DC, Law Society CEO Catherine Dixon said that ‘technology can play a facilitative role in helping law firms achieve productivity-driven growth by increasing accuracy, saving time and driving efficiencies’.
As merger activity slows, law firms are looking for ways to facilitate growth in a consolidating, globalising market, with commercial competition and expanding corporate legal departments meaning fewer instructions for external counsel. Cutting-edge technology, some of which is powered by artificial intelligence (AI), promises law firms the ability to boost productivity while maintaining margins by automating and speeding up routine processes. But this depends on firms purchasing systems and tools that deliver on clients’ requirements and expectations while differentiating the firm from its competitors.
From Recruitment to Robots, a research paper by Fox Williams and Byfield Consultancy, surveyed 76 of the top 200 UK law firms. Only 27% of respondents had merged in the past two years and 95% envisage continued consolidation – as exemplified by the tripartite merger of CMS, Nabarro and Olswang. The report sees growth coming from strategic recruitment, international reach (which does not necessarily mean establishing an international presence), and technology, which 83% of respondents believe has the greatest potential to increase profitability. One respondent referred to ‘a technological arms race between law firms, where it will be important to invest in the right products’, neatly pinpointing the legal IT purchasing dilemma.
In the past 12 months, 55% of respondents had invested more than £100,000 in technology to commoditise aspects of legal work. As the report says, some will be early adopters while others play catch-up, and there are choices between standardised software as a service and more bespoke offerings. This shows a shift in legal IT purchasing patterns: whereas cloud computing led IT to be viewed as a commodity, it is once again seen as a differentiator. ‘Better understanding of cloud and managing that environment means firms are no longer bound to traditional ways of providing IT services,’ says Steve Sumner, IT director at Taylor Vinters. ‘Brave decisions have to be made, though, and there are risks and hidden costs, so partnerships with value-add technology suppliers and service companies are the way to go.’
This means that law firm leaders need to be tech-savvy and understand what is out there, says Derek Southall, partner and head of innovation and digital at Gowling WLG. ‘The market is swamped and we can’t invest in everything. So we have to make judgement calls on priorities, product selection and identifying needs. Some technology investments will be phenomenal, while others can prove to be poor choices. It’s vital to involve the best brains in those decisions.’
What are firms investing in? Martyn Wells, IT director at Wright Hassall, highlights cloud, agile working and AI. Magic circle and other big firms that have worked cloud and agile for years are looking beyond the hype and putting their money on AI. Approaches range from self-service AI tools to a tailored, ‘productised’ approach. Currently, their ability to invest in AI is perhaps winning bigger firms the advantage they lost when cloud computing levelled the playing field.
So what happens as AI as a service (AIaaS) in the form of pay-as-you-go due diligence and contract review from RAVN, Luminance, Leverton and others hits the mainstream? Corporate legal departments may invest in AI-powered due diligence software and instruct external counsel only after completing the data-extraction stage of a transaction.
Generally, legal AI is narrow and sophisticated, involving machine-learning tailored to particular types of work. This enables firms to productise processes and offer clients a fast, cost-effective, specialist service without compromising on quality.
This is shifting the dynamics of legal IT procurement away from the ‘one-stop shop’ approach with firms relying on one or just a few vendors. The proliferation of exciting new start-ups, plus an element of FOMO (fear of missing out), is bringing legal IT back to the ‘best of breed’ approach. So a firm could potentially use RAVN, Kira Systems, Luminance, Juro and so on for due diligence and contract review, ROSS Intelligence for legal research and Neota Logic to create client-facing apps.
There is a clear progression from e-disclosure’s technology-assisted review to AI-powered tools, but they are applied differently. ‘If you have a big piece of litigation, you can bring in a third-party litigation support organisation like Kroll or KPMG who run their own software and you can pass the charges on to the client,’ says Southall. ‘The AI model offers a new dynamic as the firm needs to work with the provider to train the system.’
Bas Boris Visser, global head of innovation and business change at Clifford Chance, recently introduced Kira Systems’ AI-powered contract-comparison software to support M&A transactions. He believes it is not enough to invest in the technology – rather, it is about productising the firm’s expertise so that it delivers a sustainable return on investment. Clifford Chance clients can buy a licence to use the firm’s branded AI contract-comparison tool.
Visser and Southall see the intellectual property created by machine-learning from the firm’s core documentation as a potential differentiator. However, there are strategic financial issues. ‘Almost everything that lawyers do could be automated, but whether it can be automated profitably is another matter,’ says Southall. ‘You need to be confident that having invested in (training) a system, the firm will bring in sufficient work to pay for it.’ This also means considering implementation costs, particularly when considering products that benefit individual departments rather than bringing across-the-board improvements.
However, the concept of data as a differentiator should surely resonate with the big legal publishers/software providers. Wells envisages legal M&A activity moving from law firms to technology providers acquiring AI start-ups and data owners: ‘In five years’ time I expect we’ll be talking about LexisNexis AI, Thomson Reuters Elite AI and Peppermint AI platforms aiding lawyer productivity.’ Wells believes that legal IT is a facilitator rather than a differentiator. ‘Ultimately, clients are looking for lawyers to fulfil a particular requirement. We invest in technology to deliver that service as quickly as possible while achieving a ROI for the business. Ultimately, AIaaS will affect procurement and pricing in the same way as cloud has.’
Robots and responsibility
There has been a lot of talk about robots replacing lawyers. At September’s Virtual Futures Salon I met 20-year-old entrepreneur and Stanford University student Joshua Browder of DoNotPay, a free chatbot which has successfully challenged some 200,000 parkin g fines by applying rules and regulations to live queries. Browder has since launched a bot that tackles landlord repairs, and is expanding the service to help Syrian asylum seekers apply for refugee status with a bot that answers questions in Arabic but produces documents in English.
Although these bots provide access to free legal advice, are they replacing lawyers? Most people would not use a lawyer to challenge a parking ticket – the legal advice might be more expensive than the ticket. The same applies to some landlord repairs.
Rather than replacing lawyers, Browder’s bots are extending access to the law, and highlighting obligations and accountability. His website makes it worthwhile and cost-effective to challenge parking tickets and make landlords carry out repairs. This is practical altruism because it enables people to exercise their legal rights without prohibitive financial outlay. Hopefully, this will encourage local authorities and landlords – and soon immigration authorities – to take their responsibilities seriously by making it easier for people to challenge their decisions and actions (or inactions). Browder is working on a platform that will enable law firms to have their own legal chatbots.
The AI Summit – and ELTA
I was privileged to attend the AI Summit, the world’s largest AI event. Although it was not focused on the legal sector, three key lessons are particularly relevant.
AI is a strategic investment: it is important to choose the right product and teach it to address a specific challenge. After the initia l investment and training, the system will continue learning and improving, but it still needs feedback and guidance.
For law firms this raises two cultural issues. The first is convincing lawyers that AI can capture and apply the firm’s collective expertise. This means assigning roles beyond machine-teaching, and establishing AI as the de facto tool for particular work. Second, lawyers need to understand that although AI can affect decision-making and outcomes, it does not replace the human factor – that is to say, it cannot do everything.
Another factor relates back to the procurement dynamic. Unlike other game-changing technologies, AI’s competitive advantage lies in its ability to learn and improve, so it pays to be an early adopter rather than a fast follower. This is because machine-learning systems leverage data and improve their performance with each experience.
Finally, AI is not just about machine-learning – there has to be human learning too. One advantage that the legal IT community has is its commitment to peer learning and collaboration. To this end, it is worth mentioning the newly established European Legal Technology Association (ELTA) – not to be confused with the longstanding US International Legal Technology Association – which had its inaugural meeting in Berlin in September. Brexit notwithstanding, it welcomes UK experts from law firms, companies, technology providers, start-ups and other interested individuals to join peers across the European legal IT community to discuss topical issues and learn from each other.