Taking advantage of tech

I n a post-pandemic market, the uptake of technology in the profession has been monumental. In 2021, the legal tech market generated revenues of US$27.6 billion worldwide, with the market forecast to grow at a compound annual growth rate (CAGR) of over 4 per cent for the period to 2027.

In that year, revenues are set to reach US$35.6 billion, according to Patrick Breen, product and content general manager at LexisNexis Pacific, who said the acceleration in the legal tech industry had been driven by a number of factors.

“The legal tech industry has gone from strength to strength over the past decade. Despite the recent slow-down, there has been significant increase in investment by venture capital firms. Data from Raymond James shows that the number of deals increased steadily from 53 in the second half of 2018 to 116 in the second half of 2021.

This sustained increase in deals and investment has enabled a sizable legal tech industry to grow and flourish. This industry is now potentially worth US$27.6 billion worldwide, according to Statista,” he said.

“The advent of cloud technology has significantly reduced the costs of developing a start-up and being able to trial your idea for a low cost. Artificial Intelligence and machine learning technologies have matured significantly over the past decade, while becoming less costly to develop due to more powerful computers.

“This has enabled the unlocking of new use cases since the legal domain is highly focused on natural language. By being able to interpret written language at scale, without using high-skilled human reviewers, it is possible to develop new, compelling, start-ups.”

The Great Recession of 2008, according to Mr Breen, drove two complementary trends within the legal tech sphere.

“Post 2008, legal budgets became no-longer sacrosanct, and this has driven a focus on spend. Through this increased focus it has been necessary to adopt processes and technologies to drive efficiencies, both within corporations and law firms. This is demonstrated by the rise in legal operations as an area of specialty in in-house corporate legal teams.

“Secondly, the 2008 recession has also resulted in an extended period of ‘cheap’ money, that has been seeking above-market returns. This has helped to drive venture capital and private equity firms to invest in new industries, which has included legal tech and in some jurisdictions law firms themselves,” he explained.

“The benefits to firms from this acceleration in legal tech are that there are now a plethora of new products and solutions that address numerous areas of frustration and pain. A recent LexisNexis survey of corporate counsel found that 71 per cent believe the quality and usefulness of legal technology is improving. These tools can vary from high-volume matters such as no-code automation solutions, to practice area specific solutions such as capital table management solutions. This is resulting in lawyers being able to better support their clients through more targeted and timely advice.”

The acceleration in legal tech is also due, in part, to the global pandemic, according to co-founder and director of NewLaw firm Elit Lawyers, Robert McGirr.

“Post-COVID-19, technology has underpinned all aspects of the legal profession and practice management, including administrative decision-making, electronic signing, file management and witnessing, which is now seen in the legislation passed in 2021,” he said.

“The legal tech industry has benefitted law firms like ours in talent retention. By employing legal technology such as cloud computing and documentation automation, we could provide greater flexibility to our staff, offering them a better work/life balance.”

The adoption of legal tech, Mr Breen added, continues to be driven by two key trends: the need for corporate counsel to do “more for less” and the fact that it enables lawyers to provide higher-quality advice by freeing up their time to focus on higher value tasks.

“In terms of legal tech specifically, the key trends LexisNexis believes is impacting the legal profession are that we are increasingly seeing increased partnerships focused on interoperability across the legal tech landscape. This interoperability enables lawyers to gain the insights they need where they are on their key products and platforms without having to use a bricolage of different tools and websites. The foundation of this interoperability is the increased availability of APIs that enables information and data to be transferred between systems. Examples of this include the LexisNexis Web Service APIs and Lexis Create, which is an add-in to Microsoft Word enabling you to develop insights in your working environment.

“The next big trend is the provision of contextual insights through analytics and decision support tools. This is being enabled by continued advances in natural language programming and artificial intelligence to better understand a lawyer’s work product. Through this understanding legal tech can recommend on-point information such as cases that may have taken hours to otherwise find, or alternative clauses for drafting a contract. By combining a lawyer’s contextual understanding of a matter and advanced technologies, legal tech can provide insights in the moment they matter. Examples of this include Lexis Clause Intelligence that recommends alternative clauses with drafting notes helping lawyers to understand what they might be missing,” he said.

“Finally, we should expect a continued focus on structuring of legal information. The same advances that are impacting the provision of contextual information are also enabling corporations to structure their contractual data to enable internal analytics.”

And as there is less talk of AI replacing the lawyer and an uptake on implementing tech tools to improve operations of the legal business, the profession should be increasingly looking into both NewLaw methodologies and legal tech, according to Sprintlaw co-founder Tomoyuki Hachigo.

“In addition to the advantages to improve cost and quality, by reducing the more repetitive and menial tasks, there is also the benefit for staff retention and happier lawyers who are able to focus on more valuable work that is rewarding,” he explained.

This can also put firms in a better position to scale and secure bigger matters, because “legal techs and NewLaw methodologies primarily focus on clients’ needs”.

“Following a value-based approach, the NewLaw methods significantly change the delivery of legal services to clients by providing clients greater access to the underlying work that the lawyers do, upholding transparency in the legal profession. Also, legal tech’s digital platforms enable better communication between clients and lawyers, adding to professional accountability,” Mr Breen said.

“In the legal profession, technology can put law firms in a better position to scale and secure bigger matters by driving change in the industry by advancing legal research, discovery, practice management and offering more information to clients. It has significantly contributed to better accessibility, the expedited delivery of legal matters to clients, automation of basic legal tasks and efficient management of files and relationships.”

However, firms will often be unable to focus on both NewLaw methodologies and legal tech at the same time — as corporate matters tend to fall into two categories: “run the company” versus “bet the company”.

This can mean the difference between a document review to identify variances to a firm’s playbook compared to litigation on a core piece of intellectual property, respectively.

“These different matters are likely to be taken-up by different firms, which will drive corresponding focuses on legal tech and NewLaw methodologies. It is highly unlikely that a firm will excel in both areas since each requires a distinct set of skills, requirements, and trade-offs to drive the firm over time,” Mr Breen explained.

“For firms that focus on ‘run the company’ matters, the key watch-word will be efficiency by corporate legal teams. While this will likely be total lifecycle efficiency, the key is to deliver the most efficiency and effective service. Firms focusing on these matters will need to drive the trifecta of people, processes, and technology to drive efficiency and compete at the ‘best’ price point. This focus will include making sure the work is carried out by the most suitable resource, potential near-shoring and offshoring of expertise and technology deeply integrated into workflows to provide insights at the point of need.

“For firms focused on ‘bet the company’ matters, the key watch-word will be winning at all costs. While winning is highly subjective, the outcomes here matter more than the efficiency of actions. The adoption of legal tech will be crucial for these firms; however, it will be more focused on driving greater insights and identifying better arguments, rather than efficiency. For these firms, understanding the limitations of technologies is even more important.”

For firms focused on “run the company” matters, adopting legal tech will enable increased efficiency and the ability to continually focus on developing processes and workflows; however, to succeed long-term, firms and businesses will also need to use data and insights from their own experiences to drive outcomes for clients.

In terms of focusing on “bet the company” matters, retention of talent is key — as well as providing market-leading advice, which will help firms implementing NewLaw methodologies scale and secure bigger matters.

Additionally, to secure bigger matters, firms should expand their focus to advise on new and different areas of practice, through platforms like the recently launched LexisNOW, which Mr Breen said can “revolutionise” firms’ access to “mission-critical information”.

“You may be asked to provide employment advice for a loyal family law client, expand into a new area of practice, or provide tax advice during a business sale process. Having access to know-how, guidance, commentary, and precedents to help you advise on these expanded matters is critical to be effective and provide the high-quality advice your clients need and expect,” he said. “LexisNOW enables you to access this critical and authoritative information when you need it.

LexisNOW means you can get an answer to your query within 10 minutes, using LexisNexis’s authoritative content, so you can advise your clients with confidence. The best part is that it is a fully digital experience, so you can access it when you need it, and choose what you need.”

For lawyers to use legal tech effectively, it is vital for them to understand what technology areas the solution is based on and what this means in terms of advantages and limitations, Mr Breen added.

“Being able to advise a client on these trade-offs when using a legal tech tool or advising on one is important, since they aren’t a panacea or magic wand for every issue. In fact, 53 per cent of corporate counsel recently said that they struggled when choosing the most appropriate legal technology, with this problem only likely to grow more,” he explained.

“The other area to focus on is data privacy and security. Many legal tech tools are now cloud-based, which could result in data breaches if there is insufficient security around the solution. It is important to understand the data flows and security that your vendors provide. Cloud is now the standard for the majority of businesses and applications, and we should expect adoption to continue to accelerate.”

In addition to this, lawyers working in the legal tech space need to be following “best practice guidelines and adhere to high ethical standards of the legal profession”, added Mr McGirr.

“Lawyers must involve themselves in cyber security education initiatives to mitigate the risks of online user data and privacy breaches. They must also find pathways to increase accountability on social media and meet higher thresholds for clients’ digital expectations,” he said.

“Moving forward, technology in law is not just limited to a desktop or a laptop. It is used as a tool that allows lawyers to automate legal services and fast-track legal solutions, maintaining transparency in the services and working more collaboratively and efficiently with their clients and other stakeholders. It also offers lawyers the flexibility to choose to work from home or elsewhere as it deems fit for their lifestyle. Technology brings together lawyers from different areas of law and the world to share knowledge and insights into the profession on webinars and online forums.”

In addition to bringing lawyers together, technology can also improve legal services and should be a “no-brainer”, Mr Hachigo noted.

“Technology in the legal space can improve services both in the quality (by leveraging data and reducing human error) and the cost effectiveness (through efficiency gains). It should be a no-brainer for lawyers to adopt technology for these reasons and, as buyers of legal services become savvier about cost and quality, lawyers that don’t will be less effective,” he said.

“It is important for lawyers to have the ability to interact with technology, and knowing how the tools you use work. Technology isn’t perfect so you need to have a basic understanding of how the tools work and be able to troubleshoot when they don’t work. That said, as technology can do more and replace some of the more menial tasks that were traditionally done by lawyers, lawyers would be better placed to focus on the more ‘human’ skills like communication, empathy and commercial acumen.”

And whilst Mr Breen said electronic information solutions and practice management solutions like Lexis Advance or Lexis Affinity are not new additions to the legal tech market, as the market expands, it also remains important for the profession to continually embrace it.

“The legal tech market has expanded significantly over the past decade to offer a plethora of potential solutions across both the business and practice of law. We are already seeing the profession test and embrace these solutions, where they help solve needs and pain points for their users,” he said.

“While the legal tech landscape may be more diversified than it has historically been, it will continue to be important for the profession to keep embracing legal tech as they have done so before now. Legal tech will enable the profession to provide higher-quality and more timely advice than they been able to before now. The profession will also be able to operate their practices more efficiently and focus their time on what they know, enjoy, and love.”