Last week we discussed the emergence of alternative legal service providers and their impact on law firms in the years since the 2008 economic downturn. Firms and lawyers who have succeeded in this time period, particularly in non-litigation, transactional and patent law practices have found ways to work within the framework of their corporate clients. It makes sense to look at trends in the legal market from the perspective of general counsel, which according to ALM Intelligence:
There is a great discussion of this data here.
Cost pressure associated with the economic downturn caused “in-sourcing” at many companies. I, personally, experienced this with many of the corporate clients with sophisticated legal departments that I was servicing at this time. Much of the drafting and filing of patent applications and patent prosecution tasks I was handling was taken over by newly hired in-house patent lawyers. I was relocated to supporting these lawyers and handling more complicated prosecution and appeals.
Legal tech employed by in-house legal departments streamlines legal work and drives down costs by increasing efficiency. This trend appears to be continuing as corporate legal department spending drops as companies brace for a potential recession, creating an “enthusiasm gap” between law firms and in-house counsel. In-house legal departments have found it more cost effective to incorporate legal tech or engage ALSPs than engage outside counsel. The use of legal tech and ALSPs corporations continues to increase as the use of law firms has remained flat or decreased.
Tech savvy law firms are experiencing the same advantage that corporate in-house legal departments are experiencing. According to the the 2019 Future Ready Lawyer Survey, conducted by Wolters Kluwer Legal & Regulatory, 68% of technology-leading law firms saw an increase in profitability from 2017 to 2018, compared to 52% of transitioning firms and 38% of trailing law firms. In fact, technology leading firms were more likely to experience double-digit growth rates.
Reproduced from here.
Sixty-five percent of Leading firms intend to expand their use of technology in the next 3 years potentially widening the gap between leading and trailing firms.
The biggest deterrent from using new technology (36% of respondents) according to the survey is lack of knowledge, understanding, or skill. This is echoed when respondents were asked about specific technologies. Only about 20% of respondents believe they have a very good understanding of high profile technologies.
Reproduced from here.
Lucky for us, the natural language processing technology we use at DorothyAI makes ability to speak English the only skill you need to use our platform, and we’ll be supporting other languages soon.
Despite clear evidence of the impact of new technologies on improved value, better outcomes, and increased profitability, law firms trail their corporate clients in adopting AI technology. In 2019, only 33% of leading firms say they are currently using AI, while 72% of corporate executives say their companies are currently using AI. See, RELX Emerging Tech Executive Report. The report found that 93% of these executives say that emerging technologies, including deep learning, machine learning, and artificial intelligence, help their businesses be more competitive. Respondents site increased efficiencies and productivity, streamlined processes, and reduced cost as reasons for using emerging technologies.
The concerns identified by respondents in the Future Ready Lawyer Survey can be addressed by using emerging technology. Respondent lawyers in stated that their clients want pay for value delivered instead of hours worked and expect ready access to service and expertise. Clients evaluate firms based on cost (57%), understanding of client needs and ability to partner with the client (48%), and specialization (46%). Increasing efficiency, improving access to information, and streamlining processes, for example, improving communication and access to lawyer can all be addressed by emerging technology.
ALSPs like Axiom and Elevate are experiencing incredible growth by leveraging technology to solve legal problems. Companies and tech savvy firms are leveraging technology to reduce costs and improve profits. It’s only a matter of time until corporate clients expect law firms to use technology, or at least consider the use of technology to be indicative of better value. There has never been a better time to incorporate technology into your practice.
Tech-Savvy Firms More Profitable Now, More Prepared for the Future, Finds Survey of U.S. and EU Legal Professionals
The Future Ready Law Firm: A Guide To New Technologies
The Trend to Watch: Forecasting the Future Direction of the Legal Market
Enthusiasm Gap Persists Between Law Firms and In-House Counsel
The Law Firm and ALSP Relationship Status: It's Complicated
Adoption of AI Technologies Among U.S. Businesses Increases from 48% to 72% in One Year, According to RELX