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The Legal Industry’s Digital Future: Technology as a Competitive Advantage

Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are identified in the footnotes below.


By Maiya Dario



The legal profession has been relatively resistant to the changes introduced by the digital revolution. For instance, last year, approximately 45% of lawyers reported the use of legal analytics in their firms.[1] However, these changes, which include the rise of digital capitalism and the gig economy, along with lockdown forcing a culture of remote working, have pressured law firms to embrace legal technology and digitalise. Moreover, these changes introduced new challenges such as new competitors and client needs. Hence, firms need to invest in legal technology to retain their competitive advantage in an evolving market.


Law firms are compelled to cut costs due to the economic uncertainty caused by the Covid-19 pandemic. Traditionally, key strategy firms used to cut costs was to expand through merging and acquiring (M&A) smaller firms, as demonstrated in the 2008 financial crisis. From 2010-2019, there were “seventy large law firm mergers in the UK and USA” whereas, from 2000-2009, there were merely thirteen.[2] When considering the opportunities technology offers, it is arguable that the M&A strategy fails to maximise profits and continue the provision of services.[3] Hence, an alternative, more advantageous strategy would be for firms to invest in legal technology to increase the efficiency of their internal operations. For instance, digital networks have been used to provide numerous management tools, such as computer programs capable of substituting lawyers’ work[4] and the use of machine learning and big data (this utilises enhanced tools of data gathering to derive stronger trends) in performing tasks.[5] Consequently, these strategies increase the efficiency of firms’ internal operations.


Furthermore, the legal market is rapidly evolving. For instance, the gig economy (a free market system promoting casual working) has introduced new players, including platforms that connect lawyers and clients online, such as Rocket Lawyer,[6] and virtual law offices, such as DirectLaw.[7] These new competitors have increased client demands and expectations in an unprecedented way by offering quicker, cheaper and more efficient services than those offered by traditional law firms. This also applies to technology. One example is Kennedys IQ, an online litigation system that saves clients half the amount of money they would spend on traditional legal teams for the same services.[8]

Despite these new challenges, law firms can significantly retain and strengthen their positioning and competitive advantage in this evolving market by investing in legal technology.


Boston Consulting Group and the Bucerius Law School have recommended that law firms outsource standardised, low-skill, repetitive tasks to centres in locations where labour is cheaper.[9] For instance, Clifford Chance opened its support services and knowledge management centre in Delhi. These centres are composed of contract lawyers, paralegals, etc. who rely heavily on technology, such as e-discovery (includes processes dealing with electronic data, useful for constructing arguments) and documentary review processes (documents and data are sorted through and analysed to determine what is necessary) and contract review and data extraction, to maximise their work.[10] Outsourcing allows these tasks to be performed in a more effective, efficient and cheaper manner. Furthermore, it allows firms to diversify their services and deliver these efficiently. Examples include legal project management and advanced legal analytics, which involves the use of technology to analyse data from legal documents.[11]Consequently, firms’ competitive advantage is increased as they are able to offer more than just typical legal services. Caserta supports this, predicting that future large law firms will transform into diffuse law firms. These require fewer employees, with a primary focus on technology and outsourcing strategies as its competitive advantage. One potential opportunity for diffuse firms is an increased market share due to new technology allowing them to reach more clients despite fewer employees.[12]


Currently, the majority of large law firms are trying to develop their own legal technology. Examples include Allen & Overy’s Fuse and Dentons’ NextLaw Labs, incubators that manage the creation and development of legal technology.[13]


It must be noted that the majority of innovative legal technology is underdeveloped and is still at its early stages. Consequently, Caserta encourages firms to outsource these to companies that can focus on developing these products to fully satisfy their needs.[14] This is due to new technology, such as IBM Watson, an AI tool that can answer legal questions, needing big data to maximise its functions.[15] Hence, if numerous firms outsource to tech companies, these companies can have access to the large amount of data needed, allowing for more suitable services. This allows firms to access technology that meets their particular needs and for tech companies to develop extensive products that will benefit the entirety of the legal market.[16]


It is worth acknowledging the major concern that technology will displace some in the legal profession. For instance, Susskind argues that the resulting automation of low-skill, standardised, repetitive tasks such as research and drafting standard documents will replace junior lawyers and paralegals.[17] One example is Justis, an analytical tool created to automate such tasks by searching among a hundred legal databases and discovering and categorising precedents, among many other functions.[18] However, it is arguable that the benefits and opportunities technology provides outweighs this concern. Instead of being concerned about this, Susskind recommends participating “in the development and delivery of new legal technologies and systems.”[19] For instance, Kennedys IQ allows clients to directly access technology developed by the firm, relying on big data to analyse trends and client needs.[20]Consequently, firms who quickly adopt this practice are likely to develop a stronger positioning in the future digital legal market.


Lastly, it is worth noting the limits to technology. Aspects of the legal profession heavily rely on human capability. For instance, interpersonal skills such as negotiation and assertiveness are needed for being persuasive in arguments. Another aspect is advising clients; excellent lawyers need to understand their clients’ specific needs and know how the law operates in the unique context of each client, such as its particular business and the nature of the industry it operates in. Furthermore, interpersonal skills are needed to build client relationships and understand cultural contexts, which are ubiquitous in international deals and transactions.[21] Hence, alongside investing in technology, it is critical for firms to continuously invest in human capabilities, such as talent since technology is limited by failing to account for aspects of the legal profession that heavily rely on services only lawyers can provide. However, it is certain that technological and digital literacy are essential skills that future lawyers need to succeed. Hence, it is recommended that they develop these. For instance, they can do so by learning how to code, allowing them to use widespread, functional platforms, such as Python.[22] This allows them to perform a wide range of tasks more efficiently, such as curating, organising and summarising legal documents in minimal time.[23]


In conclusion, the future of the legal industry is digital. Law firms should invest in technology to recover from the economic uncertainty and reinforce their positioning and competitive advantage in an evolving legal market, where new competitors and client needs constantly arise and client demands continually increase. Therefore, investing in technology allows law firms to pioneer the future of the legal industry.



 

Sources


[1] Lyle Moran, ‘Law firms are slow to adopt AI-based technology tools, ABA survey finds’ (ABA Journal, 22 October 2020) <https://www.abajournal.com/web/article/law-firms-are-slow-to-adopt-artificial-intelligence-based-technology-tools-aba-survey-finds> accessed 26 November 2020

[2] Rob Millard, ‘Above all, this crisis too will pass’ (The Global Legal Post, 09 April 2020) <https://www.globallegalpost.com/commentary/above-all-this-crisis-too-will-pass-7901508/> accessed 26 November 2020

[3] Salvatore Caserta, ‘Digitalization of the Legal Field and the Future of Large Law Firms’ (2020) Laws 2020 9(2), 14 p.18

[4] Granat, Richard, and Marc Lauritsen. ‘The Many Faces of E-Lawyering.’ (2004) Law Practice Management 30(36)

[5] Kevin Ashley, Artificial Intelligence and Legal Analytics: New Tools for Law Practice in the Digital Age. (Cambridge University Press, 2017).

[6] <https://www.rocketlawyer.com/> accessed 24 November 2020

[7] <https://www.directlaw.com/> accessed 24 November 2020

[8] Kate Beioley, ‘Coronavirus forces lawyers to face their digital future’ (Financial Times, 24 September 2020) <https://www.ft.com/content/4b5ad372-050a-4ab3-b2b9-4ac032cf8725> accessed 24 November 2020

[9] Vieth, Christian, Michael Bandlow, Michael Harnisch, Hariolf Wenzler, Markus Hartung, and Dirk Hartung, ‘How Legal Technology Will Change the Business of Law.’ (2016) Edited by Boston Consulting Group and Bucerius Law School. Hamburg: Bucerius Law School.

[10] Practical Law, ‘Clifford Chance’s knowledge centre in India: the story so far’ (Thomson Reuters Practical Law, 28 April 2011) <https://uk.practicallaw.thomsonreuters.com/8-505-7501?transitionType=Default&contextData=(sc.Default)&firstPage=true> accessed 25 November 2020

[11] Cited above at n.3, p.12

[12] Cited above at n.3, p.10

[13] Alvarez Technology Group, ‘How are Law Firms Investing in Technology to Remain Cutting-edge?’ (Alvarez Technology Group, n.d.) <https://www.alvareztg.com/how-are-law-firms-investing-in-technology-to-remain-cutting-edge/> accessed 25 November 2020

[14] Cited above at n.3, p.19

[15] <https://www.ibm.com/watson> accessed 25 November 2020

[16] Cited above at n.3, p.20

[17] Richard Susskind, Tomorrow's lawyers: An introduction to your future. (Oxford University Press, 2017).

[18] <https://www.justis.com/> accessed 25 November 2020

[19] Cited above at n.17

[20] Cited above at n.8

[21] Enoch Chan, ‘The Future Lawyer in a Digitally Disrupted Age’ (Medium, 23 October 2018) <https://medium.com/predict/the-age-of-digital-disruption-the-role-of-the-future-lawyer-e5ea618f1b08> accessed 24 November 2020

[22] <https://www.python.org/> accessed 27 November 2020

[23] Adam K.H., ‘Five reasons how lawyers and aspiring lawyers could benefit from learning how to code’ (The Coding Lawyer, 15 June 2020) <https://www.thecodinglawyer.com/why-coding-for-lawyers/#:~:text=As%20said%20above%2C%20lawyers%20and,other%20programming%20languages> accessed 27 November 2020


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