December 3, 2020

Why Investing In LegalTech Makes Sense For Your In-House Team/Law Firm

The legal profession is undoubtedly a conservative one and has not changed much over the past decades. The resistance to innovation is believed to be due to weaker cost-reduction incentives (since the costs are reimbursed to the client) and high-risk aversion as every technological mistake could have "fatal" consequences. The situation is however changing, and the legal industry is transforming.

Cut costs and boost productivity

The Coronavirus (COVID-19) has forced essentially every industry, including law, to digitalize. Cloud Services and Video Conferencing Software platforms have become inevitable means of providing legal services. The pandemic has also highlighted the need for more efficiency in response to an unprecedented economic burden. And here comes the legaltech which can likely provide a solution by positively disrupting the traditional way of providing legal services. Legaltech is "attacking" many areas of the legal services like contract review, document drafting, legal research, litigation prediction and patent analysis. While traditionally these tasks can be performed only as well and as fast as the human performer is, for legaltech, with some exaggeration, "the sky is the limit". According to the results reported in Altman Weil's most recent survey of 362 U.S. law firms; 64 per cent of Large law firms and 43 per cent of Midsize law firms are already using technology tools to augment human resources. The investment trends also support the bright future of legaltech. Bloomberg Law reported that legaltech investments hit at least $1.2 billion by the end of the third quarter, surpassing the previous year's record of $1 billion.

Stay competitive

While currently investing in legaltech might be primarily a way to improve efficiency; soon the innovation can become a necessity rather than a virtue. According to the 2020 Report on the state of the Legal market; over the past few years there has been significant growth in non-law firm competitors and corporate use of alternative legal service providers for E-discovery services, Document Review and Litigation and Investigation Support has increased significantly. Therefore, the law firms do not have to compete only with other law firms that have reacted more promptly to legaltech innovations, but also with alternative legal service providers whose business model is fully based on the legaltech innovations. The law firms may improve their work processes by expanding the use of technology and be able to provide competitively innovative services. For illustration, some law firms have already launched software development services, others have introduced consulting services to encourage innovation and numerous have created on-line services to assist their clients. Law firms have a strong advantage of being the main legal services provider for centuries. In general, at least in the near future, the clients are likely to have more trust in traditional law firms when it comes to legal advice than to new, not yet so well-established alternative legal providers. The provision of legal advice is a sensitive service where the speed and the price are not always necessarily the main factors considered by the clients. Also, the regulation of the provision of legal services in some jurisdictions might make it challenging for alternative providers to enter the market on a large scale. However, that is not to say that the law firms should rest on their laurels. We live in a fast-paced world and the historical advantage of the law firms might disappear from one day to another. Thus, the law firms should invest in legaltech and they should probably do it sooner rather than later. If they couple their strong market position with appropriate innovation, they are likely to successfully stand the competition of legal start-ups and other alternative providers.

Stay competent  

American Bar Association recognized the importance of technology in the legal profession already in 2012 when they adopted an amendment to Model 1.1 Competence, Comment 8 in the Model Rules of Professional Conduct. The amendment states that lawyers should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology. Competence, as one of the main duties of each legal professional, thus not only requires legal knowledge, skill, and proper preparation but also acquaintance with legal technology. Technology is gradually establishing its position in every aspect of our life and so it makes sense that the lawyers should be technologically competent too. Already today, lawyers can show their technological competence in many areas like cybersecurity, electronic discovery, understanding the technology used by their clients, or can "surprise" their clients by delivering legal services via legaltech. Needless to say, lawyers may feel-maybe rightfully-overburdened by a requirement to educate themselves in a field which until now has not been understood as connected with the legal profession. While some lawyers might be naturally more tech-enthusiasts, for many it might be difficult to implement the technology in their daily legal practice. Moreover, lawyers already have many legal and other related training they need to follow to keep themselves updated on the latest developments in the specific legal field. However, the transformation of the legal profession seems unstoppable and lawyers will have to become tech-savvy whether they like it or not. The good news is that their effort will be likely soon paid off by the increased efficiency of their law practice.

References

Goodman, Bob (16 December 2014) "Four Areas of Legal Ripe for Disruption by Smart Startups". Law Technology Today. Retrieved 1 May 2015

Altman Weil, Inc., 2019 Law Firms in Transition Survey: An Altman Weil Flash Survey, May 2019 ("Altman Weil 2019 Law Firm Survey")

https://www.businessinsider.com/legal-tech-disruption-biglaw-innovation-venture-capital-startups-2020-9

https://images.thomsonreuters.com/Web/TRlegalUS/%7B169f0d36-6fcd-4cc1-bd84-878b713055cb%7D_2020_Report_on_the_State_of_the_Legal_Market-191231.pdf

https://images.thomsonreuters.com/Web/TRlegalUS/%7B169f0d36-6fcd-4cc1-bd84-878b713055cb%7D_2020_Report_on_the_State_of_the_Legal_Market-191231.pdf

https://cmgconsultants.com/the-problem-of-keeping-lawyers-competent-in-technology/

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