The future of legal technology in law firms

The future of legal technology in law firms

Traditionalists at heart, lawyers are notoriously slow when it comes to embracing new technology – everybody in the legal sector knows that. But the pandemic has moved this not-so-tight-lipped secret into an industry misnomer.

The new University of Oxford’s Technology Innovation in Legal Services report for the SRA, which surveyed 900 SRA regulated law firms, found over a third (35%) of firms had introduced new technology in the last 12 months, while over half (55%) had improved or increased use of existing technology.

To find out where technology in the legal sector is headed, I spoke with Mari Sako, Professor of Management Studies at Saïd Business School University of Oxford, and Director of Solutions at LexisNexis, Chris O’Connor.

Legal technology adoption will continue to accelerate

The legal sector has experienced a high level of hype alongside the introduction of new legal technology in recent years; many law firms have seen right through it and held back as a result. However, the pandemic was useful in pointing out the essential technology lawyers lacked, says Sako, who led the team behind the recent SRA report.

“With COVID-19, and particularly with remote working, there's been a change in the willingness of lawyers to use day-to-day technology, such as video conferencing and virtual meetings, or e-signatures for documentation. Those step changes are not going to be reversed; they're going to actually stay or accelerate.

The newly published LexisNexis Bellwether report 2021 also found legal technology is reaching maturity and moving into the mainstream within smaller firms – 73% of small firms said the pandemic was an opportunity to drive change and innovation.

“The legal sector is transitioning from early movers to wider adoption. Now, lawyers are more open to tech than ever and are looking at the next generation of tools – knowledge management, legal drafting, legal document automation and legal analytics,” says O’Connor from LexisNexis.

“Legal buyers are no longer impressed by a fun widget – technology needs to improve efficiency and reduce process steps, not add to them. They’re also looking to use the tools their clients use, and collaboration in the Microsoft environment is where things are heading.”

Implementing new technology in law firms

When it comes to implementing new technology, the majority of law firms rely on in-house staff and external consultants, says Sako.

“External consultants became quite important in the implementation stage, but also when searching for alternative tools, they can help you do that effectively. Within the legal sector, there are some very large firms that use external consultants regularly.“

She also noted the growing number of firms employing tech talent, such as legal engineers and legal product architects, and how it will transpire in a law firm setting.

“With the adoption of LawTech solutions, lawyers and tech experts are asked to work together to implement technology, and so we have multidisciplinary teams that includes practicing lawyers, project managers, cross-mapping experts, data scientists, support staff and more.”

“In order for multidisciplinary teams to work effectively together, where people from different expertise and different specialisms – and therefore with different languages – can communicate with each other, there needs to be mutual respect.”

It also involves being open minded about alternative ways of looking at things, and having a common language that everybody can understand, says Sako. “Legalese language is not always useful; neither is tech language.”

O’Connor agreed with Sako regarding the need for consultative support when helping law firms adopt and implement new legal technology products, which is why he and his team have invested significantly in this kind of ‘external consultant’ resource for clients.

He was also quick to point out the risk of failing to innovate.

“It’s easy to overstate the risks in the short term – if you stick to old methods, the sky won’t fall in –but you will inevitably come up against two problems,” he says.

“Firstly, innovation tends to be a virtuous circle – adopting the simplest tools gives your team confidence, builds tech savviness and makes internal business cases easier to justify. By passing on an investment now, you may find yourself ill-prepared for more exciting technology down the line.”

“Secondly, what may seem like modest gains in year one will have much larger cumulative impacts over the years. This gap will be compounded if your competitors do innovate. If you are a market-leading firm or top in-house team, you may not feel the impact at first, but over the next three to five years you’ll find your hard-won advantages starting to erode, and rivals you used to beat winning mandates ahead of you.”

Are alternative law firms and the Big Four better prepared?

Since the 2007 Legal Services Act, England and Wales allowed firms with alternative business structures to start practicing the law, and while there are a number of successful ALSPs on the market, it’s interesting that none of the magic circle firms or the top firms have rushed to become alternative businesses, with the exception of DWF and Mishcon de Reya, Sako points out.

However, the Big Four accounting firms have taken advantage of the relaxation of regulations by relaunching their legal services.

“The Big Four have a number of advantages over law firms. One is scale – large magic circle law firms are smaller in comparison. Another is their relationship with clients – it’s not just with in-house legal counsel contacts, but they have full access to the C-Suite, too. They’re in a great place to claim to be able to provide an integrated solution to a business problem in the way that law firms may find difficult.”

Read the LexisNexis Big Four report for more insights

Another advantage that the Big Four have over law firms is the huge amounts of resources they can deploy to invest in tech, but she also pointed out their limitations. “It’s worth remembering that neither law firms nor the Big Four are tech companies. However cutting-edge their solutions are, the Microsoft’s and the Google’s of this world would get there much faster.”

Another interesting point Sako made was that the Big Four lack the credibility that their law firm rivals have in spades.

“The main asset law firms hold is their human capital – their lawyers – and if you recruit a team of non-lawyers, then that muddies the waters in terms of what is the main intangible asset that they are selling in order to charge huge fees to their clients.”

The Big Four have forced lawyers to step up their game to maintain their historical advantage, claims O’Connor.

“As a former consultant, I can attest that the Big Four don’t have the legal expertise and pedigree of the big law firms, but they can do two things really well – solve problems and productise solutions.”

“Law firms need to step up their project management to get leaner and more efficient. They also need to partner with clients more broadly, helping them solve commercial problems, rather than just legal problems, to compete with the Big Four’s suite of service lines.”

For more information about the SRA and University of Oxford’s Technology and Innovation in Legal Services report, Professor Mari Sako has a series of podcasts outlining the survey findings.

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About the author:
Dylan is the Content Lead at LexisNexis UK. Prior to writing about law, he covered topics including business, technology, retail, talent management and advertising.