How Fast Technology is Changing the Business of Law
I spend most of my time in the UK and internationally, engaging with law firms and advising them on future plans; opportunities, risks, challenges, transformation, and growth. I often remind my clients that I am no ‘techie’; I have no background in developing, deploying, or maintaining systems, and I still grapple with personal IT glitches like everyone else. However, my journey through the legal world has been intensely focused on future strategies and changes, and inevitably legal technology found me. My role is to sit alongside firm leaders rather than with technologists, helping them answer questions like, ‘What does this mean for our business model?’, ‘How different will our firm look in 3 to 5 years?’, and ‘How will this change what our clients want and are willing to pay for?’. From these discussions, some themes have emerged regarding how – and how fast – technology, including but not limited to artificial intelligence (AI), is changing the legal world. These thoughts will evolve, be evidenced, and sometimes disproved many times in the coming years. But right now, here’s what I’m seeing.
Technology has been transforming the Business of Law for Decades already
The promise and threat of AI have loomed in the legal tech space for a long time. Decades ago, we saw the deployment of machine learning at scale in litigation discovery, followed by AI-based contract tools. Throughout, we’ve been reading and hearing predictions from experts like Professor Richard Susskind and Josh Kubicki about what’s around the corner. In other sectors, AI was being used in ways that law hadn’t yet contemplated. Lawyers thinking about what AI could mean for the future of their work is not new. More importantly, a bundle of technologies has been altering almost every aspect of our working and personal lives over the past 30 years. We’ve had long enough to understand, apply, and adapt to them. Your personal and firm philosophy should recognize that we are in the middle of a multi-decade revolutionary era of massive change, rather than facing a sudden surprise assault from AI.
Generative AI is already having a real impact on Law and will explode in 2025
A defining moment of the 2020s was the launch of ChatGPT in 2022, introducing Generative AI to the world. The hype has barely let up. I curate, chair, or speak at around 20 legal business events each year, and AI has been featured at all of them since then. Legal technology consultant and co-founder of 3Kites Consulting, Paul Longhurst, uses a great image of a breakfast cereal packet emblazoned with ‘NOW with added AI!’ amusingly reflecting what we are seeing in the legal IT marketplace. Indeed, try finding software that doesn’t claim to have AI inside. Legal industry giants like Microsoft, LexisNexis, and Thomson Reuters have developed specific generative AI tools that I predict will see massive sales as firms conclude they are the easiest, maybe safest way to dip a toe in the AI water. All this has happened within 18 months.
Let’s pause there. By legal business evolution standards, we’ve become surrounded by Generative AI in the blink of an eye. What we read, the events we attend, the products we are offered, and the decisions we make regarding investments, business plans, and tech infrastructure upgrades are all influenced by AI. As firms approach the new financial year and finalize their budgets, AI-enabled tech in 2025 will be as inevitable as a Tamagotchi on a kid’s Christmas list in 1997. The legal world is already changing at speed from the inside, with unprecedented shifts in where we place our investment dollars and the development of our core IT infrastructure.
It is the People dimension in Firms, not just IT, that is already being transformed
We are already buying tech tools designed and built by large tech companies or nimble start-ups backed by substantial investors. There is also a people revolution underway in large law firms, gradually spreading to the mid-tier. I routinely meet with law firm Innovation, Transformation, or LegalTech Heads; these roles are becoming standard in larger firms. Talent is being head-hunted, offered partnership or C-suite status, and increasingly influential inside the firm. Many trained and practiced as lawyers, in fact some moved directly out of fee-earning Partner positions, while others have impressive tech and product development backgrounds outside the law.
These new-model Innovation and Transformation leaders are building large multi-disciplinary teams comprising legal engineers, legal ops specialists, developers, design thinkers, and product owners. Many team members trained as lawyers but chose this career path due to disillusionment with the soulless grind of being a fee earner in a big law firm resistant to change. Others come from tech or business college courses or sectors where these functions are already established. This novelty status is receding in law; another example of law firms being transformed almost imperceptibly from the inside out. In the UK market alone, several firms now have 30+ people in these teams, with many more client-facing lawyers learning new digital skills and taking on part-time innovation roles. Firm leadership is starting to grant these teams ‘trust-busting’ rights to deliver innovative apps, platforms, and solutions to key clients, even if that might cannibalize existing hourly-billed revenue streams. Essentially, these firms are applying hard lessons from other industries and know that no industry ever transitioned to a new model without breaking some elements of the old. ‘No pain, no gain’ will likely be the watchword over the next five years.
Generative AI is the Second Transformational Tech Revolution this Decade
Picking up the ‘no pain, no gain’ theme, I need to reflect on the COVID-19 pandemic lockdown and its long-term impact. Medically, societally, educationally, and economically, we are still learning month-by-month about the long-lasting implications of this genuinely global crisis. In responding to the pandemic with lockdowns and remote work, the world underwent a massive social experiment, at scale and with minimal preparation. The impact, good and bad, is emerging over time. However, we can already see that technology saved us in many ways, allowing us to get through that dark period in better shape. It kept us connected to our friends, colleagues, and the world, and enabled us to get food, goods, and medicine relatively quickly and easily. At the organizational level, technology investment and tools built up over the previous decade were crucial. Without the money spent, sometimes grudgingly, on laptops, mobile connectivity, cloud, and video conferencing tools, many more businesses would have had to shut down. Partners were often amazed that their firms, which they felt had not changed much over the previous decades, could pivot in days to a wholly remote digital working model and then to an agile hybrid basis when offices reopened. Various commentators believe that COVID accelerated the digitization of legal services by 5-10 years compared to the trajectory we were on back in 2019. Many firms have since doubled down and applied the lessons from lockdown, investing heavily in completing their digitization across all offices and jurisdictions. These programmes, seen as top strategic priorities by those firms, have been impressive, as I’ve seen from my judging of many legal technology awards. Did your firm drive a major technology investment to fully digitize in the last three years, or did you instead focus your effort and energy on trying to cajole your staff back to the office?
The Digital Doom-Spiral: Why you might only have three years to save your Firm
The rapid digitization in response to the pandemic highlighted the critical need for firms and legal departments to build on a completely digital platform. As we face the next wave of next major disruption from Generative AI, completing your digitization is even more essential. AI is fuelled by and monetizes data – to maximize your return, your data should be clean, accessible, and digital. Utilizing new AI apps and tools requires your existing technologies to be running on the latest versions. Firms that have not fully digitized and are running old versions of apps will find themselves unable to use the new AI tools effectively and that means the existing disadvantage for firms lacking a fully digital infrastructure will increase at pace year-by-year. I refer to this as the digital doom-spiral, and my estimate is that firms have just a few short years left to pull out if they want to still be in business in 2030.
I am already seeing successful – but not fully digitized – firms recognizing the need for a big push in terms of basic IT upgrading, digital skills development, and process re-engineering, just to get to the start line for the Generative AI era. I have faith that those firms have just enough time to pull out of the doom-spiral, prioritize investment, and fend off the new and intensifying competitive threats. There are some red flags that indicate a firm is in this last-chance saloon and I’ve outlined those, at a very high level, below.
Red Flags
Does your firm:
• Maintain paper rather than electronic matter files as your default standard?
• Use wet signatures internally or with clients, where not mandated by law or expected by the client?
• Have important data or documents that are not accessible electronically and shareable?
• Operate any widely-used applications or databases that can only be accessed onsite in an office?
• Have a substantial number of people (lawyers and support staff) who are unable to work easily off-site?
• Run core IT applications that are still on pre-2020 versions?
• Have nobody responsible for innovation or transformation of how legal work is delivered?
• Offer no digital skills training program for partners, lawyers, and support staff?
If that does sound like your firm, especially if you’re approaching your 2025 planning and budgeting cycle, make this issue a top priority on your agenda. You may only have a few years to address the ‘final mile digitization problem.’
Clients Are Going to Drive the Pace of Change Ever Faster
It is, of course, crucial to consider the perspective of law firms’ clients. Clients are already asking how firms use AI, posing what may sound like a ‘no-win’ question: using AI raises concerns about information security, quality, and accuracy; not using it implies a failure to innovate and offer the savings AI can deliver. Firms will have to navigate these concerns for years to come, but as AI quality and accuracy improve, clients will expect improved services at reduced costs. Competing legal products and services are already in development to meet these expectations. Over the next few years, every firm will need to respond; is your firm horizon-scanning for competitive threats and spending management time working out how to address them?
Pricing and Billing legal Work using billable hours in the age of AI
Pricing and billing legal work just using billable hours has been in steady decline as technology and client expectations have changed, but that process has been slow and patchy across different practice areas and jurisdictions. There is now a widespread belief that Generative AI will finally break the default use of billable hours. Smart tech, which can accomplish tasks at scale in seconds that a lawyer might take hours to do, will force firms to change their charging model in order to avoid a significant reduction in revenues. In most parts of the business world productivity means achieving output with less time and resources. Clients will expect law firms to adopt this premise and price their work accordingly as AI becomes more prevalent.
Your People want tools that make their lives easier and more productive
As clients press firms to show the benefits of new tech, new hires and your existing workforce will ask whether your firm has the tools and tech that can help them work smart. Automation and AI can make lawyer lives easier, allowing them to focus their time on their highest and best use. Over the next few years, AI has the potential to slash administrative burdens on lawyers and support staff, liberating them from time-consuming and low-value activities. It will also reinforce the hybrid work revolution, enabling people to work flexibly regardless of place or time. Firms without these tools or the skills to use them will be at a significant disadvantage in the talent market.
Are we already past the Tipping Point?
Tech has been a driving force in re-molding the legal business model for a long time. Generative AI is the latest and perhaps the most significant wave in this process, already beginning to transform parts of the legal world. As described by Malcolm Gladwell in “The Tipping Point,” few people recognize the tipping point where irreversible change has kicked-in until much later.
My advice is always to not wait until the tipping point where AI has transformed legal practice is 100% proven and universally acknowledged; that will be much too late. Like addressing climate change now based on scientific warnings, you don’t need to wait for all the evidence to be certain. Ask yourself and your colleagues; ‘are we ready for tech to change the legal business model forever over the coming years?’ Do we understand what it is that is changing and the emerging new competition? Finally, and crucially, if you might only have a few years to get your digital house in order, what is your plan?
How and how fast is technology changing the business of law
I spend the largest part of my time, in the UK and internationally, talking with law firms and advising on their future plans. Opportunities, risks, challenges, transformation and growth. As I often remind them, I’m no ‘techie’; I’ve no working background in developing, deploying or maintaining systems and I still seem to spend days of my time grappling with personal IT glitches just like every other layman. But my journey through the legal world has been intensely focused on future strategies and changes and legal technology, inevitably, found me. But my perspective is to sit alongside firm leaders, rather than technologists, helping them to answer questions like ‘what does this mean for our business model?’, ‘how different will our firm look in 3, 5 years’ time?’ and ‘how will this change what our clients want and are willing to pay for?’. From those many meetings and discussions some themes have emerged about the question of how – and how fast – technology, which includes but is not only artificial intelligence (AI), is changing the legal world. Like everything else in this arena these thoughts will have to change and evolve, be evidenced and sometimes disproved, many times in the coming years. But, right now, here’s what I’m seeing.
Technology has been transforming the business of law for decades already
The promise and threat of AI seems to have been looming inside the legal tech space for a long time now. Decades ago, we saw deployment of machine learning at scale in litigation discovery, then the early flowering in the last decade of AI-inspired contract tools and, throughout, we’ve been reading and hearing the sage predictions of Professor Richard Susskind, Josh Kubicki and others about what is around the corner. In other areas of the economy and in science, AI was being used in ways that law hadn’t yet contemplated. So, lawyers haven’t to think about what AI could mean for their work isn’t, or shouldn’t be, new. What’s more important still is that a whole bundle of new technologies have been at work altering almost every aspect of our working and personal lives over the past 30 years. We’ve all had long enough now to understand, apply and adapt them; the point being that your personal and firm philosophy should be that you are in the midst of a multi-decade revolutionary era of massive change, not being assailed by some sudden shock from ‘AI’.
Generative AI is already having a real, pervasive impact on law and will explode in 2025
And then one of the defining ‘moments’ of the 2020s; the launch on a partly unsuspecting world of ChatGPT in 2022 and the overnight ubiquity of that term Generative AI. The hype has barely let up since then. I curate, chair or speak at around 20 legal business events each year. In the last year, not one of them has failed to feature AI. Legal technology consultant and co-founder of 3Kites Consulting, Paul Longhurst, uses a great image with a breakfast cereal packet emblazoned with ‘NOW with added AI!’, which neatly captures what we have all seen in the legal IT marketplace; in 2024, just try finding software which doesn’t claim to have AI inside. The legal industry equivalent of household name companies – Microsoft, LexisNexis, Thomson Reuters – have developed and launched specific generative AI tools that I predict will notch up massive sales numbers as many firms conclude they are the easiest, maybe safest, way to dip a toe in the AI water. And that’s all happened inside 18 months.
So, let’s just hit pause right there. Inside what is, certainly by legal business evolution standards, the blink of an eye, we have become surrounded by Generative AI – what we read, the events we attend, the products we are being offered and, already in 2024, the decisions we are making in terms of investments, business plans and upgrading the most fundamental components of our core tech infrastructure. As firms in the US and other parts of the legal world approach the new financial year and finalise their budgets, AI-enabled tech in 2025 will be as inevitable as a Tamagotchi on a kid’s Christmas List in 1997. The legal world is already being changed at speed from the inside: where our investment dollars go and how our basic enterprise IT works is shifting at unprecedented pace.
It is law firms’ people, organisation and skills, not just IT, that is already being transformed
So, we are already buying in tech tools designed and built by large tech companies with very deep pockets, or sometimes by new, nimble start-ups backed by large investors with very deep pockets (and which, at lightning pace, seem to be snapped up by those same large tech companies at ever-higher valuations). But, there is also a people revolution underway inside large law and percolating its way through the mid-tier. I now routinely meet with law firm Innovation, Transformation or LegalTech Heads; those roles are now becoming standard in larger firms with talent head-hunted, offered partnership or C-suite status and increasingly influential inside the firm. Many trained and practised as lawyers, some have moved into the role direct from fee-earning Partner positions, others have an impressive tech and product development bio from another sector. (It is worth commenting that these new, powerful executive roles are just one example of the wave of professionalisation and transformation of law firm management and leadership that sometimes seems to be under the radar. Firms are increasingly needing to bring onboard skilled specialist leaders, often from outside law, to take charge of areas like Innovation, DEI, ESG / Sustainability, Information Security, Wellbeing, Procurement. Genuine influence on strategy and direction is, as a result, inexorably slowly shifting to specialised professionals – ‘non-lawyers’ in that delightful phrase – and, therefore, away from the full-time lawyer partner. It’s a subtle shift and I still find many Managing and Senior Partners don’t notice it, but many now do).
These new-model Innovation and Transformation leaders are building, in most cases, big multi-disciplinary teams. These teams are made up of legal engineers, legal ops specialists, developers, design thinkers, product owners. Once again, many of them who trained as lawyers but decided this looked like a better, or maybe just more interesting, career path. Many have told me they were disillusioned by the soulless grind of being a ‘fee earner’ inside a big law machine which seemed to them resistant to change and blind to the importance and likely impact of tech and other changes in the world outside the law. Others in the teams are coming straight in from tech or business college courses, others from sectors where these functions were already an established feature, not a novelty. That novelty status is already receding in law too; another example of the way we run law firms being transformed, almost imperceptibly, from the inside-out. In the UK market alone, there are a host of firms now with 30+ people in these teams, with many more client-facing lawyers learning new digital skills and taking on part-time innovation roles too. In many cases firm leadership is giving them ‘trust-busting’ rights to deliver innovative apps, platforms and packaged solutions to key clients or prospects, which often cut across the practices of incumbent partners and sometimes cannibalize existing hourly-billed revenue streams. I still find plenty of partners who find it hard to understand or accept the willingness of some firms to move away from profitable existing models and over-rule equity partners who don’t want to change. Essentially, those firms are applying hard lessons from other industries (see Clayton Christensen’s The Innovator’s Dilemma) and know no industry ever transitioned to a new model without breaking at least some elements of the old; no pain, no gain is surely the watchword over the next five years.
Gen AI is actually the 2nd transformational tech revolution we’ve seen already this decade
Picking up the ‘no pain, no gain’ theme, a word or two about the Covid-19 pandemic, lockdown and the long-term impact of our response to it. The apocryphal story about Vietnamese leader Chou En-Lai’s comment that it was “too early to say” what the historical significance of the French Revolution had been comes to mind here. Medically, societally, educationally, economically, we are learning month-by-month that there are long-lasting, initially hidden implications from such a global crisis. In responding to the pandemic threat with lockdown, social distancing and stay at home (and therefore work from home) the world underwent a massive social experiment at scale with minimal planning or preparation. The impact, good and bad, is emerging over time. But we can already see that technology saved us in many ways and allowed us to get through it in much better shape at a macro level. It kept us connected to our friends, colleagues and the world and enabled us to get food, goods, medicine quickly and easily to our doors. At the organisation, the law firm, level the same is true. Without the technology investment and tools firms had built up over the previous decade or more, and in particular the sometimes grudging investment in laptops, mobile connectivity, cloud and video conferencing tools, many more businesses would simply have had to shut up shop for good. I found so many partners who were frankly staggered that their firm, which they had felt had not changed so much over the previous decades, was able to pivot in days to a wholly remote, digital working model and then to an agile hybrid basis when offices cautiously re-opened. Various commentators believe that Covid accelerated the digitisation of legal services 5-10 years faster the trajectory we were on in 2019. And many firms doubled down and applied some of the lessons of lockdown over the following years: I’m a judge for a number of legal technology and innovation awards and saw just how many firms drove their full cloud migration and work from anywhere capability really hard in the years since 2021/22, investing in completing their digitisation. These efforts, often applied across multiple offices or jurisdictions, were impressive and seen as top strategic priorities by those firms. Did your firm drive through a major technology investment to fully digitise in the last 3 years, or did you hunker down and focus on herding your staff back to the office?
The digital doom-spiral and why you might only have 3 years to save your firm
In terms of how and how fast the legal world will be transformed by technology, the impact of the pandemic and the rapid digitisation in its wake highlighted how critical it is in the 2020s for firms and legal departments to build that completely digital base. Like waves breaking on the shore, the next major disruption (from Generative Al) is already upon us, before we’ve fully recovered from the previous wave post-Covid. And the Gen AI revolution only reinforces and underlines how critical completing your digitisation now is. AI feeds off and leverages data – to maximise your return from this new technology your data should be clean, accessible and, of course, digital. And utilising the new AI apps and tools appearing everywhere will often require your existing technologies to be running on the latest versions. Firms who have not fully digitised and are running old versions of apps will find themselves unable to use the new AI tools properly, even if they have the cash and will to invest in them. What is already a growing disadvantage for firms who have built a fully digital underlying infrastructure will grow, I believe, at incredible pace year-by-year from today. I refer to this as the digital doom-spiral and, along with others who spend their time on the boundary of law firm strategy, business and tech, my estimate is firms have just a few short years left to pull out of the spiral if they want to still be in business in 2030.
I am already seeing great – but not fully digitised – firms who recognise they have a massive programme of basic IT upgrading, digital skills development and process re-engineering to do just to get to the start line for the Generative AI era. I still have some faith that many of those firms have just enough time to pull out of the doom-spiral, prioritise that investment and focus and fend off the competitive threats that will come from all sides over the coming years – from bigger firms who have driven through the change, from smaller nimble (but highly investable) alternative legal service providers and from spin-out law firms where the lead lawyers realise being tech-first enables them to rip clients and work out of the hands of less progressive firms.
This thought piece is already long enough and not the place to present a full programme for firms who are worried that I might just be talking about them. But if you tick these boxes right now, then it could be you and you should stop everything and focus your best minds on what to do. This is not, absolutely not, the time for Business As Usual.
The digital doom-spiral red flags. Does your firm:
- maintain paper rather than electronic matter files as your default standard
- use wet signatures internally or with clients in any instance where it is not mandated by law or demanded / expected by the client
- have any important data or documents that is not accessible electronically and shareable
- operate any widely-used applications or databases that are not can only be accessed onsite in an office
- have a substantial number of people (lawyers for sure but also support staff) who are unable to work easily off-site
- run core IT applications that are still on pre-2020 versions
- have nobody responsible for innovation or transformation of how legal work is delivered
- offer no digital skills training programme for partners, lawyers and support staff
If that does sound like your firm and especially if you’re approaching your 2025 planning and budgeting cycle, take this issue and ink it in at the top of your top-table Agenda. You may only have a few years to deal with the treacherously difficult ‘final mile digitisation problem’.
Clients are going to drive the pace of change ever faster
It is critical, before I wrap up, to bring in the perspective of law firms’ clients and people. Clients are already asking most of the firms I talk to how they use AI. Law firms describe this as a ‘no-win’ question: if we say we’re encouraging people to use it, they’re worried about information security, quality and accuracy. If we say we’re not using it (maybe for those good reasons), they say we are failing to innovate and not offering them the obvious savings that AI can deliver. Firms will have to navigate between these two rocks for years to come, but ultimately – as the quality and accuracy issues are improved – clients will point to numerous other services transformed by AI where improved quality and accessibility is accompanied by reduced cost. A growing raft of competing legal products and services are already in development that aim to offer exactly that. Over the next few years every firm will have to respond; is your firm horizon-scanning the market for those competitive threats and spending management time working out how to deal with them?
Pricing and billing legal work using billable hours has been in steady decline over decades, although that change has been patch in different practice areas and jurisdictions and stoutly defended by many private practice law firms. There is an overwhelming body of opinion building that Generative AI is likely to finally break the default use of the billable hour. As smart tech which can do something at scale in seconds that a person might have taken hours to do becomes standard, firms will have to move their charging model or accept a massive reduction in revenues (note that some firms will probably accept and embrace the latter route, if they believe they can manage to massively reduce their headcount, partner ranks and cost-base even faster). Most sectors of the economy already recognise that the true measure of productivity is that any given output should take less time and less resource to achieve. Clients will look, more than ever, for law firms to subscribe to that goal and price their work accordingly as AI becomes more prevalent.
And your people will expect to have the tools that make their work easier and more productive
At the same time as clients press firms harder to show the benefits of new tech, every new hire – and most of your existing workforce – will be asking whether your firm has the tools and tech that can help them work smart. In a follow-up piece I’ll drill down into what I believe is the outstanding factor that will drive rapid lawyer adoption of Generative AI, perhaps especially in mid-tier and resource-constrained firms; the ability of AI to operate as a high quality, instantly available and 24/7 Assistant. For now, there is already plenty of evidence that automation and AI can make lawyer lives easier and allow people to focus their limited, precious and expensive time on their ‘highest and best use’. It has the potential, over the next few years, to slash the administrative burden on lawyers and support staff and liberate many from the most time-consuming and least value-adding activities. As well as reinforce the hybrid revolution, enabling people to get work done without having to work in a prescribed way, place and time. If that is true and these tools are launching now and will become widely used during 2025 and 2026, then firms who haven’t got them – or whose people don’t have the skills and knowledge to use them – will be at a massive disadvantage in the market for the best talent.
How and how fast is the business of law changing: are we past the tipping point?
My view, as you’ll have seen, is that tech has been a driving force to remould the legal business model for a long time now. That Generative AI is the latest, and maybe the biggest, wave in that process and is already beginning to transform parts of the legal world around us. Unless you spend all your time in the legaltech arena, it can be hard for anyone to discern those changes as they happen. As described by Malcolm Gladwell in his book The Tipping Point, that’s normal – you don’t usually know the tipping point where irreversible change kicks-in has happened until much later.
So, don’t wait until the tipping point becomes obvious and is universally acknowledged, because that is, by definition, too late. In a similar way to countries and organizations around the world taking steps to deal with climate change now, because the scientists tell us we might be in huge trouble down the line if we don’t, you don’t need to wait until the evidence is all lined-up and 100% certain, even if you are a lawyer. Ask yourselves whether you are ready for tech to change the legal business model forever? Do you understand what is changing and the emerging new competition? And, finally and crucially, if maybe I’m right and you might really only have a few years to get your digital house in order, what is your plan?