Is Legal Tech Dead? Considering the Law Element of Legal Technology

In his excellent overview on the state of the legal technology industry, Hyperscale Group Limited Founder Derek Southall shares that unless lawyers begin to focus on the element of law in the development of legal technologies, they may miss an opportunity to capitalize on their legal expertise and cease being the driving forces in the development of technologies to support their legal efforts.

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Editor’s Note: In his recent article, “The Death of Legal Tech?” Hyperscale Group Limited Founder Derek Southall highlights how the use of technology by law firms and in-house legal teams has surged during the last three years. He also emphasizes that much of this surge has been based purely on infrastructure technology usage and not tied to technologies specifically designed and developed to accomplish tasks requiring legal expertise. He further shares that unless lawyers begin to focus on the element of law in the development of legal technologies, they may miss an opportunity to capitalize on their legal expertise and cease being the driving forces in the development of technologies to support their legal efforts. Derek’s complete article, published with permission, is provided below for your consideration.

The Death of Legal Tech?

An article published by Derek Southall, Founder of Hyperscale Group Limited

The last three years have seen a huge surge in the uptake of technology used by law firms and in-house legal teams. More has happened during this period than in the 30 years before. The market has gone from famine to feast. In the past, you sometimes struggled to find the right technology to deliver a solution. Nowadays you are spoilt for choice and in addition, you have a mass of other technologies looking for problems. In some ways, we are living in a golden era for technology.

So why does this mean the death of Legal Tech? Surely the opposite is true? Superficially this is, of course, correct, but we must dig deeper to understand what is truly going on.

In big-picture terms, Law is an $850 billion global market. For the last 30 years plus law firms have been leveraging technology. However virtually all this technology has been infrastructure technology i.e. it has been technology to manage financial information, documents and emails and time recording information. There is nothing wrong with this and to be totally clear these technologies have made a huge contribution to efficiency and productivity. But equally, let’s be realistic there is no law in these technologies. They are quite simply technologies not legal technologies. Ironically of our $850 billion global market, virtually the entirety of all legal work is delivered by lawyers i.e. the manual labors of human beings. The only exceptions have been smatterings of case and matter management, document assembly and eDisclosure but the bulk of legal delivery is still analog not digital. We have an $850 bn analog legal market, bar the advancements in the last 3 years or so.

Technology can be broken down into three key areas namely:

  1. Digital basics – core infrastructure tech like document and email management;
  2. Enabling technology – tech to allow you to do work faster like document assembly; and
  3. Disruptive technology – AI, Blockchain, etc.

Sadly, virtually every law firm has had to concentrate most of its effort to date on the former category and for many law firms, this area is still not in great shape due to the evolution of the maturity of the suppliers and the end of life tactics of some. For 20 plus years, the business of the delivery of law has been left to the lawyers and partners with very little technology to support it.

Why has this happened?

In short, infrastructure technology is by far the easiest to implement. A large project in this area can be delivered by say four technologists and can be rolled out to benefit 1500 lawyers. From a software vendor’s perspective, it is also a great area in that very little customization is needed. No one has to get involved in getting under the skin of the legal process and the nuances of how different areas of law are delivered. By way of example, one project in this area can benefit 1500 people rather than having to drill down into how individual teams of say ten lawyers work, optimizing it, and then automating the wide range of different legal products that they deliver. For a supplier, this means they can concentrate on software license revenues with strong ARRs favored by venture capitalists and minimize the need for large services and implementation teams. It is the low hanging fruit of Legal Tech – the correct thing to prioritize as it is the lowest effort for the biggest return but leaves a lot of the hard work remaining to be done.

A simple analogy that many of you will have heard me use is that the world of legal IT is like taking a flight. If I want to fly to China, I buy a ticket online, turn up at the airport, board the plane and fly – that’s how I want Legal IT to be. The equivalent in the world of legal IT is that you are shown into an aircraft hanger with thousands of components, and a manual on how to build a plane and a manual at additional cost on how to fly it. This is far from ideal as most people working in Legal IT don’t have the time and resources to build the plane. What they really want is to buy the airline ticket i.e. a product/solution, to get on the plane and to fly to China.

Sadly, for legal tech, most suppliers have concentrated on supplying us with toolkits (i.e. IT with no “Legal” in them). Most IT Departments or legal ops teams don’t have the depth of resources or skills to implement multiple projects of this nature. Working with lawyers and getting under the skin of legal work is hard. They are time poor and they are very agile in how they operate meaning it is difficult to lock their resources to cross-organizational project plans. Innovation departments have grown but the challenge they face is that often they are only resourced to deliver specific tactical projects and the overall long-term plan is hard to pin down – we need sustainable and not tactical innovation. In short to date the industry has not challenged the most difficult area namely the automation of the delivery of law, and now Legal Tech is dying. One solution would have been low code platforms but again it is newer software companies who are now delivering on this front rather than the established Legal IT Vendors.

So, what of the huge technology explosion we are seeing? How can Legal Tech be dead? Where are all these vast sums of money being invested?

What we need to do is recognize that Legal Tech has perhaps missed its moment. Law firms have been too busy being preoccupied with PMS systems and document and e management systems and the move to the cloud. We failed to push the boundaries of developing and implementing legal technology to enhance the delivery of law. Even AI products are often delivered as toolkits rather than solutions. We should have seen more platforms emerge albeit the tide is turning in this regard and so watch this space.

Whilst everyone’s attentions have been elsewhere in the last three years, we have seen a wave of other technology moving into space legal technology should have occupied namely PropTech, DisputeTech, InsuranceTech, PensionsTech, IPTech, ContractTech, and even DeathTech (together “MarketTech”). Conventional Legal Tech is now under attack from multiple directions and to survive it will need to interface with all of these new technologies and platforms which are coming its way. We need to accept that Legal is not a “thing” but an essential step in a much wider business process, so perhaps it is right that these wider business platforms and systems should dominate but interoperability and flexibility of legal platform will be key in achieving this.

Legal Tech is no longer dictating its own future. If in five years from now every property transaction is executed on one of two blockchain platforms with algorithmic valuations and auto financing, it will be the job of Legal Tech to fit in and to interface with these systems. Sadly, for most law firms (and for some in house legal teams) this will be a struggle as the core platforms tend to comprise PMS/e-billing, Document, and email management, and if they are lucky CRM. The core capabilities of these systems will not have altered materially in the last 20 years and so how will they interface with this new breed of systems without creating multiple projects for IT functions? LegalTech needs to step up and we need stronger platform capability.

As part of our R&D, we see approximately 120 demonstrations per year. I am constantly amazed (albeit sometimes disappointed) by the capability of the new “MarketTech” start-ups that we are seeing. I find around two out of every ten are outstanding and could teach lessons to a well-established Legal Tech industry. I am not saying they are without problems but some of them really do go to the core of legal delivery. i.e. the very job that Legal Tech should’ve been doing for the last 25 years. Their challenges though are different and are not insignificant.

So, what am I saying we should do? I think there are several things.

  • Firstly, we need to redefine the role of the legal technologist. This should no longer be about “doing” but should be about “making the right things happen”, irrespective of whether it involves “real IT” or a service/MarketTech.
  • Secondly, we need to recognize the power of the start-ups and need to find a way of efficiently working with them which ties them into our core systems and infrastructure – shadow IT needs to be recognized for what it is namely IT in a different guise or the future of Legal IT/LegalTech 2.0.
  • Thirdly, we need to revisit our infrastructure technology and need to start relegating it from front of house to back office. We need to find a way of managing this better which does not consume so much time and effort to free people up to do work with a higher return on effort i.e. improving the efficiency of the delivery of law.
  • Finally, we need to speak openly and honestly to our suppliers and get them to tackle the real problems we are seeing and to get under the skin of the delivery of legal work and legal process. We need them to deliver more solutions and not toolkits. Sadly, even many of the AI suppliers have fallen victim to this – they are often (not always) selling toolkits whilst many firms struggle with the levels of resources they need to deliver projects in the way they need.

We also all need to think much more about capabilities rather than products. What capabilities will a law firm need to have in the next five years to service its clients? How does that match up with its tech stack? Where are the gaps and how are these filled? What does the target operating model look like?

As a closing point, there is one final thing we need to change to ensure success in this new world. Historically lawyers have been very used to having technology delivered for them. Given the above approach, most of the technologies have needed no legal input and so this has been fine. We are now entering a new era. If we start to tackle the delivery of law and legal processes this can only be done with lawyers as opposed to for them. Even if a start-up or new technology service is the answer this needs to be assessed and implemented with technologists and/or innovation people working side by side with lawyers. This requires a new mindset and economic model as legal groups will play a key role in implementation.

Is Legal Tech Dead?

It can be argued either way but it is fair to say it has potentially missed an opportunity by focussing on the same areas (Digital Basics) for far too long. Going forward it will now have new challenges (not the least MarketTech interoperability and platforms) and so to achieve its potential and remain relevant it is vital that it refocuses its efforts.

Read the original article at The Death of Legal Tech?

Additional Reading

Source: ComplexDiscovery

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