LegalTech IT in Law Firms

2024:3 top trends in legal digital technology

The integration of new technologies, including generative artificial intelligence (GENI), helps law firms save time and money, as well as increase productivity. Leaders of such organizations are moving from short-term task automation to systems that empower employees in general. Gartner predicts that by 2026, half of law firm workers around the world will apply AI in some form - either to improve performance or to improve the quality of results. In an October 23, 2024 report, Gartner analysts identified three key trends in legal digital technology.

1. Increased use of Genia

The use of such tools allows you to speed up and optimize many operations in the legal field. Implementation options for Genia range from analyzing large amounts of data and conducting research to forming contracts and managing cases. Systems like Microsoft Copilot, MindMeld and IBM Watson Studio, thanks to natural language processing algorithms, can interact with huge amounts of information with high efficiency, making it easier to extract and organize the necessary information. In addition, Genia provides an opportunity to automate routine repetitive tasks, which allows employees to focus on more important issues.

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At the same time, the integration of Genia functions into existing legal technologies allows us to expand their capabilities. For example, more than 50% of risk management and compliance service providers invest in AI, according to a 2023 survey. These tools help law firms mitigate risks by identifying alarms early. AI also predicts the likelihood and frequency of problems, creating a more effective risk management system.

2. Increasing demand for self-service systems

Professional burnout of employees is largely due to the constant performance of recurring tasks. This kind of monotony can be automated with self-service tools such as Legal Front Door (LFD) platforms, which optimize the reception of legal requests. In addition to partially addressing burnout issues, self-service tools provide a number of other benefits:

• Save time by automating the process of processing incoming requests that employees otherwise need to analyze manually;
• Accelerate customer responses;
• Simplify the sorting of queries and ensure transparency of legal workflows;
• Search for information in available sources and automatically generate ready-to-use documents and templates.

3. Alternative Legal Service Providers (ALSP)

ALSP are companies specializing in the provision of "massive" legal services. These are document review, contract management, litigation support, legal research, etc. A distinctive feature of ALSP is that such companies do not adhere to the traditional rules and methods that are used in the legal field. Alternative legal service providers are actively implementing modern technologies to optimize operations and improve productivity. ALSPs that offer services with Genia capabilities can help legal groups maximize the use of appropriate tools without having to invest in adaptation.^[1]

2023: Global digital spending for lawyers rose 9% over the year to reach $18.33 billion

In 2023, the volume of the global digital technology market for the legal sphere reached $18.33 billion. A year earlier, costs in this area were estimated at $16.75 billion. Thus, growth exceeded 9%, as stated in the Market Research Future review, published in mid-August 2024.

The study takes into account specialized tools for case management, for legal research, information analytics, as well as eDiscovery tools (used to identify, legally verify the reliability of digital evidence, analyze it and develop responses to requests), etc. It is said that one of the key drivers of the market in question is the introduction of artificial intelligence and machine learning. The legal industry is built on complex and time-consuming processes that can cause significant delays and inaccuracies. Automating operations by implementing AI algorithms helps lawyers save time and other resources, as well as improve the efficiency of operations in general. In addition, AI provides an opportunity to improve legal research and predictive analytics.

There is also a growing demand in the legal industry for cybersecurity solutions as organisations become increasingly aware of the risks posed by data breaches. Low-code and No-code tools are gaining popularity - methods of designing and developing applications using intuitive tools that reduce or eliminate the need for traditional developers who write code. This accelerates the creation and deployment of legal applications. Cloud computing also plays an important role in allowing companies to access their legal information and services from anywhere in the world.

Herbert Smith Freehills, Alston Bird LLP, Cooley LLP, Baker McKenzie Bird Bird LLP, Jones Day, Dentons Linklaters LLP, Freshfields Bruckhaus Deringer LLP, Clifford Chance, Norton Rosulfe and others are named as key players in the global digital market for lawyers. Many companies, it is noted, are directing investments in research and development related to the creation of advanced platforms for automating tasks and improving workflow performance.

According to the deployment model of legal tools, analysts divide the market into three segments - local, cloud and SaaS (software as a service). In 2023, the cloud model accounted for the largest share of total costs, the advantages of which analysts attribute to economic efficiency, scalability and ease of access. From a geographical point of view, North America occupies a dominant position in the global digital technology market for the sphere under consideration. The developed legal industry of the region, combined with the presence of large technology centers, stimulates further growth. In second place is Europe, where there is an active introduction of new technological solutions by law firms and corporate legal departments. In the Asia-Pacific region, government initiatives to modernize the legal sector are contributing to rapid growth. South America, the Middle East and Africa are emerging markets with significant potential as the adoption of legal technologies is gaining momentum in these regions.

Market Research Future analysts believe that in the future, the CAGR (average annual growth rate in complex percentages) in the global market for legal solutions will be 9.39%. As a result, by 2032, costs globally will reach $41.1 billion.^[2]

2021: Introduction of AI into the Russian judicial system

In early April 2021, it became known that the working group "Regulatory Regulation" at the ANO "Digital Economy" approved the concept of machine-readable law and sent a document to the Ministry of Economic Development to prepare for adoption. This initiative contributes to the introduction of artificial intelligence in the courts, will help reduce the costs of Russians for lawyers, as well as transform the scope of control and supervisory activities of the state. Read more here.

2020

Share of LegalTech spending in global IT budgets increased by 1.5 times - Gartner

In 2020, the share of LegalTech expenses in global IT budgets increased 1.5 times - to 3.9% from 2.6% in 2017. This is evidenced by the data of the analytical company Gartner.

According to Gartner analyst Zuk Hatto, the burden on the legal services of many companies has increased extremely, while their states are unlikely to expand significantly, given the state of the economy, which has changed amid the COVID-19 coronavirus pandemic. Therefore, legal services will have to increase investments in LegalTech in order to depend less on third-party legal companies, effectively solve problems related to the COVID-19 pandemic and generally modernize and automate legal work.

Gartner analysts note that already in 2020, many lawyers who work in the legal service have to engage in technical and operational support. From 2018 to 2020, the share of services in which the position of operations manager (responsible for technical personnel) appeared increased from an average of 34% to 58%, with a much higher percentage of use of this position among Fortune 500 companies. Along with this, some services in large companies are increasing the share of narrow lawyers in order to reduce the cost of paying for the services of third-party law companies. As a rule, narrow-profile work is more difficult to automate.

Researchers argue that not all legal services will be able to achieve maximum efficiency from investments in contract lifecycle management technologies. To achieve full value, companies need to develop a thoughtful and practical plan for implementing CLM technologies, while prioritizing the desired business results and the operational resources necessary to achieve them.^[3]

Deloitte: only 15% of law firms in Russia use IT

Only 15% of law firms in Russia use information technology. Such data are given in a study conducted by Deloitte Legal and Skolkovo LegalTech.

As Kommersant writes with reference to Anton Pronin, director of legal technology development at the Skolkovo Foundation, they estimated the volume of the legal services market in Russia at 222 billion rubles, only 5% of them are IT for this sector.

Relatively few, especially against the background of leading countries in the field of legal innovation. But this segment is actively developing, the state and business are preparing comprehensive strategies for the implementation of LegalTech, - Director for the Development of Legal Technologies of the Skolkovo Foundation, member of the ALITA Managing Committee Anton Pronin.

Law firms of the Russian Federation lag behind other areas in the penetration of IT

According to the report, after falling revenues by 20-30%, legal companies in Russia thought about new types of services, including LegalTech solutions, the interest in which has grown in recent years. So, in 2019, 49% of Russian companies were interested in the competencies of IT consultants in the field of LegalTech against 26% in 2017. Thus, in two years, a twofold increase in demand was registered.

According to the authors of the study, against the background of unprecedented technological and economic challenges (for example, the income of Russian law firms in 2020 fell by 20-30%), the question of alternative approaches to the provision of legal services began to arise more and more sharply before the business. Companies are moving away from the usual hourly or fixed wage in favor of more efficient customized and customer-oriented models - design thinking, agile methods and the Six Sigma concept are gaining popularity.

It also follows from the report that the Federal Tax Service (FTS) of Russia is the leader in the public sector in introducing LegalTech, the top three also include the Federal Antimonopoly Service (FAS) and the Federal Intellectual Property Service (Rospatent).^[4]

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