Law firms are under increasing pressure to adopt lawtech, with the rewards for doing so “potentially huge”, but despite this the profession has been slow to embrace systems that would radically change legal services, according to a major report.
The Law Society-commissioned research  into lawtech adoption found that, although a “diverse but fragmented ecosystem” of lawtech start-ups had emerged, smaller firms had tended to shun disruptive technology that could offer clients a new way of accessing the law.
The report was put together by industry consultants TechMarketView, based on 47 interviews with lawtech vendors, legal service providers and others, plus a literature review.
It found that it was mainly larger firms that have adopted efficiency-promoting technology like artificial intelligence and machine learning-type solutions to help in areas such as contract management, legal analytics and compliance.
However, the business-to-consumer market was “lagging behind”, the report said. “Lawtech is not yet fundamentally transforming the provision of law,” it said.
This was even though exploitation of this space was “potentially huge”.
Where there had been traction, it was in law firms providing “large-scale commoditised services” such as conveyancing – and possibly in future, debt litigation – where automation could deliver efficiencies and “chatbots, DIY law… [and] robo-lawyers” could be deployed to give better customer service.
By contrast, the fintech and insurtech markets had benefited from better funding and so a number of start-ups were offering new ways of delivering financial services or insurance products.
Comparatively, although the funding environment was improving, lawtech was less mature. How long it might remain so, the report could not say, but speculated it could be as long as 10 years.
If so, “that is still a significant part of a law firm partner’s career and, without initiating change early on, there is a real risk of being left behind as competitors progress”.
The report explained: “Lawtech adoption will have significant implications for the future of the law and legal profession, with new skills, new delivery models and a new competitive environment slowly entering the sector…
“Recent years have seen a rise in the number of lawtech companies, but not an acceleration in the rate of lawtech adoption among legal practitioners.
“After several years of start-up activity, the sector is now ripe for a wave of consolidation and later stage funding.”
The report predicted firms that opted to take an approach that fused technology with legal practice would deliver a “’platform-based’ approach to service delivery or ‘law-as-a-platform’.”
Alternatively, an ‘Uberisation’ of law could see cost-conscious providers deliver legal “services without actually employing any lawyers.” Equally, competition from the Big Four accountants could disrupt the market.
On skills law firms would be likely to need in future, it added: “Future ways of delivering legal services are likely to depend on a range of professionals, not only lawyers, and so having multi-disciplinary teams is likely to be key.”
An obstacle to law firms adopting technology, the report observed, was the way much of the profession was organised, such as the partnership model and a continued attachment to hourly billing.
One lawtech chief executive told researchers: “It is very hard to find a partner within a firm that is willing to be the first to deploy machine learning or natural language processing on a live client project for the first time…
“They just see the risk of it going wrong, losing the client and damaging the law firm’s reputation.”
The report added: “The billable hour mentality can provide a challenge to efficient legal practices as well as meaning that active lawyers have minimal time to explore the adoption of new technology and learn new tools.”
Law firms also tended to be risk averse. One complaint of lawtech vendors expressed to the researchers, for example, was the use of electronic signatures, despite the Law Commission recently coming out in favour of them.
There was no shortage of desire for technological adoption coming from all directions. As well as clients demanding lower costs and billing transparency, the pace of change was being driven by younger, tech-savvy staff who created internal pressures.
Another driver was an increase in regulatory and compliance requirements, such as anti-money laundering. For instance, technology could help reduce unbillable hours spent on these activities.
Not all firms are tech-averse, though. In a separate development this week, City giant Herbert Smith Freehills announced that it is to allow all staff to spend up to 10 days a year working on innovation projects.
The new ‘Innovation 10’ initiative will support staff to work on projects that find new and innovative solutions to the challenges faced by the firm and its clients.
These could include activities such as building apps, working on document automation and artificial intelligence tools, or working on the firm’s blockchain and smart legal contracts project.
CEO Mark Rigotti said: “Innovation 10 will accelerate our global strategy for innovation and technology.
“We are empowering our people to increase the momentum behind projects, creating opportunities to connect with our clients, and further strengthen and differentiate the services that we offer.”