At the moment the profitability of law firms is slowly slipping away – it’s no surprise, as the legal field is facing major change. Legal spend rules the decision-making of corporations, who are demanding more and more value from their legal counsel. Alternative service providers in the legal space are adding fuel to the fire of an already competitive landscape, making it more crowded – but this in turn also makes the sector much more innovative. Thomson Reuters’ 2018 Report on the State of the Legal Market concluded that declining profit margins, weakening collections, and declining productivity are all disrupting the status quo. What’s more, alternative service providers coming for a piece of the pie are causing even more disruption.
Law firms that can counteract these market pressures and differentiate themselves from competitors – by embracing technology to provide new and more cost-effective services to their clients – will find themselves at a competitive advantage. They are embracing technology to improve operational efficiencies and transform the way lawyers and firms interact with clients, answer their questions, and tackle their legal challenges. Digitisation and automation technologies that can streamline internal processes, for example, mean lawyers can spend more time advising clients and less time on admin work.
Is the legal market ready for new tech?
The 2017 International Legal Technology Association (ILTA) Technology Survey found a growing market readiness for artificial intelligence (AI) and machine learning (ML) technology. More than a third of survey respondents said that they expect these technologies to create a significant change in the legal profession within the next three to five years. From contract review to compliance analysis and discovery, AI has the potential to disrupt how lawyers work every day. Given that the legal services market in the US reached $437 billion in 2017 (2% of GDP, according to Thomson Reuters Legal Executive Institute), the potential for AI-enabling technologies is huge – and just around the corner.
Revolutionising legal contracts with text analytics
For most organisations, manual review of contracts takes up a huge amount of time and resources.
AI-enabled text analytics has the ability to ‘speed-read’ documents with human-like understanding. Powerful server recognition, data capture and natural language processing identify key sections, clauses, entities and facts from contracts and other complex, partitioned business documents. Contracts and leases are examples of partitioned documents contain titles or headers for each section – these give us the clues we need to make sense of otherwise disparate streams of text.
Contract terms and obligations and opportunities locked within them are critical inputs for a huge number of systems, not limited to legal – these include contract lifecycle management systems, accounting, procurement, logistics, and HR. Contract analytics services use AI and natural language processing to extract the critical business intelligence required by other systems of record.
Likewise, obligations that were once easily understood – and entered into many enterprise systems of record – are changing. That means any client that leases property, whether land, storefronts, equipment or vehicles, now has a looming deadline to get everything right. All leases will need to be reviewed and the obligations within identified and analysed. For small clients with just a few leases, this can be done manually. But for big clients, who may have thousands of leases, meeting deadlines through manual review isn’t easy. In this context, smart and efficient contract analytics is required to automatically identify and highlight obligations quickly and easily. Intelligence gained through the use of text analytics is a way to comply with new regulations while delivering business value.
The uncertainty around the UK’s decision to leave the EU and of course GDPR will also drive the need for businesses to review current contracts as they could potentially be affected by both of these scenarios. Certainly with Brexit, now is the time to start checking commercial contracts for potential risks. These could be around specific event clauses for issues with currency fluctuations, changes to customs borders, or potential costs that could arise from any Brexit-driven changes to laws following the UK’s exit from the EU. The ability to use AI-based contract review technology will be critical in ensuring businesses are able to complete efficiently – and guarantee that they are not exposed to any unwelcome risk or fines.
Blockchain: the new kid on the block
One technology that will disrupt the legal field is blockchain. A blockchain records data across a peer-to-peer network. Every participant can see the data and verify or reject it using consensus algorithms. Approved data is then entered into the ledger as a collection of “blocks” and stored in a chronological “chain” that cannot be altered.
One of the main buzzwords associated with blockchain is ‘smart contracts’. Smart contracts are self-executing agreements based on blockchain technology. With this technology, execution of legal agreements is done automatically, immediately triggering actions or payments once conditions are met. In the near future, smart contracts will use real-time information, such as asset GPS data, to trigger events such as a transfer of ownership or funds.
Other areas, such as intellectual property and chain of custody, also stand to be revolutionised by blockchain, especially alongside the use of digital files.
Driving productivity through tech
Another technology transforming day-to-day activity in law firms is the use of new OCR and PDF software for increasing business productivity when working with documents. These tools access and modify information locked in paper-based documents and PDFs. During litigation, for example, when documents are collected and reviewed by attorneys prior to presenting to opposing counsel, the ability to perform text searches to identify potentially significant documents is critical. If not done thoroughly, opposing counsel can challenge the process used to determine what documents were provided to them, which could result in possible delays and sanctions – or even losing a case.
Even though digital transformation initiatives are in full swing at most law firms, the amount of paper documents remains high. Intelligent document conversion and capture software make it easier and more efficient to convert and compare documents. Case records, writs, pleading, patents, contracts and mandate files can all be digitised and managed, and text passages can be extracted or used without having to be retyped or reformatted.
The use of associates, paralegals and billable hours can be changed drastically by the advent of these technologies. Reducing the amount of time they spend on admin and increasing the amount of creative and client-facing work they can do will revolutionise the world of legal. By embracing these three technologies in the appropriate way for each individual firm, eDiscovery and case processing times can be shortened and client enquiries can be addressed more quickly. Using AI-enabled technologies in the document-heavy world of legal can facilitate a newly-robust document strategy for any law firm – no matter the challenges ahead.