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Legal technology promises to make lawyers’ lives easier — and the pandemic has highlighted how much this is needed as working from home becomes widespread. But critics say its scale is unlikely to ever reach that of financial technology.
Demand from clients to achieve more with less has forced the legal profession to innovate in recent years, and the legal tech market has been growing fast, offering a vast range of products for specific uses.
The next step is to move from products with narrow uses to customisable tools that lawyers can use like building blocks according to their requirements, say legal tech proponents.
“A few years ago we had a lot of vendors appearing that created point solutions [for single issues] that were often used for very deep but narrow use cases,” says Oliver Campbell, head of practice operations at Hogan Lovells.
“They were great but they didn’t integrate with everything else,” he says. However, they have started building better connections between [computer] programs, “because they realise you want to connect their software to something else”.
Legal tech is still a minnow compared with the explosion of innovation in banking and finance and insurance, and the scale of investment is at an earlier stage in development than fintech.
In the UK, lawtech companies attracted around £260m in the first half of 2019 compared to around £2.1bn in fintech investment, according to data from Thomson Reuters. US lawyer and technologist Bob Ambrogi puts the scale of global lawtech investment at $1bn last year, a long way behind the $137.5bn that KPMG estimates was invested in global fintech.
However, legal tech is attracting private equity funding and angel investment. The number of legal tech start-ups in the UK alone has grown over three years from 70 to more than 250 last year, including early-stage and scaled up groups, according to Thomson Reuters. A list of global lawtech companies compiled by Stanford University features more than 1,700, up from 1,250 last year.
In 2018 the sector gained its first unicorn, when platform company LegalZoom was valued at $2bn following a $500m investment. Other investments in recent years include Kira Systems, which raised $50m in Series A funding from Insight Venture Partners in 2018.
Too many, too narrow?
Nevertheless, expansion may be hindered by too many legal tech solutions remaining narrow in focus and too hard to knit together, says Adam Ryan, chief legal innovation officer at law firm Freshfields Bruckhaus Deringer.
“For example, in the M&A space there are a number of fantastic individual tools for drafting, proofreading, redaction, due diligence, post-merger integration and more” — but nothing that tackles the whole dealmaking process, he says. “To truly scale, we need solutions that connect the right legal tech at the right point in an end-to-end process.”
According to Thomson Reuters’ Legal Tech start-up report last year, start-ups are focusing on areas such as document automation and contract management.
Selecting a technology from the horde of relatively new companies can be mind-boggling; the risk management of handling confidential legal data makes incorporating new products labour-intensive and potentially costly.
Alistair Maiden, chief executive of lawtech consultancy Syke, says: “There is a plethora of different options . . . and a lot of the organisations can be a bit like snake oil salesmen, so it’s challenging.”
Making the different technologies work together can be tricky. “I've talked to a lot of legal departments who have assessed or implemented point solutions that solve a very specific use case,” says Mary O’Carroll, head of legal operations for Google. “But then we all turn around years later and feel the pain of trying to maintain and integrate data from multiple systems.”
Unlike financial services, where consumers are becoming used to managing their money on platforms, few legal technologies have yet come close to operating a platform model in which multiple processes are managed using the same portal.
Last year Thomson Reuters acquired HighQ, a platform where law firms and clients can collaborate on projects, which lawyers can customise.
Richard Punt, chief strategy officer at Thomson Reuters says the Covid-19 crisis is accelerating and reshaping the adoption of legal technology. (Thomson Reuters is a sponsor of the FT’s Innovative Lawyers series).
Digitalisation has enabled greater uniformity in legal processes, which is allowing lawyers to manage and automate more efficiently tasks that were once handled solely by humans, he says. “We’re starting to see the codification of legal practice to enable remote working and the application of technology into what has been an incredibly craft-based way of working.”
Thomson Reuters’ technology acts as a set of tools that legal teams can slot together in order to configure it to specific needs. Over the past year High Q has built “templates” allowing certain groups of lawyers — for example, employment lawyers or M&A — to quickly deploy the technology most useful to them.
The growth of so-called “low code” or “no-code” platforms such as High Q means that legal teams can build their own platforms without knowing how to code.
“The trend at the moment seems to be democratising access to legal technology by giving people the ability to do it themselves,” says James Thomas, head of legal technology and innovation at KPMG.
He says lawyers have also realised they can repurpose existing tools. The workflow tool created by American software group Service Now — often used as a ticketing tool by teams such as facilities or IT — is now building legal products.
“Many businesses are now looking at how existing corporate technologies, such as workflow tools and project management, can be configured for use by the legal team to meet their needs,” says David Halliwell, director of client solutions at law firm Pinsent Masons.
As Ms O’Carroll points out, the sector has a way to go to match the scale of fintech: “We're only just getting started.”
Who are the outstanding legal technology providers in 2020? The FT Intelligent Business “Legal technology” shortlist was drawn up by RSG Consulting and decided by a judging panel comprising: 10 individual technologists highlighted in last year’s report; senior members of the Corporate Legal Operations Consortium; law firm representatives; and other industry experts. The award was made at the online Intelligent Business event on November 19.
Legal Technology category research and award supported by Orrick
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