Derek Southall Discusses How Legal Tech Is No Longer Dictating its Own Future
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 labours of human beings. The only exceptions have been smatterings of case and matter management, document assembly and e disclosure but the bulk of legal delivery is still analogue not digital. We have an $850 bn analogue legal market, bar the advancements in the last 3 years or so.
Technology can be broken down into three key areas, namely:
- Digital basics – core infrastructure tech like document and email management;
- Enabling technology – tech to allow you to do work faster like document assembly; and
- 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 customisation is needed. No one has to get involved in getting under the skin of 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 10 lawyers work, optimising it and then automating the wide range of different legal products that they deliver. For a supplier, this means they can concentrate on software licence revenues with strong ARRs favoured by venture capitalists and minimise the need for large services and implementation teams. It is the low hanging fruit of Legal Tech – the correct thing to prioritise 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 resource 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 resource 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 resource to cross-organisational 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 recognise 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 the 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 their 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 2 out of every 10 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 recognise 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 recognised 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 resource they need to deliver projects in the way they need.
We also all need to think much more about capabilities rather than product. What capabilities will a law firm need to have in the next 5 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.
Derek is speaking at The Alternative In-House Technology Summit 2020 on 3rd & 4th February. Learn how to book your place here.
Hyperscale Group delivers a range of services in relation to Innovation, Digital, Futures, Strategy, Operational Excellence and more. They work for corporates, in house legal teams, software companies, venture capitalists, SMEs, start-ups, law firms and other professional services businesses.
Derek Southall, founder and CEO is a high profile and very well connected figure in the legal technology, innovation, knowledge management and digital marketplaces. Derek has spent nearly 25 years in a range of leading strategic roles for a top 50 global law firm, for most of this time as a Partner and Head of Strategic Development and subsequently as Head of Digital and Innovation. During this period Derek oversaw and helped drive growth from £27 mil TO to in excess of £425 mil TO as well as driving and supporting numerous mergers and international expansion to 18 offices in 10 countries.
Derek was ranked by the FT as one of the top three most innovative lawyers in the UK in its first study into the legal market. Derek also led the firm’s technology team to become ranked as the most innovative in Europe and subsequently the firm to ranked as the second most innovative firm in Europe as well as picking up a range of other awards.
Derek has been the relationship partner for a long list of major household name clients in a range of sectors including Automotive, FMCG, Financial Services, Food and Drink, Fashion and Construction and has a strong track record in sales and product delivery. Derek has been ranked three times in the last three years as an Acritas Star for outstanding client delivery (based on independent feedback).
Derek chairs and was one of the founders of the Legal IT Innovators Group (www.litig.org) which has 80 or so of the top 100 firms as members and which plays a key role in driving ahead technological thinking and change for the good of the legal profession. In this role, he has worked alongside the United Nations and a range of other large organisations.
www.hyperscalegroup.com recently joined forces with two other leading advisory businesses in the fields of technology, operations and financial management to create the www.intuityalliance.com which has been referred to as the “Holy Trilogy” of Legal IT. Its purpose is to pool experience and intellectual know-how to ensure we have a more holistic approach to how they give advice.
Derek also serves on the advisory boards of several start-ups and has recently been appointed to the advisory board of the Global Institute of Innovation, which brings together around 400 academics to solve some of the world’s biggest problems.