Attitudes to AI are changing swiftly, along with the technology, but new tools bring with them new questions for legal structures and financials.
The Lawyer‘s City Signal report this month highlights the possibilities of disruptive AI technology, and for the first time assesses legal industry perspectives on it. While there is consensus on AI’s potential to drive growth in firms and improve operational efficiency and productivity, there is less certainty regarding its impact on the workforce and business costs, with only 26% of respondents agreeing that it has led to improved financial performance at this point.
“The legal market is effectively shifting as we’ve seen it shift in other industries, from what is predominantly still a labour-type model to a capital-type model. Who will own which elements of the value in the value chain?” asks Deloitte Legal’s global chief technology officer, Bruce Braude.
Will law firms using AI retain those labour-intensive elements of the value chain that it replaces, or will that value pass to the tech platforms providing and building legal knowledge into the AI?
This is one of the questions firms need to consider as they look at integrating new AI technology and skills into existing processes. Implementation cost is another: while headline-grabbing ChatGPT is free, in reality enterprise platforms built on AI systems are likely to be an expensive addition to business operating costs.
There is also the need to have appropriate skill sets in the business to ensure optimum use of new technology. Over 35% of respondents agreed that their organisation had faced difficulty securing AI expertise, with another 48% neutral, meaning only 17% had encountered no problems sourcing this new part of their workforce. The industry-agnostic skills of tech talent mean that they have a wide range of sectors open to them, making it more important than ever to ensure that workplaces and working practices are appealing to job candidates.
Certainly, with broad awareness of recent generative AI developments and growing recognition in the industry that AI will cause significant upheaval of traditional labour-intensive systems, clients will be starting to question where cost savings can be passed on to them, even if firms themselves are yet to determine what financial benefit AI investment might provide.
Expectations are already growing that there will be reductions in law firms’ charges and more self-service available for simple tasks, noted several respondents, with change potentially driven from the in-house side of the industry.
“GenAI will subject GCs to heightened expectations from the business (more data-driven decision making, faster response times, more proactive risk management — and lower cost). This will trickle down quickly to law firms,” says Deloitte Legal partner Isabel Parker. “This has to result in tangible benefits for the client.”
“It’s possible that clients will turn to what will become very artisanal, very highly specialised lawyers for specialised things with very little infrastructure sitting underneath them.”
Lawrence Lessig of Harvard Law School agrees that these developments open up new possibilities for many firms, in an Economist piece analysing the impact AI will have on the industry. “You can be a smaller, leaner specialised firm and have the capacity to process these sorts of [large, complex] cases.”
Deputy editor of The Lawyer Matt Byrne summarises the required shift in mindset in a recent newsletter: the focus is no longer on billable hours, firms are “selling results, and they should price for value, not time.”
Despite varied outlooks on the long-term financial and structural effects, there is agreement that AI will drive the evolution of the industry, with almost 60% of respondents believing it has the potential to drive significant growth at their firms.
That growth will be more significant the earlier a business adopts the new technology, allowing them to offer better value to clients, says Parker. “Because of that, they’ll be able to retain their people. It is the junior lawyers in law firms that don’t adopt AI that should feel most threatened.”
Read the full survey report from The Lawyer here.
