Law Firms Face Tough Questions About Life After AI

I was in Portland last month at PREX 2019 to host a panel titled: “Tech Spotlight: The Case for AI in a Privacy-Conscious World.” One topic that came up in the discussion was the impact that AI adoption will have on the law firm business model. My musings and coverage are below.

Joining our panel at PREX, the annual conference in Portland for in-house ediscovery professionals, were: Julie Heller, Vice President, Knowledge Management & Information Governance at AIG, one of the biggest buyers of legal services in the world; Ben Dryden, Antitrust Partner at Foley & Lardner; and Tushar Vaidya from Seyfarth Shaw. 

Text IQ at PREX

The tipping point

The same week that Text IQ had the pleasure of hosting this panel, we celebrated an exciting milestone. A Fortune 200 customer added a question to their Request for Proposal for law firms: “Describe your experience with AI solutions like Text IQ?”

Our company has reached several other exciting milestones this year—closing our recent funding round, growing our team 5x in a short time, and expanding our product suite—but in a way, this RFP milestone is the most exciting of all. It represents a tipping point. AI has gone from front edge to solid ground. 

“AI is not magic,” Professor John Paisley, one of our advisors, once told me. “It’s math.” As artificial intelligence systems improve, their capabilities have come to reliably outperform humans in certain kinds of low-value work. And as document volume continues to explode, the value of AI to automate large-scale understanding continues to increase. This is bad news for law firms whose business models depend on billing hours for lower-value tasks that AI can now automate. But it’s good news for law firms that are utilizing AI to empower their attorneys to focus on doing their very best work: applying subject matter expertise and interpretation to give advice and make hard calls.

Many Fortune 200 in-house counsel have experienced for themselves the automation that AI can bring to bear on the low value work, together with the augmentation that it can bring to high value work. These attorneys are calling on law firms adapt to life after AI.

As the ground shifts

This call comes at a time when law firms are waging battle on multiple fronts. On one front, there's a growing market of alternative legal services providers. A study by Thompson Reuters found that the ALSP market has grown 13% over the last two years, topping $10 billion in revenue in 2018. The study projects that the ALSP market will grow 25% over the next few years. 

On another front, there’s a growing market of non-law firm competitors such as the Big Four and other providers. The Thompson Reuters study finds that this market is also growing at double-digit rates to more than $10 billion in annual revenues.

That same report also highlights changing expectations among law firm clients, who are demanding more value from their legal spend.

The report’s lead author concludes: “For many years, it was largely assumed by both firms and clients that legal work was labor intensive [and] could only be performed by lawyers. That no longer reflects the realities of the marketplace for legal services, where new competition, technology and innovative legal service delivery models are rapidly transforming how legal services are provided.”

Rethinking legal services

The traditional law firm business model is at stake as the legal landscape goes from a seller’s market to a buyer’s market. With the ground shifting beneath their feet, how can law firm partners operationalize AI in a way that allows them to provide the most value to their clients, while also growing the business? This was the big question at our PREX panel, where we heard Ben, Julie and Tushar share the results of utilizing AI in their work.

The panelists spoke about their experience using artificial intelligence to automate tasks that have traditionally been done using humans and search terms, in processes that have proved to be costly, error-prone, and risky. Ben also shared how unsupervised machine learning algorithms have begun to allow attorneys to automate increasingly sophisticated tasks. For example, Text IQ can now automate 80% of the initial drafting for the privilege log, a task that has typically been a time-drain for the most senior lawyers. You can read more about this result in our case study.

The message from Fortune 200 in-house counsel to outside counsel is loud and clear: adopt AI or be left behind. Ironically, this demand for advanced technology is about going back to the way things were—back when corporate law was about applying human expertise, before the global data explosion down-leveled many attorneys to the mundane task of poring through piles of documents.

The first law firms to round the AI adoption curve include some of the world's most prestigious firms. These are firms that don't rely on "marking up" low-value work, and they're populated by lawyers who welcome the opportunity to spend even more time on the high-value work that artificial intelligence can augment. 

Consider Cravath, the world's "most prestigious law firm." Cravath hired Scott Reents—Lead Attorney, Data Analytics and E-Discovery, Litigation—to support the firm’s integration of AI into its legal practice. In the coming weeks, we’ll share more details on other top law firms that are proactively leveraging machine learning to take care of the rote work so lawyers can focus on what they do best—lawyering.