Where are the AI-lawyers?
Even though legaltech startups such as SoOLegal, Legal Salah and MikeLegal have raised funds recently, the growth of the segment has been sluggish, with AI-lawyers still being a distant dream.
We have AI-doctors / nutritionists who see higher engagement on healthcare service delivery platforms compared to physical doctors (and at a much lower cost too!), self-driving cars are no longer a dream of the distant future, and drones have already replaced delivery personnel. But where are the AI-lawyers? Despite how repeatable and replicable the tasks and the approach to the tasks is, why are law firms so hesitant to experiment with and adopt technology?
At a VC fund, you have professionals looking at various sectors, right from the mainstream ones such as B2B Enterprise, Fintech, HealthTech and Logistics to relatively niche sectors (or segments) such as Alternative Proteins and Hydroponics. And the catalyst for the high growth / reason for the high growth potential in each of these sectors has been the increasing rate of adoption of tech tools which bring in efficiency, increase engagement rate and ensure scalability etc. Another benefit is that services can be offered to consumers at their fingertips, promising convenience at no additional cost! For investors, it means faster growth, higher returns and assured exits. But then why has the legal services industry lagged behind?
It may all be rooted in how the revenue model of the law firms is structured and how the present model does not incentivize the adoption of technology.
Admittedly, this may be an oversimplification of the problem, but consider this — clients are billed by the hour and associates are under tremendous pressure to manage their workload and meet client deadlines while ensuring that they keep a log of all their tasks and how much time they spend on them. Performance assessment (and promotions) are a factor of the number of billable hours you log in. Is this not a strong impediment to adoption of technology?
You are an associate working at a law firm with a target of 2500 billable hours in a year and you are tasked with drafting a shareholders’ agreement. You have two choices: 1) Generate a base draft using a tech tool and then edit the draft based on specific client inputs. Time spent = 5 + 55 minutes; 2) Draft the entire agreement manually = 3 hours. There is always a third choice where you actually adopt method 1 but tell your partner you adopted method 2 to inflate your billable hours — but that entirely defeats the purpose!
Your partner, the decision maker and the payer for the technology will never know how beneficial the tech tool was, resulting in it almost never being adopted fully after the free pilot. More importantly, you have no incentive to contribute to making the technology better! If you aren’t paying for a service, do you really care what the flaws are? Tech departments of law firms often form pilot groups to test new tools. Several contract drafting, proofing and risk assessment tools make it past this phase and are rolled out for a pilot for users to provide feedback and make that binary decision. More than 90% of the solutions will not make it past this phase and for the 10% that do, the utilization rates (at least on paper) would be low enough for them to never make it to year 2!
For a second, imagine if a law firm adopted a subscription model, i.e., a client that you acquire / onboard pays you a fixed subscription fee for a bundle of technology and services, with additional services / certain technology features being charged at a premium.
How does this really solve the problem though? A change in the revenue model essentially alters the definition of a good resource — from one who logs in the most number of hours to one who is efficient. Technology will become an enabler, reducing associate burnout. Firms will have a clear monetary incentive to drive up efficiency, leading to higher adoption and investment in tech tools. Firms may consider co-developing such tools in-house with inputs along the way from legal specialists. There are other obvious benefits as well. Leveraging technology and harnessing its full potential will distinguish the top firms from the others — reducing the time taken to do a particular task can free up bandwidth and enable firms to take on a larger number of mandates. A combination of the best human resources and technology will lower the attrition rate, ensure a better work-life balance and free up time for the organization to focus on client retention and engagement. From undercutting other firms for mandates to ensuring that you provide the best quality services in the most efficient manner!
Take the case of a corporate which has thousands of consumer complaints filed against it in lower courts (often, difficult to track). There are two firms pitching to the general counsel with contrasting value propositions:
Firm A: We will provide you the best legal representation at the lowest market cost! Our firm has 400+ lawyers pan-India and our litigation team in Mumbai has 20+ lawyers with a combined experience of 150+ years. We will be at your behest 24/7! For geographies where we do not have a presence, we have a network of lawyers who we will connect you to for the best legal services, at the lowest cost!
Firm B: Our team of lawyers, while working closely with our tech team, has developed a tool for you to effectively manage your caseload and track their status. Using this tool, we will constantly engage with you and make sure that you are aware of the status of each case in real-time. We have a network of 50+ lawyers strategically located across the country to ensure no case goes unrepresented. For the tech tool + 10 cases, we will charge you an X amount with each additional case charged a Y.
Which firm will you retain?
