AI's Slow Growth in Law Firms
Innovation and Artificial Intelligence (“AI”) have been all the rage among law firms and the technology companies that specialize in the legal industry. This matches a broader trend of using AI to solve problems in other industries. Dozens of companies now market applications that use some form of AI in the legal application market, a remarkable trend given the perception that law firms are slow to adopt new technologies.
Among the hundred largest law firms in the United States, a majority now have a Chief Innovation Officer. Many of these new positions are the result of clients requesting new ways for firms to address legal issues. AI has captured the imagination of many thought leaders in the industry as the tool to deliver that change.
The applications under development in the labs of legal industry technology providers have the potential to change the work that lawyers do in profound ways. However, having watched the promise of new technologies in this industry for almost 30 years, I think the breathless anticipation of the robot lawyer powered by AI is a bit much. Law firm Chief Information Officers must help their firms sort through the hype to identify which technologies can bring meaningful change. Many of the firms that crow about their fabulous new AI tools don’t have many lawyers actually using them. Having implemented many new technologies at large law firms over three decades, I don’t think investing in AI solely as a marketing tool is likely to provide the best return on a firm’s marketing dollars. Technology implementations of AI are like any other project in my view; they must have a clearly defined business problems that they solve and criteria for success.
Many large firms now have teams testing these new technologies. Promising areas include contract due diligence, legal research, and eDiscovery. However, the road from testing to adoption is usually long in most firms. It is a common lament at gatherings of law firm CIOs that lawyers are often unwilling weather the period of lower productivity that learning new technologies entails to reap the benefits, especially when the benefits are seen at an enterprise level and are not immediately apparent to everyone. The imprimatur of firm management helps, but even with that support, it often takes time for some to embrace the new.
As the market for AI-enabled technologies shakes out and firms gradually adopt the winners among them, their lawyers will need to adjust to new work paradigms. Billable tasks that were handled by mid-level associates may disappear and new tasks will likely arise. Many firms are already facing pressure from clients to discount certain work, and increasingly, clients are moving some of their routine work in-house.
Despite the market pressure, I do not think widespread adoption of AI tools will come as quickly as some predict. Change is more likely to be incremental in firms who adopt the best of these new technologies. Once the products do gain momentum, it is likely that there will be a limited window for adoption and that firms who are late in moving will struggle.
Once the promise of AI is achieved, the cost reductions and the change in methods driven by these technologies may force firms to reassess their pricing models. Further, AI-enabled analytical tools may help firms move away from using the billable hour as the basis for pricing services. The idea of changing the paradigm for billing from the billable hour to one that aligns the firm’s incentives with client’s needs has been around for a very long time. It is possible that, with the rise of AI, lawyers will no longer have to keep track of hours that are still the measure for which they are paid. If AI can deliver that, I am confident lawyers will adopt.