Technological applications are standardizing, automating and ‘productizing’ what were once labor-intensive tasks performed by lawyers at law firms. Legal services – like so many other industries – will be transformed by tech-enabled, process-driven and client-centric providers.
Intensive digitization of large parts of the economy is underway. New knowledge can be reused without any cost and enhanced by network effects. The pace of change and conversion pressure will be high in each affected sector, business opportunities and business models are created and destroyed at high speed. Globalization and new communication platforms enable companies to launch products and services in a global marketplace in a short period of time.
As far as the legal sector is concerned, the way to organize the division of labor between different players is governed to a large extent by transaction costs. If the technology changes, transaction costs will also change, which will change the competitive situation. Insofar as established actors are unable to recapitalize and reorganize their business, they will largely be replaced by new service providers for the benefit of the customers in a creative destruction process.
Declining transaction costs also affect the size of the companies and the number of jobs. At the same time, increased productivity will increase the demand for work. Simple routine jobs and encodable tasks disappear while demand for problem-solving and creativity increases. Less qualified legal work with more repetitive elements will be automated or, as far as possible, moved to other countries (legal process outsourcing). The qualified, creative legal information that is difficult to digitize or where qualified legal and personal services are requested will remain. However, even qualified legal work will change through greater use of different types of analysis tools as part of the work. Digital technology and developments in artificial intelligence allow for the collection and analysis of huge amounts of data. In some cases, they may be used by other automated systems and production processes.
In other cases, however, the possibilities of big data and artificial intelligence are a complementary tool for better, faster and more informed decisions. Implementing digital technology also requires a partially different business model where employees are given a different and extended responsibility. Tomorrow’s day demands that employees be responsible, initiative-oriented and persistent.
Fixed price for specified tasks increases, current account decreases
Price competition increases; services have become easier to compare between the various competitors and customers therefore press legal fees
High standardization, especially for routine tasks
Digital working methods throughout the flow increases
Legal documents are created largely by the customer based on standardized templates and digital platforms/instructions. Less complicated legal information and advice is offered basically for free
High legal costs
Legal work is often expensive and difficult to forecast, with inefficiencies and manual processes driving up both internal and external costs.
Insufficient control and compliance
Companies struggle to maintain oversight of legal processes and ensure ongoing compliance with regulations, increasing operational and regulatory risk.
Barriers to business growth and execution
Legal bottlenecks slow down decision-making, delay deals, and create friction between legal requirements and business objectives.
Limited visibility and poor communication
Work is hard to track across departments and external counsel, leading to misalignment, duplicated efforts, and unclear ownership.
Suboptimal contract management
Contracts are fragmented across systems and teams, making them difficult to manage, update, and analyze throughout their lifecycle.
According to the CEOs, it is the volume of law that makes the greatest cost savings of having internal lawyers instead of hiring external lawyers
CEOs want internal lawyers to focus operationally on creating standard templates and procedures and negotiate contracts
A General Counsel today should be a business leader - providing insightful commercial advice to the other senior executives and the board, based on sound legal principles. A risk manager - constantly alert against an increasingly broad array of global threats to the company, and handling them accordingly.
Chief Legal Officers are shifting work from outside law firms to their own in-house lawyers; making greater use of contract and temporary lawyers; moving some in-house work from lawyers to paralegals and other paraprofessionals; and outsourcing to non-law-firm vendors.