The Three Legal Technology Trends That Revolutionized Law Firm Business Models

01
Feb
2023

Cristin Traylor

Now almost three years ago, the pandemic’s onset brought pervasive, perpetual and exponential change to business models across every industry. However, one of the most widespread shifts remains the obligation to digitally transform.

While the legal industry has been known to take a traditional approach to conducting business and is well-known for its reluctance to adopt modern technologies, the global pandemic all but forced law firms to embrace them at a much faster pace than the legal industry had seen to date. From increased cloud adoption to AI integration, the tools now utilized by law firms hold the power to spark a new era of law firm business models.

As a practicing attorney for more than 20 years and a member of the law firm practice innovation office, I have experienced this transformation firsthand. In this piece, I’ll explore the top three legal technology trends that have revolutionized law firm business models.

Trend #1: Widespread Demand for Cloud Technology 

Many organizations quickly embraced the cloud during its unprecedented growth in 2020 but concerns around security prevented many law firms from taking steps toward cloud adoption. The past three years have provided proof points around the high levels of security that cloud technology can provide. Law firms that previously would not have entertained the idea of implementing cloud technology have changed their tune and now even prefer the cloud for data hosting due to the enhanced security. Cloud technology encompasses advanced threat intelligence, security insights, data continuity, and industry-specific compliance standards. 

According to the 2022 International Legal Technology Survey, 45% of firms have a philosophy of cloud with every upgrade and another 31% are mostly in the cloud. With regards to e-discovery, 50% of firms are utilizing cloud solutions, or will be migrating to the cloud within 12 months (up 15% since 2019). Further, the shift among clients' sentiment around cloud security has empowered law firms to incorporate cloud technology into their long-term strategies.

Aside from security benefits driving the demand for cloud technology, its scalability enables firms to engage in larger legal matters while optimizing costs and resources. One law firm reported that. since moving to the cloud, they have been able to support cases with over one million records, something they previously would have outsourced because they would run out of space on their server. Hosting matters in the cloud eliminates the concern over on-premises cases growing to unexpected sizes and becoming burdensome to teams and resources. 

Trend #2: Trading Tradition for Tech-Enablement

In the modern workplace, to upgrade your business, you must upgrade your technology. Just as with the increased cloud adoption among law firms, we’ve seen firms lean more heavily into legal technology. Firms are taking advantage of the existing tools, platforms and frameworks at their fingertips to make their organizations more efficient and effective. As a result of successful technology use, law firms are able to enjoy increased value proposition and profitability. In today’s digital economy, those firms that are effectively leveraging technology are going to come out ahead of those that are not. 

For example, Troutman Pepper, a national law firm, was faced with reviewing large volumes of unstructured text from form documents, such as invoices, contracts, employment records and meeting minutes. For any legal team, it would take hundreds of hours to review these documents and cost their clients thousands in legal fees. However, Troutman Pepper created its eMerge Xtractor tool to solve this exact problem. Through AI and machine learning, Xtractor provides an automated solution to convert the unstructured text from form documents into structured data, allowing for filtering, sorting and analysis. This utilization of advanced technology has allowed Troutman Pepper to resolve legal document review challenges that it would otherwise not have been able to overcome.

Trend #3: Slowly but Steadily Increased AI Adoption

AI is regarded as an “advanced technology” among lawyers and legal teams. As shown in The General Counsel Report 2023 from Relativity and FTI Consulting, 73% of general counsel feel too unfamiliar with the advanced nature of AI to be able to incorporate it into their organizations without significant risk. However, despite hesitation, law firms’ AI adoption continues to grow. 

Technology equips law firms with the speed necessary to deliver outstanding customer service that would not be possible otherwise, and AI specifically does so by reducing human error and intelligently managing large volumes of data. Additionally, the potential to increase internal productivity and efficiency motivates law firms to implement AI solutions that enable better outcomes, thereby driving more repeat business and profitability. Some of these AI applications include accelerating document review for greater efficiency and accuracy, advancing data breach review and notification to meet complex reporting guidelines, and analyzing contracts to make smarter business decisions.

The legal industry is one that has been established over generations, supporting the overwhelming perception that ‘what isn’t broken doesn’t need to be fixed.’ However, with the rapidly paced innovations in technology and cybersecurity over the past few years, the legal industry has witnessed a massive paradigm shift. The benefits and practical applications of these trends above have been validated and implemented by a growing number of legal organizations. Long-established traditions are being traded for proven technological solutions that can uplevel not only the work that must be done, but the processes behind it. Into 2023, the legal industry itself will continue to reflect the transformative nature of the technologies it embraces by ushering in an updated standard for law firm business models.