By Anthony C. Johnson—maverick, magician, rule breaker—founder/CEO of Stellium. The tech that drives the legal industry is broken. It’s time for change.
It’s an indisputable fact that the legal industry has had difficulty evolving over the years, particularly regarding data utilization and modern technology. In addition to missing out on the myriad advantages of embracing a more modernized approach to legal work, law firms that fail to adopt updated solutions must contend with the increasing number of alternative legal service providers (ALSPs) and other non-legal entities that have begun entering the space.
As an attorney with a background in software development, I have been outspoken about the threat of tech-savvy outsiders to traditional law firms, as well as our industry’s broader need for a reality check. Rather than take my word for it, legal professionals today need only to look at the evidence suggesting that ALSPs are not only here to stay but are actively seeking to reshape the market.
A Changing Market
The industry’s latest wake-up call comes from Thomson Reuters’ biennial report on the ALSP market, which plainly reveals that the alternative legal services sector has, in fact, been experiencing significant growth in just the past few years. From 2019 to 2021, the ALSP market grew at a compound annual growth rate (CAGR) of 20%, marking a 5% increase from the previous two years.
The report’s analysis describes a rapidly evolving legal market in which the distinctions between ALSPs, traditional law firms, corporate law departments, and even technology and software firms are becoming less and less pronounced. These rapidly blurring lines raise serious questions about the future of partner law firms and their ability to retain and attract clients.
From my perspective, initial changes will need to happen at the individual firm level, and fortunately, some legal professionals will recognize and embrace digital transformation. In fact, while the report identifies independently operated ALSPs as the primary drivers of overall growth in the sector, it also reveals that so-called “captive ALSPs,” or those owned and operated by traditional firms, represent a smaller yet faster-growing subset of alternative providers.
Still, in the absence of any real and coordinated commitment to digitalization within the industry, we’re left with a burgeoning and wildly fragmented legal-tech space that currently, and somewhat ironically, is tilted disproportionately in favor of non-legal participants. This tells us that the business of law is evolving regardless of our opinions, and the immediate and emergent needs of corporations and individuals now override the ostensibly sacred “legacy” of the traditional legal profession.
In other words, clients don’t just want change; they require it. And if your firm isn’t ready to provide the kind of change they’re looking for, they’ll be more than happy to find it elsewhere.
Forbes contributor Mark A. Cohen summed it up beautifully in his recap of both the aforementioned study and Thomson Reuters’ broader 2023 report on the state of the legal market by contrasting the slow-moving digital transformation of traditional firms with the rapidly evolving needs of businesses and consumers in light of myriad societal, geopolitical and macroeconomic obstacles: “The legal function must align and collaborate with other business functions to meet these challenges as well as participate to seize the opportunities they present. This cannot be accomplished by fealty to legacy models and cosmetic change at the margins.”
How Companies And Firms Can Adapt
While it’s one thing to acknowledge the need for broader technological adoption in the legal industry, what law firms today require more than anything is an unwavering commitment to actually implementing these changes in practice. Here are a few simple steps that any partner firm or corporate legal department can take to ensure a successful start to their legal-tech journey.
1. Invest in education and training.
The ability to leverage advanced legal technology effectively isn’t something you can expect the entire firm to gain overnight, and therefore, it’s crucial to invest in education and training at both the individual and team levels.
In addition to aiming for technical proficiency with specific software tools, this should include the cultivation of understanding around everything from local and federal regulatory oversight to the myriad ethical considerations that come with utilizing sophisticated technology in the unique context of legal work.
2. Create a road map around clear objectives.
There is no one-size-fits-all solution for adopting legal technology. Take the time to understand the various tools available and, most importantly, how each one impacts your specific operation.
After identifying the most viable and relevant solution(s) to your practice, work to develop a comprehensive road map for implementation that includes everything from your clearly defined objectives to an actual timeline for execution.
3. Start small.
Trying to match the progress and functionality of other firms and alternative providers may be tempting, but the best strategy for virtually any firm looking to adopt legal technology will be to start small. Begin by addressing the most obvious pain points within your firm, particularly processes that can be updated with as little operational disruption as possible.
For example, it may be clear that you’re spending too much time on manual document review, so it might make sense to experiment with automation. While it may seem like you’re only making minimal progress at first, each successful implementation will deepen your understanding of what’s possible, as well as your ability to identify and solve new problems as your firm becomes more familiar with the functionality and benefits of existing and emergent technological solutions.
Overall, when you couple the ongoing and rapid advancement of technology with the increasing presence of non-legal entities in the market, it becomes obvious that law firms are overdue for a change in mindset.
While there’s no getting around the fact that digital transformation is a complex and challenging endeavor, legal professionals should view this moment as an opportunity rather than an existential crisis. After all, attorneys are in the very business of tackling adversity on behalf of their clients, and there’s no reason we can’t use that same unrelenting conviction to successfully transform our industry for the digital age.