(Aug 16) Expect a whole lot of AI at ILTACON

Welcome to Law Tech Daily - the podcast that answers "what happened in legal tech this week?". Join us each Monday, Wednesday, and Friday as we dive into the exciting world of legal tech news. Don't forget to hit that subscribe button to stay up-to-date on the latest episodes! In today's episode, we'll cover AI-enabled features unveiled by legal tech providers, the changing support staff structures in legal firms, and the increased demand and profits in law firms, particularly in bankruptcy and litigation services.

Let's dive in

Here's what happened in legal tech recently...

The AI trend continues with an increasing number of legal tech providers unveiling AI-enabled features. This trend will continue and intensify with a large legal technology conference - ILTACON - being held next week.

Multiple startups have garnered attention, including Definely and Clearbrief, for their innovative use of AI in improving efficiency in legal workflows. Meanwhile, the new cybersecurity disclosure rule introduced by the Securities and Exchange Commission (SEC) has also generated considerable interest due to its potential impact on shareholder lawsuits.

Predictive approaches driven by data are becoming increasingly popular, prompting a shift in the skillset required for legal executives. AI-driven technologies such as natural language processing and machine learning are on the rise. For instance, Definely employs these technologies to enhance contract drafting and review.

Collaborations between legal tech companies and management platforms have also been on the rise. The partnership between LiquidText and iManage Work serves as a notable example. Moreover, legal tech companies are leveraging AI for more than just analysis. Litera, for instance, has incorporated AI-powered smart summaries into its contract review software called Kira.

Elsewhere, the rapid adoption of AI brings challenges, particularly in terms of data and cybersecurity risks. It emphasizes the need for robust controls and diverse risk management teams. The SEC's new cybersecurity disclosure rule emphasizes the importance of maintaining strict cybersecurity measures to avoid potential legal implications.

Firms that prioritize a user-oriented approach in product design and service delivery signify an important shift in the industry's mindset. They strive to balance cutting-edge technology with user accessibility and ethical standards.

Overall, recent developments in the legal tech industry have been eventful, characterized by innovative collaborations, technological advancements, and noteworthy trends within the field.

Now, let's review our key stories.

BigHand's comprehensive research confirms that the legal sector is undergoing significant changes in response to declining client demand. The study reveals that a staggering 93% of law firms have already implemented structural changes in the past two years, while an additional 63% plan to increase their secretary-to-lawyer ratios in the next two years.

To address the new landscape, many law firms are adopting a more centralized and team-oriented approach to their support staff structures. This strategic shift not only aims to improve cost-cutting measures but also enhances overall efficiency. In line with this, investing in workflow technology has become a priority for these firms, as it enables the transition towards a more flexible and technology-enabled model.

By reallocating tasks traditionally handled by lawyers to support staff, law firms are able to manage staff attrition more effectively and reduce costs associated with lawyer-administered tasks. This approach ensures that service quality remains intact while optimizing resource allocation.

BigHand's research showcases the industry's progression away from conventional support staff structures to ones that leverage technology and embrace flexibility. These evolving models empower law firms to adapt to the changing market demands by streamlining processes, increasing productivity, and effectively managing costs.

Overall, the legal sector's response to declining demand is marked by a proactive pursuit of innovative support staff structures and technology integration. With the evolving landscape, law firms are positioning themselves for success in an increasingly competitive market.

According to the Thomson Reuters Institute, law firms experienced significant profit gains in the second quarter of the year, driven by rate hikes and increased demand. Average billable rates saw a considerable rise of 5.9% compared to the same period in the previous year. This growth surpassed the 5.5% increase recorded in the first quarter and represented the largest quarterly surge since the global financial crisis of 2008-2009.

In addition to the rate hikes, the demand for legal services also witnessed a YoY increment of 1.5%. This rise was propelled by countercyclical areas such as bankruptcy and labor and employment law. Notably, the demand for bankruptcy law in Q2 surged by 5.7% compared to the previous year. Litigation demand also experienced a substantial YoY increase of 4%, making it the second-highest quarterly rise since 2010.

Based on these findings, there are indications of a potentially positive market for law firms throughout the entire year of 2023. However, in order to sustain profitability, law firms will need to effectively manage their headcount, and expenses, and adapt to the shifting growth patterns in various practice areas. Striking a balance between these factors will be crucial for ensuring profitability in the long run.

And that's a wrap.

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