It’s clear that the use of technology has simplified and accelerated business operations across a variety of industries. The legal services industry is no exception. With the rise of legaltech, the task of corporate law firms as well as startups have one common challenge; to stay ahead of the curve.
The demand for transformation to more technology-driven solutions has increased around the world, especially during the COVID-19 pandemic. The global pandemic has not only proved to be a game-changer in business, but also a time of deep review. For many business owners and entrepreneurs, it has triggered a complete overhaul of how and why they are working. However, the pandemic has also presented business opportunities. A key benefit of this new reality for businesses is understanding the need for agility and being able to quickly adapt. Business owners are doing just that – adapting their strategies, their sales channels and their entire ethos to reevaluate, remodel and realign.
The legal services industry is no exception to this shift. An industry which has operated in a more traditional manner with little innovation and advancements previously has in the last decade faced an increase in demand to digitise the world of law and services.
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A recent article in the FT states that businesses which have suffered from the financial crisis moved their legal work in-house as they sought to reduce their reliance on external advisers. “That, in turn, created a renewed focus on how to do more for less – and how to use technology and more efficient management of internal processes to do it.”
Taking processes in-house for legal firms can both accelerate and hinder the process and efficiency of the internal workload if the business infrastructure isn’t in place. Challenges to maintaining and operating effectively with old paper-based systems need to be addressed from within the business first to adapt a more agile approach before bringing in new technological advancements.
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The first step that businesses should focus on is the importance of getting the formalities correct. These include mitigating any risks with technology and finding alternative solutions.
A key risk factor for legal firms around a decade ago would have been sharing files securely and the security implications of doing this. Nowadays, legaltech firms use machine learning and algorithms to help with due diligence and smart contracts that are set up with practical management tools.
Rradar, a commercial law firm that uses legal expertise combined with technology and digital tools, is another firm disrupting the legaltech industry. CEO Gary Gallen explains how the traditional law firm model is still based on rigid and old legacy systems which most practices are still routed into. “There’s more talk about change especially in larger law firms than actual change. Many firms are very reluctant to change their structure. We approach the change from within and to create different financial models such as subscriptions with clients rather than hourly rates. There are tons of SME clients and firms that are disruptors that want to partner with more tech savvy law firms. A lot more bigger companies are also now looking for their legal partners to be tech savvy.”
The legal firm is based in Bruntwood SciTech’s technology hub, Platform in Leeds, which has seen continuing growth in the legaltech sector and is now one of the region’s specialist strengths with over £74m investment in this emerging technology over the past four years.
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Aiming to highlight the way technology can change law firms, Gary continues: “We have our own coders, data scientists and education specialists in the firm now – a few years ago lawyers were not allowed to recruit a multidisciplinary team. The way technology is changing law firms is through due diligence and the support space that wraps around the business – preparing documents quicker, speeding up internal administration and so on. Technology helps bring efficiency both with time and cost. We chose to build the technology and then blend it with legal knowledge to help our clients and how this helps results.
Another example of a legaltech firm is UK-based startup Orbital Witness, a startup that modernises and accelerates the legal due diligence process in real estate with a platform to organise property information from HM Land Registry and local authorities, facilitate document review and flag risks automatically to lawyers and underwriters. Recording and transacting real estate has been the same process for 150 years, and the due diligence process is a significant hassle. 40% of buyers and sellers experience delays and high costs, and in the UK alone, due diligence for property transactions costs £4bn annually.
Legaltech firm is Sparqa is similar – the startup provides the legal expert help and guidance to allow businesses to cut their costs, by reducing their reliance on traditional methods of obtaining legal services. From employment contracts, commercial agreements and trademark applications, the startup Sparqa is suited to the needs of startups and small businesses, who must deal with demands for high levels of legal compliance, on modest budgets.
The second area in need of transformation for legal firms is their tech infrastructure. This is an area that has been seemingly tested in the last few months. Most firms and enterprise products are seeing a rapid increase because businesses have had to fast-track their digital transformation journeys. Big shifts in regulation are creating opportunities for efficient compliance.
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The third aspect of review should be trial and error. Understanding what works within a business to run smoothly with little constraints and improving constantly is key. What are the realities that businesses are facing in this new world order? What’s working now but what is also at risk? Are businesses now more productive by relying on technology? Asking employees about the strengths and weaknesses and testing new systems to undertake tasks and automate processes is an area that legaltech firms are constantly changing to become more agile.
The fourth key aspect in adopting an agile business model is investment and talent. One of the significant challenges for the legal industry is to retain talent and invest in employee engagement with a motivated workforce.
This is an area where startups win over large firms; they can attract the top talent because they can offer the flexibility and employee investment that most larger firms cannot. A great example is Allen & Overy, a legal firm who have focussed on the strength of technology within the legal sector and set up their own tech incubator.
A recent whitepaper from Pi Labs states that the ongoing disruption has brought a sharper focus on how technology can increase the value of their business. “The opportunity cost of investing in new technologies reduces as the returns from funding regular operations declines. The clearest parallel is the 2008 downturn, which led to a boost in technology to find competitive advantage and maximise savings.”