Top Three Misconceptions about Legal Tech that Every Lawyer Should Know

Legal tech continues to grow from strength to strength, with funding and acquisitions of legal tech companies at an all-time high – according to Bloomberg Law's analysis, as of Q3 2019, total legal tech investments topped US$1.2 billion globally.

Yet with the benefits of legal tech widely reported, and deals and investments on the fast track, why has technology adoption in the legal profession not kept pace? Part of the reason is due to misconceptions held by legal professionals about legal tech, whether as a result of (i) not having sufficient time and resources (eg a dedicated team) to fully research on the legal tech tools available; or (ii) being overshadowed by prior unsuccessful stories in the market about legal tech implementation. These misconceptions remain one of the major stumbling blocks leading to the slow adoption of legal tech, and I will explore below the three most common ones that I've encountered:

1. Legal tech is not worthwhile since successful implementation is costly and time-consuming

Often, when the high-cost of legal tech is mentioned, the emphasis is on the absolute one-off cost of buying legal tech – this can normally include (i) the software license costs, (ii) integration with the law firm/legal department's existing systems; and (iii) re-designing the workflow of the legal work that fits into such legal tech's use cases.

On the contrary, we need to think about costs from a relative and continuous manner. This means a proper cost-benefit analysis that weighs the benefits of adopting such legal tech – benefits can be (i) number of hours expected to be saved over the life of the product, (ii) stickier relationship with, or (iii) improved satisfaction of clients (for law firms)/other teams within the organisation (for inhouse legal departments), etc.

In the event that the above cost-benefit analysis doesn’t yield an attractive return-on-investment (ROI), keep an open mind about the legal tech and consider if there are other alternatives to consider, such as (i) arranging a trial with the vendor to re-evaluate the cost-benefit analysis; (ii) liaising with the vendor to lower the initial investment costs or considering Software-as-a-service (SaaS) or subscription based solutions (the costs of which are often usage/annual based).

There are great legal tech solutions even if one's budget is limited, by starting small. Use open-source software, or the existing tools that an organisation already have to solve a small problem. For instance, one can do document automation with docassemble, a Macro in VBA, or even the MailMerge and Quick Parts features of Microsoft Word/Outlook.

2. Legal tech is only about cost savings

Cost savings are the most frequently cited reasons for using legal tech, because they are quantifiable, and therefore provide easily comparable metrics to justify the ROI of adoption. Yet there are many more compelling reasons to adopt legal tech:

i. Enhanced collaboration among team members or other teams within the organisation: project / matter management tools offer distinct advantages over emails in managing legal work. These tools offer features to track statuses of tasks/documents assigned to individual team members, co-editing of documents by multiple parties, as well as a timeline view of major steps in the project. These tools are particularly useful for work that involve a large volume of documents or multiple jurisdictions.

ii. Improved consistency of work quality and fewer human errors: document automation/contract management tools standardise legal documents by reducing variance in contract terms (eg for some clauses, only permit a few pre-defined choices which have been approved by the compliance or risk team for other contracting parties to choose from, rather than allowing free text edits). This therefore allows contracts to be drafted consistently and make them easier to manage, as well as reducing human errors. On the other hand, legal tech tools that make use of artificial intelligence, machine learning or natural language processing can also improve work accuracy when they are used properly to cross-check work performed by lawyers (rather than using it to replace and substitute a team of lawyers). This is contrary to the common belief that legal AI tools lack sufficient accuracy to be used in the legal profession. These tools are gaining traction in a wide range of use cases such as large scale contract revisions (which are often event driven like Brexit, or as a result of regulatory changes like IBOR repapering), contract management or document review in due diligence or contentious work (often known as e-discovery).

iii. Pivoting legal departments away from being a cost centre: Better management of contracts can lead to recovery of value leakage in contracts (eg failure to take advantage of indemnity provisions or bulk purchase discounts when contracting with different offices of the same supplier, etc.), which can be as high as 40 percent of a contract's value based on a study by KPMG on supply chain capacity management. Using a proper contract management tool, all the key information of each contract (eg party names, term, dates of renewal, remedies for late performance, etc.) will be recorded in a structured database, and the system will alert the legal department when obligations and liabilities associated with a contract is triggered. This would allow the legal department to take advantage of such comprehensive information to drive value for the organisation (eg asking for a bulk discount if the organisation is buying a large quantity of supplies from the same supplier in multiple offices, taking advantage of significant early payment discount in dealing with companies in need of a strong cashflow, etc.).

3. Using a "wait-and-see" approach and only adopt others' success cases

Legal professionals are trained to favour precedents and templates. Intuitively, this kind of mindset would seem sensible as well when considering legal tech. After all, why not wait while others first do the hard work of figuring out what aspects of legal tech are most useful? However, in legal tech, there is no "one size fits all" answer and you should pay attention to the following:

i. No two organisations transform in the same way: While the second-mover advantage of replicating proven success stories is tempting, there are a lot nuances in legal tech implementation that turn success stories in other organisations into disasters in your own organisation – be it culture (some organisations are more open to radical changes but some may prefer small and incremental ones, workflow (different organisations may have a completely different workflow for similar types of work), incentives etc.
ii. The best solutions are organisation-specific: The best ideas for legal tech adoption or process improvement often come internally, because people working within an organisation know the problems best and are able to identify the most critical areas of improvement. When you can invest in your organisation's innovative potential, chasing after external success cases may well be a waste of energy and time

Conclusion

I hope this article is helpful to legal professionals who are interested in legal tech, or are looking for ways to work more efficiently. Key takeaways are:

i. Time is ripe for legal tech to shine, yet adoption remains a challenge – more is needed to be done to clear the obstacles and growth is enormous.
ii. Legal tech is not expensive when its cost is weighted against potential benefits – when budget is a concern, start small with existing or open-source software.
iii. Legal tech delivers far more value than mere cost savings – improved collaboration, quality of work and value add of legal departments are all equally valid reasons for legal tech adoption.
iv. There is no need to follow the footsteps of the others in legal tech implementation – there is no guarantee that success can be replicated, and the best ideas may come within the organisation. 

Jurisdictions: 

Legal Tech Advisor, Clifford Chance APAC

Cliff Yung is a legal tech advisor with Clifford Chance in APAC. His primary responsibilities include: (i) assisting lawyers with the configuration and adoption of the firm's legal tech and automation tools; (ii) advising on the firm's legal tech strategies; and (iii) legal business intelligence with data and text analytics.

Prior to joining Clifford Chance, Cliff was a HK qualified corporate and regulatory lawyer with an international law firm. He has spent over 1000 hours self-learning python coding, natural language processing, machine learning and deep learning, and has self-developed some legal tech software.