Lessons from Legaltech: It’s Not About Legal Tech

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NEW YORK — Legaltech, the trade show at the heart of ALM’s Legalweek event in New York City each year, began with a “state of the industry” keynote briefing from the folks at ALM Intelligence. The interesting thing is that the briefing barely mentioned technology.

ALM analysts Erin Hichman and Nicholas Bruch painted a picture of an industry that is changing its size and shape. Like other industry observers, they see the emergence of a stratified, hourglass-shaped industry, consisting of a group of elite firms handling “bet-the-company” matters for large corporate clients at the top, and a wider base of legal providers that focus on process-based “run the company” legal work.

While the top of the hourglass will likely consolidate, those firms will continue to win by focusing on talent management and high-value work. The bottom of the hourglass will also consolidate, but there the winners will focus on entirely different things — building scale through the effective use of data, process management, and technology — and will show a client focus through productization and partnering with other parts of the legal services supply chain.

Speaking of that supply chain, the base of that hourglass is where the growing alternative legal service providers (ALSPs) are finding their home. ALSPs were a mentioned in practically every educational session at Legaltech. That includes the launch at Legaltech of the 2019 update to Alternative Legal Service Providers Report, produced by Thomson Reuters, in partnership with Georgetown Law’s Center on Ethics and the Legal Profession, the University of Oxford Saïd Business School, and U.K.-based legal research firm Acritas. The report shows that the ALSP market is now worth $10.7 billion, growing nicely, and engaging both corporations and law firms as clients in new and dynamic ways.

The Legaltech keynote’s focus on the changing industry structure and the market forces at work in it was the perfect set up for the rest of the conference, much of which was focused not on technology, but rather on business techniques like strategy, building scale, talent management, and client-centricity.

Three educational sessions sponsored by Thomson Reuters illustrate this idea that Legaltech is now about much more than Legal Tech:

  • A session on legal analytics illustrated just how much strategy and operations savvy goes into turning a law firm’s data into useful assets and applications. The examples provided by Meredith Williams-Range of Shearman & Sterling and Kate Orr from Orrick show that analytics is not about simply buying technology. Effective use of analytics requires a data strategy, and people with the right skills (both legal and technical) to make it all work in order to provide value to both firms and clients.
  • Another session on the use of document automation software also illustrated that just rolling out software isn’t enough. Effective use of tools like this require legal organizations to revise their workflows and, more importantly, change their relationships with clients, often in very positive ways. But the technology doesn’t do that alone; firms require not just tech tools and tech skills, but also change management and good client relationship practices. Moreover, a firm that uses document automation extensively for certain kinds of work is making a deliberate strategic choice, and firms that don’t have strategic thinkers in place will be at a disadvantage.
  • Finally, a session highlighting the new biennial ALSP report mentioned above led to a lively discussion of the role of ALSPs in the new structure of the legal industry. Here again, the discussion had little to do with technology and everything to do with the strategies of both law firms, in-house legal departments, and the ALSPs themselves as they all jockey for position in the new legal marketplace.

What a contrast this Legaltech was compared to those held four or five years ago, when a new wave of legal tech startups began appearing at the Legaltech show. Stanford Law’s CodeX center even set up a separate legal tech pavilion in the exhibit hall, and held pitch-like events and a separate track on the new technologies that were thought by some to be on the verge of transforming the industry overnight. Technology was seen as a form of pixie dust that could be just sprinkled over the industry and suddenly nothing would be the same.

Now we know better. Technology will transform the industry, certainly. But the biggest changes will be driven less by the technology and more by the business issues that need to be addressed, such as the structural, strategic, and operational changes to the delivery of legal services that Legaltech’s opening keynote highlighted.