Legal Tech – 2022 and Beyond

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Legal Tech – 2022 and Beyond

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So it is all doom and gloom? No, most certainly not; the shifts in the legal sector are now unstoppable. Many have finally moved to the cloud, and more are following quickly in their wake.

The only newspaper I read in the US is the Financial Times; it drops onto my South Philly doorstep a few times each week. It should be six days a week, but the delivery guy isn’t very consistent. Even so, it gives occasionally has an article that touches my professional world, in this case, Legal Tech. Last week journalist Jane Croft penned an interesting piece entitled “Why are investors pouring money into legal technology?” , in fact, over $1B since September 2021. Particularly interesting for us here at Deep Analysis as we spent time immersed in the legal tech world and have been asking much the same question over the last couple of years.

$1B in the tech sector is not that much (crazy though that may sound). Yet, that is a massive amount in the Legal Tech sector, particularly when investors expect highly lucrative, multi-billion dollar exits in the coming years.

On one side of the coin are the positives; the legal sector is changing and adopting modern technologies after years of resistance. The use of AI for legal research and contract review is currently in vogue. Even established legal tech areas such as document management and e-discovery are moving with the technological times. Newly minted partners in their late 30s and early 40s are responsible for some of this change, the reluctant embrace of hybrid working plays a factor, and last but certainly not least, client expectations are a huge driver. In addition, clients are putting pressure on law firms to review the information and provide guidance much more quickly than legal firms are typically used to, as well as questioning high hourly rates for what would generally be automated work in most other sectors.

The flip side of that coin is that through change is coming, it’s not coming as fast as many might lead you to believe. There is still a solid streak of technophobia in the legal sector, and senior partners can be slow and reluctant to part with money. Though comfortable with charging hundreds if not thousands per hour for their time, many law firms are unwilling to pay thousands for technology to assist them. Plus, this is a relatively small buying community (compared to healthcare, manufacturing, or government). Yet, the legal sector is currently awash with startups and well-established vendors vying for a limited number of lucrative accounts.

So it is all doom and gloom? No, most certainly not; the shifts in the legal sector are now unstoppable. Many have finally moved to the cloud, and more are following quickly in their wake. In particular, AI & Machine Learning technologies that can read documents are gaining traction and demand. But a looming recession and a pile of money from impatient VCs likely means there will be reckoning to come over the next few years. The strongest will survive, the weak will fall by the wayside, and those of middling strength will likely be acquired. We have already seen a bunch of acquisitions in the legal tech sector in 2022; we expect many more to come, some at bargain prices. Most likely, well-established legal tech vendors like iManage, NetDocuments, Relativity, and Clio will sit comfortably over the coming years. Still, change is afoot, and some new gutsy startups have a chance to make their mark over the coming few years. So as that tired old cliche goes, ‘we live in interesting times.

If you are a buyer or user of legal technology and wondering how to navigate these difficult times, we have a free – yup, free – confidential advisory service for you. A service that means all you have to do is find a time on our calendar.

If you are a seller of legal technology, then, like many others, you may be reassessing your current business, pricing, or go-to-market strategies to adapt to these turbulent times. Again feel free to reach out and chat with us as we may be able to help by providing some critical but constructive advice and support.

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