Three ways AI will change the legal sector… and three ways it won’t

AI will save time and improve output

There is no longer any debate – AI can help lawyers complete work faster while also improving the quality of that work. According to a Thomson Reuters report, legal professionals expect to free up about 190 hours every year because of AI, equivalent to around $18,000 in annual value per lawyer. “If you put all lawyers in the US together, this means it’s about $20bn of impact on the legal industry through time saved on legal work that would have been done before but is now completed by technology,” says Ramanathan.

Right now, however, there is a significant gap between firms that are embracing the technology and innovating around AI, and those that are lagging. According to Thomson Reuters, firms in the former camp that have developed robust AI strategies are seeing 3.9 times more benefit on time savings than those without a clear strategy.

Billing models will have to change

While this might not happen in the immediate future, the speed at which work can be done using AI means firms won’t be able to continue billing in the same way as they have in the past, with lawyers charging an hourly rate for their time. “Clients will say, ‘You’re saving all that time, why should I have to pay you as many hours as I paid you before?’, so we need an answer to the billable hour model,” says Ramanathan. Some firms are already experimenting with new models, he says, with greater emphasis on fixed-price work or outcome-based pricing, where fees could be contingent on success or how fast work is completed.

There are also more conversations about how both parties can share in the gains AI creates so that it is “win, win,” Ramanathan adds. “People are looking at commercial structures that allow both firms and clients to benefit,” he says. “Within the next 24 months, we should start to see significant changes as firms experiment with new revenue models.”

Firms will rethink resource allocation

Once firms start to reengineer their legal workflows and operations through AI, workforce needs will inevitably change. In the first instance, this will likely mean firms will require fewer paralegals, says Ramanathan. “Paralegals have always been one option to scale up and down with demand, which will still happen to some extent, but firms will increasingly use AI to do this instead,” he says.

Firms may also start operating with leaner associate pools as AI will enable junior lawyers to be more productive, meaning firms will likely need fewer associates in the future. AI may also change expectations around what associates will be required to deliver, with AI handling much of the ‘grunt work’ and associates tasked with providing more insights and strategic thinking. Firms may also need to rethink reward structures for non-lawyers, particularly if they want to hire employees from other disciplines such as technology, says Ramanathan. “If firms want to run lines of services which are very tech heavy, you might want to attract some tech talent and have some kind of equity structure which also allows you to reward tech talent,” he says.

The legal industry will remain heavily regulated

The advance of AI won’t change the judicial or regulatory backdrop for the legal industry – there will still be a need for human judges and codes of conduct; AI won’t replace that, says Ramanathan. Lawyers, therefore, will still carry the same responsibilities and be subject to the same ethical and professional standards as before. “Just because there is new technology, it doesn’t mean that human accountability will go away,” Ramanathan says.

Human judgement will still be essential

The reason clients will hire a particular lawyer is because they value the advice being provided. “The advice is not just about knowing specific areas of the law; the advice is about seeing around corners, judging grey areas and providing a sense of strategic analysis and critical thinking,” says Ramanathan. “This will become even more important because many of the other things can be done by AI.”

While firms will increasingly rely on AI to complete work faster, lawyers will also still be required to validate the output that AI provides. “Humans will still have a role and the ultimate accountability for the end product – we’re not talking about a world where AI gives the answer and that’s the final answer; accountability still rests with human lawyers,” Ramanathan adds.

Client relationships will always be built on trust

Given that the nature of legal work means firms will be handling sensitive and confidential client information, relationships will still be built on trust, says Ramanathan. “That is something that is going to be very hard to replace with AI,” he says. Therefore, while AI can help people find answers to questions faster, clients will still be looking to lawyers that they trust to help them strategise and plan and provide the final call on any decisions that need to be made, he adds.