2021 Predictions: The Pandemic’s End, to Pent Up Demand

It’s that time of year again when we start to set out predictions for how 2021 will look. Here are some of my thoughts on what we can expect, divided into several key topics.

The Pandemic’s End

First, the single most important factor for 2021: when will the negative impacts of the pandemic start to reduce?

In the UK and in other countries the vaccination programme is just starting. However, anyone assuming that life will be back to ‘normal’ by even late Spring of 2021 is getting ahead of themselves.

The roll out of tens of millions of vaccine doses, and in the case of larger nations such as the US, hundreds of millions of doses, will take many months.

For a large business that employs a range of age groups, from people in their 20s, who will be at the back of the line, to people in their 50s and 60s, who may also have to wait several months before they are called to be immunised, we are probably looking at early Summer before all who want to be vaccinated are immunised – and that’s just in developed countries and where people actually want to be immunised, or where their place of work demands it.

As we have seen, some science-denying people are trying hard to stymie uptake of the vaccine, and ironically many are based in the US and also in the UK, both countries famed for their embrace of the benefits of science, (but that’s another story).

Moreover, after the Christmas holidays we will inevitably see further lockdowns as a result of increased social proximity. So, what we have been experiencing up until now will likely continue for some time to come, i.e. social distancing interspersed by shutdowns of certain sectors of the economy. The key question is when will things tail off?

We could explore how immunisation of the elderly will rapidly reduce the death rate and that will help the general mood, while contagion rates will still continue to rise in the young yet generally they won’t be hospitalised, but let’s skip to the end of this one.

Going back fully back to the office, if any law firm or corporate actually wants to do this now that remote working has been normalised, and at least for those with a broad demographic age range of staff, it is not going to take place until at least the summer and maybe later in some countries.

But at least from then on we can have business meetings more easily, conferences will be able to take place in person in countries where immunisation rates have been very high – but probably with some social distancing still in place, and a strange kind of ‘post war’ sense of normality will return.

The Macro Picture for Law Firms

When law firms do badly they understandably downgrade their focus on non-essential projects, e.g. experimenting with new types of legal tech. Equally, when an inhouse team is in crisis mode and helping to stop the company from going bankrupt then their bandwidth to muse about legal tech’s importance is also limited.

However, as Thomson Reuters’ data shows (see below), many of the larger commercial law firms are actually doing well now. The pandemic did not hit many firms as much as they feared. Some firms have been hit, especially where they focused on the mid-market and High Street, but most of the Top 50 in the US and UK seem to have done well overall. Globalised firms no doubt saw the benefits of a more diversified client base as well.

As the market starts to recover in 2021 things should get better, and as we reach the summer, pent up demand should really be unleashed by the client base.

As you can see from the PMI index, which goes up to Q3 2020, overall feedback from the market puts major firms at a higher point now than they were across most of 2015, 2016 and 2017 – which were not bad years for the legal market by any means. Part of this has been caused by a drop in costs – e.g. less property costs, trimming some staff in a remote working world, and a reduction in travel and other operational costs. And, as said, for many top commercial firms demand has been healthy.

2021 will see more litigation coming to court (virtual or otherwise), driven by the economic fallout of the pandemic. There will also be more M&A as companies that have just about survived through 2020 become targets for takeovers, or where business owners of strong, but smaller companies, decide there is greater security in size and decide to sell up.

Property work will be an odd area. Will there be more demand for commercial real estate legal work or less? Many companies in 2021 may decide to reduce their space when leases renew even when the pandemic has receded. Why? Because reducing office costs goes right to your profits. If the company – or law firm – can operate just as well with less costs any business owner would be remiss not to take that option. No doubt that will lead to less office construction, but equally more spats between tenants and building owners about rates and break clauses.

The key point here is that law firms will be back to having the capacity to invest time and money on new legal tech projects. And, if feedback to this site is representative of the wider market, several of the larger firms are already back to ‘normal’ when it comes to innovation projects and investments there. So, that is a truly positive sign for our sector.

Legal Tech Companies

Companies that have depended heavily on transactional work will see an uptick in business. This especially covers AI doc review, as when M&A dips they get hit. LIBOR and some of the really large deals have kept things in play. But a return to a more vibrant transactional market across the world will really help lift them up. And that will be good to see, especially as many have received plenty of VC investment over the years and the pressure to keep growing must be immense.

The newer companies and the startups will likely see VC cash flowing more easily again, especially as investors see how the pandemic has shunted digital laggards in the legal world into embracing change.

The larger platforms will clearly keep on with their consolidation drive. Platforms from Litera to Onit to BigHand and many others are going to keep buying up smaller point solutions, backed all the way by the private equity funds that own or majority own those types of platform businesses.

We may also see more JVs and partnerships between smaller point solutions that want to provide a greater offering but do not – yet – want to cede control to a platform. That may also include more consortia, such as LexFusion.

But, whatever happens next we will keep seeing new start-ups emerge. That will never stop. Some will appear and have a small impact, but as is always the case, some startups will emerge that really shake things up and make the constituent parts of the platforms wonder if they have made the right decision to join them, given how successful certain point solutions turn out to be.

As in all fields, the moment you think everything has plateaued out, that all the market is owned by a handful of companies…..suddenly new entrants arrive. Such is the nature of business.

Artificial Lawyer receives messages from new legal tech companies every week – and it’s great to see the energy and creativity out there. This site will always be excited to hear from new legal tech companies.

The Big Four And Process Businesses

The Big Four and other process-focused businesses are really going to go for it in 2021.

Large corporates have got more and more used to seeing the added value in specifically-designed process approaches to legal work. Combined with likely higher cost sensitivity this will drive greater uptake of what the process experts have on offer.

Law firms will counter by ramping up their own process groups in places such as Belfast, but the net result will be the normalisation of this approach – which will put more pressure on the traditional law firm model.

The Adoption Curve

Last couple of things: new tech and adoption levels. One could see 2021 as the beginning of a new chapter for legal tech adoption. The sector is familiar now with the many automation and machine learning tools in the market. The challenge now is to really use them.

2021 may well be the breakthrough year as familiarity combined with economic necessity drives far wider uptake and genuine implementation and use.

That said, some things may still not happen yet:

  • Smart contracts will continue to be a niche area, although if DocuSign buys Clause that could change things more rapidly. Let’s see…..
  • Blockchain solutions will also remain a niche subject, though POCs will continue as ever.
  • GPT-3 will not be a total game-changer in 2021 either, but more companies will experiment with it. People will probably wait for better iterations to come, and also for better ways of handling data privacy challenges within the system.

Conclusion

2021 should be a year of rapidly increased growth for the legal tech sector, certainly once we are past the summer.

The shocks and forced digitisation of 2020, plus the years of experimentation with new tech tools leading up to 2021, should result in higher levels of adoption and use, as well as an increase in innovation projects to develop and onboard new approaches to legal services delivery.

Overall we will see a surge of pent up demand being expressed in 2021, with something of a steady build up in the first half of the year before finally, once vaccination rates have covered most of the population, seeing the field fully open up and then we will be really off to the races.

P.S. those are some of my thoughts, as also usual for this time of year, Artificial Lawyer will be publishing a 2021 Predictions piece based on what the wider market thinks. Please drop me a line by the end of this week to richard@artificiallawyer.com if you have a predictive nugget to share.

By Richard Tromans, Founder, Artificial Lawyer

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