2022 Predictions – The Market View: Part 1

What do people want to see happen in 2022? And what do they think will really take place next year? These were the two questions Artificial Lawyer asked a range of legal tech experts from across the market. The quality of responses was so good, and the views expressed so detailed, that this year the 2022 Predictions will be published in two instalments.

Here we go:

Kerry Westland, Head of Innovation, Addleshaw Goddard

What would you like to see happen in 2022?

We’d like to see more clients successfully implement new contracting strategies, both using technology and using better drafting and process. We’d also like to see them lean on their law firms more for support, guidance and technical assistance for this type of work, both before and after decisions about approach and strategy have been made.

Whilst looking at this with clients we’d also like to see the legal industry reduce its reliance on Microsoft Word and make strides towards being able to structure data from the outset and, therefore, in the long term, start to reduce reliance on AI-powered document review tools which simply extract and structure data from unstructured documents.

We’d also like to see law firms work collaboratively with legal departments to design the delivery of their legal advice in a way which better suits the business. This also involves agreeing an approach to sharing the risk in a way which is commercially viable for both corporates and law firms. Wholesale transformation – rather than improvements to improve efficiency – cannot happen in silos and will only happen if both the people providing legal advice and the recipients of that advice are involved and agree to the new ways of working.

I’d like to see more AI tools come out with an honest assessment of their ML algorithms, whether through moving to something like the new Google doc AI and giving up on their own ‘closed source’ versions, or coming out and helping customers understand the gaps in their data a bit better. I’d also like to see a concerted effort to pool data together to improve more open source algorithms through law firms and clients allowing better access to documentation and a push towards a better open source community.

And what do you think will really happen next year?

Litera will probably buy a law firm…

We’ll see more corporates buying legal technology tools to support their inhouse teams, we are already starting to see this trend and are supporting some clients through the process, but I think this will start to speed up as these tools become more affordable and start focussing on corporate clients. I think this will focus a lot on contracting – but clients need to be aware that technology for contracting isn’t the only thing to be thinking about. The documents and the processes/workflow need to be looked at before even thinking about buying a technology platform.

I think we’ll see a focus on legal data as the realisation about just how much data analysis could impact the way in which we measure legal risk gathers pace. However, I think open source and sharing of documentation / data will struggle through another year due to risk averse clients and law firms partly thanks to regulation, with no one willing to take the first step towards it. So we will only be able to scratch the surface of the data piece.

A law firm will have the first (and last) metaverse client meeting.

Lewis Liu, CEO and co-founder, Eigen Technologies

What would you like to see happen in 2022?

I’d like to see law firms take a long-term view and actually disrupt their business models to transform the sector by using technology to benefit their clients.

And what do you think will really happen next year?

This won’t happen, law firms are too invested in their current business models and won’t change until it’s too late. Instead, their end customers and tech providers will disrupt the sector for them. We have seen this in financial services for several years and it will increasingly spread to other sectors.

Emma Walton (Knowledge and Innovation Manager) and Emily Lew (Senior Knowledge & Innovation Manager) – Slaughter and May

What would you like to see happen in 2022?

We would like to see two things (1) an increased focus on design principles used in law and (2) a transition for legal tech from ‘innovation’ to ‘business as usual’.

By using design principles, we mean approaching legal work in the way that designer of a product would. When a designer is designing a product, they are thinking all the time about the user of that product. When lawyers deliver legal services they tend to think about all of the steps they (the lawyer) need to take and the specific outputs they need to produce (e.g. a report, contract or similar document) rather than the client’s experience. But the client doesn’t necessarily want a document; instead they want a transaction to happen, or they want the information required to make a decision. If we can adopt design principles, we as lawyers will be thinking chiefly about how the client experiences the services we provide.

Once we refocus our minds on how the end user experiences the outputs that lawyers produce, an obvious next step would be to redesign those outputs to make them clearer and more accessible to our clients. Next year, we would love to see an increase in the use of visual contracts. And we would welcome tools which can make that easier!

In terms of a transition for legal tech from ‘innovation’ to ‘business as usual’, we would love to see more successful embedding of legal tech once it’s been procured. It’s fair to say that some of the tools that have been on boarded by firms over the last 4-5 years have not yet reached critical mass and are not being used as regularly or to their full extent, in the same way that Microsoft Office tools are. We would like to see the use of legal tech on matters become second nature and stop being seen as a new and innovative way of working. The benefits of using these tools are now proven and so shouldn’t require so much effort in pushing adoption.

And what do you think will really happen next year?

We predict that the trend towards consolidation in the legal tech market will continue with big companies buying out the most successful legal tech tools in the market. But we don’t see this decreasing the rate at which we see new entrants entering the market; if anything, it is fuelling it.

Investing in legal tech is still big business. The ‘Shaping the Future of Law’ Report from LawtechUK states that the UK legal technology sector has a potential £322 billion annual market opportunity. And, a Thomson Reuters report showed that tech spending increased by 3.3% compared to last year (2020), and  KM spending increased by 5.1%. We are of course no exception having been early adopters of tech investment with a stake in Luminance back in 2016 and having recently launched Slaughter and May Ventures.

We predict a continued focus on how to make the experience of hybrid working better for both law firm employees and clients. Hybrid working seems here to stay. Its benefits are well known, but it presents challenges around on the job learning, client experience and collaboration. Tech has already gone some way to relieving these challenges but we expect (and hope!) to see much more in this space in the coming 12 months.

We think automation is also a trend that will continue, with a shift from document automation to business process automation. Gartner predict that by 2024 legal departments will automate 50% of the legal work associated to key business transactions and we think we will see similar in law firms as back office processes are increasingly carried out by bots and other automations.

Michael Mills, Co-Founder & Chief Strategy Officer, Neota Logic

What would you like to see in 2022?

We would like to see states across the U.S. tear down regulatory barriers to innovation in legal services. We would like to see human-centred design thinking at the heart of every product, process, and service. We would like to see our community – from law schools to tech companies – advance the cause of access to justice. And we would like to see our friends unZoomed, unmasked, in person.

What will really happen in 2022?

All of these will happen – in some measure, gradually, with some successes and many stops, starts, retrogrades, frustrations, and failures. Vinton Cerf’s simple flowchart will still be right about blockchain. Data wizards will create 3,112 more dashboards elegantly charting 27,404 unactionable data points. Google will not analyze your contracts. ‘No code’ will be no drama: ‘It just works’,

Ned Gannon, CEO, eBrevia

What would you like to see happen in 2022?

More collaboration among service providers, corporations and legal tech vendors to find new and creative ways to achieve business outcomes while leveraging data to decrease legal risks and drive more informed decisions. Lines are starting to blur as service providers, including law firms, develop or invest in legal tech and some legal tech vendors deploy attorneys to augment their software. In this dynamic and evolving landscape there are lots of ways for entities of all types to work together and create value.

And what do you think will really happen next year?

As the market matures, we’ll see increased consolidation both within product-specific niches as larger entities purchase smaller competitors and more broadly as private equity-backed companies and strategic buyers identify targets to add to their product suites.

I expect we’ll also see the emergence of additional vertical specific Legal Tech / RegTech venture capital funds.

Alex Su, Head of Community Development, Ironclad

What would you like to see happen in 2022?

Corporate legal departments should look to partner with their business to help them accelerate revenue and reach their full growth potential in 2022. To do this, they will need to shed their reputation of being a bottleneck. One way they can do this is by making efforts to standardise contracts, such as a universal NDA or using a public workflow for pre-approved contract clauses.

And what do you think will really happen next year?

With limited resources and increasing workloads, I expect to see corporate legal departments place continued focus on bolstering their legal operations teams. With so many different ways to improve processes and leverage technology, legal ops professionals will increasingly rely on their peers, and tap into their communities, to help solve common problems and develop best practices.

Jenifer Swallow, Director, LawtechUK (combined answer)

We are edging towards a tipping point.  Awareness of what is not working has never been greater and people are calling that out in increasing numbers.  You hear this all the time now, in the legal world as well as in the wider world, where tolerance for inadequacy and vested interests is at an all-time low. 

Businesses are under incredible economic and compliance pressure and need to re-think.  General counsel and in-house lawyers are crazy over-loaded and have to find ways to deliver.  People want their legal issues addressed, expect high standards and digital capability from the legal profession, and are increasingly open to self-serve elements and solutions.  Employees want their work to matter and to take deeper care of themselves.

In pockets, the legal sector is responding and it is those pockets that will lead the change.  We can expect to see that start to crystallize through 2022 as leaders emerge and pull away from the pack, sometimes from the most unexpected places.  It will become obvious who has been quietly putting the work and investment in and who has not – who is putting service of customers and people first, and who is not.  

We saw 101% growth of lawtech over the last 3 years, faster than any other applied tech sector, and out of that regtech grew 214% and the SME/consumer market grew 74%.  We can expect these trends to continue and mature as risk management holds its priority place on the board agenda for corporates, and the £11.6bn per year in underserved consumers and SMEs continues to call our lawtech entrepreneurs to opportunity.  

With the rise of purpose, people are more willing to come together and we have seen this through our work at LawtechUK during 2021.  People are alight with curiosity, creativity and collaboration across our work programmes and it is a theme that will continue in 2022, as shared challenges are presented for collective attention. 

There is so much that needs re-thinking and re-structuring in the law and a little leadership and a little tech go a long way. The regulators are no exception and we can expect to see their engagement on tech and innovation further increase in 2022 through the work of the Regulatory Response Unit and beyond, as they make themselves available to innovators and entrepreneurs, and target increased customer focus and confidence in the market, and support in practical ways with tech development and adoption.

Data will be the area that change is most expected, as the legal community has been waking up to the responsibility and opportunity of properly collecting, producing and using data, and fully digital trade is an obvious near term reality.  There are hard yards to build that capability, but 2022 will start to see the phasing out of old attitudes, practices and protectionism, as clients demand more data driven insights and they and regulators put their weight behind responsible data use and sharing. 

We can expect to see some soul searching and hard questions, too – about the purpose and value of lawyers, the role of law in society, and the type of future we want to build.

Eric Laughlin, CEO of Agiloft

The growth of the CLM market shows no signs of abating. We can expect IPOs, M&As, and lots more movement in the market. But for the sake of our customers, I’d like to see better classification within the market. Lets clear the fog. When you look at the CLM landscape, you’ve got 100 CLM vendors with basic contract repositories with a very basic CLM, or a repository plus AI. That CLM-Lite approach might suffice for smaller organizations, but it is not going to cut it for the enterprise use cases that require complex workflows, unique data structures, and strong connections to the enterprise tech stack.

Many CLM-Lite solution vendors won’t survive in the medium term – there can’t be that many entry level competitors doing the exact same thing, with limited capabilities. However, what will actually happen this year is that new players with simplified CLM will get massive investments from VCs and will continue to pop up everywhere because CLM is hot and equity is cheap. In this environment, buyers need to understand that there is a huge difference between the CLM-lite players and the enterprise class solutions so they can be efficient in their search and can select the right solution for their situation.

Jack Diggle, global lead partner for Deloitte’s Legal Management Consulting and Craig Conte, Partner responsible for Deloitte’s Contracts Legal Management Consulting team (combined answer)

Jack’s views on the law department side:

Something that is already happening, and will be even more prominent in 2022, is the convergence of inhouse legal technology transformation with the business’s existing enterprise technology programmes, tools and platforms. 

Business leaders recognise that investment in digital transformation is necessary, but it can also be expensive. As a result, inhouse legal departments are being encouraged to make use of the solutions that may be available with their organisation’s existing enterprise technology to meet their legal transformation goals. This means that the efficiency and productivity gains can be achieved more quickly and, crucially, legal requests are streamlined and can work seamlessly with other functions across the business.

This is a trend that is also apparent on the supply-side; we are seeing convergence of enterprise legal management and contract lifecycle management platforms, as well as enterprise technology providers, investing more into legal and contracting modules. It is a critical way we are seeing GCs improve the integration of legal with business areas.”

Craig’s views on the contracts side:

It is well established that digital transformation is happening right across the legal and contracts landscape. We are seeing a renewed focus with AI and machine learning advancements driving demand in smart or ‘touchless’ contracting as well as self-service and alternative sourcing. However, CFOs and COOs understandably want to be able to have a good grasp of what the return on investment would be before they entertain the idea of implementing a new technology or solution.  And quite frankly, a generic ‘better’ just won’t do.

Modelling data, predictive technology and the maturity and sheer number of use-cases, have all reached a level of sophistication where it is now more possible than ever to illustrate the return on investment that an organisation can realise in one, three or five years after a particular technology and/or transformation has been landed.

In 2022, C-suite decision-makers will continue to demand fact-based business cases for change and more ‘try-before-you-buy’ approaches that will require not just proof-of-concepts, but also proofs-of-value approaches across services and technology in this space.  This goes double for CLM as this is something that touches the whole organisation and that level of change and investment requires a higher standard than platitudes or straplines.

Maurus Schreyvogel, Head of Legal Innovation, Novartis

In 2022 I would love to see a return on investment from all the tech investments in legal tech companies that we read about over the last 18 months.

I expect that the technology companies will need more time to deliver against their promises. I also expect an increasing amount of pressure from my function and company to accelerate technology implementations. To address some of the pressure that I will be facing, I prepared for some quick wins but likely those will not keep legal professionals happy and satisfied for the entire year.

Dan Sinclair, Head of MDR LAB, Mishcon de Reya

If MDR LAB were to meet the LegalTech genie/grinch, we would wish for three things:

Continued adoption of LegalTech on the buy-side: This crucially must be (1) law firms (large all the way through to small) paying for technology that can help solve organizational and client problems, and (2) lawyers actually using the tools that they have available to them and increasing digital literacy.

Continued investment into the sector from both capital providers and regulators to help sustain momentum: MDR LAB believe that the sector has benefitted massively from the large sums of money pouring into companies from Series B/C > to exit, where there is already data and traction to point to. The wish is to see a more even distribution of investment, including earlier/ seed stage companies.

More / deeper convergence of LegalTech/ legal sector with other parts of the market. In recent years, there have been great examples of this across financial services, cyber, and privacy spaces. Looking ahead, the explosion of NFT / Web3 as well as the ongoing developments in crypto will surely present lots of opportunities for x-sector collaboration, which are hugely exciting.

MDR LAB also believe that 2022 will be a pivotal year for retail/ b2c legal, driven by a combination of increased consumer demand (more people doing more complicated and tech-enabled things), social consciousness and economic pressures as we continue to feel impact of the pandemic.

Dorna Moini, CEO, Documate

What would you like to see happen in 2022?

Changes in the way that legal services are delivered, in practice, packaging, and pricing. In 2021, we saw lawyer cloud use go up 35% – that’s huge. In 2022, I’d like to see those same law firms use technology to package their services in new ways (combination tech and services, bundles of hours, document review). Similarly, those packages should lead to differentiated pricing, for example, more flat fees and subscription models. The most obvious applications apply to consumer-facing areas of law, but this applies throughout the legal system.

And what do you think will really happen next year?

The flywheel has already started. Lawyers are moving from one-to-one legal services to scalable one-to-many legal products. Subscription plans and recurring revenue will be motivating drivers of this change for lawyers, along with the broader audience these models open lawyers up to.

Hugo Seymour, Chief Operating Officer at Della

What would you like to see in 2022?

I would like to see law firms moving away from the billable hour model and play a more active, consultative role on the technical and legal aspects of running a business. I don’t think the first will happen, the second seems more likely.

What do you think will actually happen?

Lawyers will continue to bill by the hour and it will continue to prevent many firms from offering a more active, consultative service. Client pressure to reduce prices and demonstrate efficiencies will continue, alongside increased salary demands from associates. Those static prices and increased costs will require technical solutions, including AI and machine learning. At the same time AI will become easier to develop and manage, with some features becoming configurable in common tech platforms. GPT-3 is now a callable function in Google Sheets, for example. Successful providers will provide specialist end-to-end solutions and have established use cases.

Shilpa Bhandarkar, CEO, CreateiQ, Linklaters

What would you like to see happen in 2022?

I would like to see a more data-driven legal sector. This could mean more in-house teams reporting on metrics like the number of contracts negotiated and executed for their sales or procurement colleagues every quarter, or the time from document request to signing. It could mean law firms using more predictive and AI technologies to review the document databases they have access to, and then sharing the insights gained with their clients and future deal teams.

Whatever the individual role, within our sector, I would love to see all of us move the needle in our efforts to actually capture data at the source. We can then interrogate and use that ‘clean’ data to make smarter decisions and provide better client services, both for legal and the business.

And what do you think will really happen next year?

We may not get there in one year, but I think we will take steps in that direction through greater standardisation and automation. Initiatives like oneNDA and ISDA Create show what is possible when we collaborate, from a simple two-page NDA through to the much more complex derivative master agreements. I think (hope!) we will see more of that next year – which together helps the industry move forward to a more data-driven future.

Thanks to everyone who provided their hopes and views on what will happen in 2022. The predictions and analyses really were great this year. Maybe having so much time working from home, plus the challenges and opportunities created by Covid have inspired everyone? And perhaps the legal market really is on the cusp of significant change…? We will find out next year!

The second instalment will be published on Thursday.