Here is a statistic (wild guess…?) that will be in every legal tech company’s pitch deck to VCs from now on….!
Technology market analysts Gartner have announced that ‘the legal tech market will reach $50 billion in value by 2027’– with genAI as the key driver for growth. In comparison, one recent estimate from Fairfield research stated that the market in 2022 was worth $25.6 billion. So, that’s quite a big leap.
Chris Audet, Chief of Research in the Gartner team for Legal, Risk & Compliance, said: ‘Rapid genAI developments, and the widespread availability of consumer tools such as OpenAI’s ChatGPT and Google’s Bard, will quickly increase the number of established legal technology use cases, in turn creating growing market conditions for an increasing number of legal-focused tools.’
Whether broad availability of LLM technology means there will be a surge in the use of legal tech tools and that the market value will rapidly rise, remains to be seen. But, two things are true: genAI tech is being added to dozens of tools, (or forming the core of them, see second point) – whether this is a chat bot add on, a thin, or thick wrapper, and two: there are a lot more new startups in legal tech again, many using OpenAI as the core tech upon which the wrapper is added.
The challenge with the statistic above is whether actual usage of legal tech tools increases super-fast and that clients and law firms are really going to pay more from their budgets? Will they just use more tools that have genAI, but the total budget won’t go up that much, because they stop using as many tools and features that are not powered by AI? I.e. it all just balances out.
Or, another scenario is simply that the market widens a lot, i.e. new buyers in new market areas of the legal world. That would mean much more consumer legal usage perhaps, and more legal tech uptake in markets that have been slow to use such tools before.
That could all happen, but it’s not a given by any means.
Gartner goes on to say: ‘There has been significant growth in spend management, e-billing, contract lifecycle management, legal matter management and legal document management as legal departments increasingly seek technology-led efficiencies. Incorporating GenAI into these applications will only accelerate purchasing and adoption.’
‘As various business functions pursue automation, legal leaders may find themselves facing some tough questions from senior leadership if they haven’t evaluated its potential in the legal department,’ Audet added.
The billable hour also gets a kick in the backside from Gartner, and the balance of external and inhouse lawyers may also change, they said.
It would be great if Gartner is right and we see a huge surge in the use of legal tech tools. But, as mentioned, the question is: where does this growth come from? Will law firms that spend $Xm on tech suddenly double it? That seems a bit of a stretch. Inhouse teams may be where things can grow, although even selling CLM systems has been tough work. So, how fast can spending on legal tech by inhouse teams really increase? Or will the growth of tech in legal actually come from OpenAI’s suite being used directly by lawyers, i.e. not on legal tech tools per se?
As noted, consumer legal is also a big potential area of growth – but monetizing products for a market where most people don’t have much money is also hard. Hmmm……..tricky.
So, while AL hopes Gartner is right, getting to these numbers will be quite a journey.
P.S. if you are a VC and you start seeing this $50bn number on pitch decks, please let me know 🙂