The present article has been written by Nayancy. She is a second year law student in Dr. B. R. Ambedkar National Law University, Sonipat.
Suppose, you have a very important court case scheduled today. This could be one of a landmark case of its type in history. However, unfortunately you forgot all your important documents and now you are in great trouble. If you were in the 18th century, this could have been problematic. Fortunately, this is the 21st century where we have science and technology to help us. Even in legal matters! You can now store all your important documents on any legal tech software or application and access them anytime and anywhere.
Legal Technology or Legal Tech is basically the support and assistance provided by technology to legal professionals, law firm and clients through automation of their work. It decreases the workload and enables us to stay efficient by simplifying the most arduous and complex tasks. Most of the legal works which earlier required huge efforts and loads of time can now be done in just a blink with the minimum possible efforts.
Just like the history of computers is not very old, so is the history of legal tech. Legal tech is a very new concept with the first software being developed in the year 1973 named as ‘UBIQ’ and hence, initially people were not much aware about it. It has gained popularity very recently.
Since, legal tech itself is a very new industry, therefore, investments in this arena is also a very recently developed concept. People have started to invest in legal tech only a few years back and it is at its nascent stage. In the year 1984, it had only $2.5 million investment. Lack of popularity, trust, uncertainty and it being a new concept can be cited as the reasons for its very low investment rate. The growth dynamics of investments in legal IT startups over the past few years have not been very strong. Investors avoided making significant investments because the industry was still relatively new. The legal sector was among the last to adopt technology-driven change because it is rife with conservative attitudes and steeped in tradition. The speed at which courts, enforcement organisations, and governments operated was never designed to match that of contemporary corporations. Older rules, security requirements, and other factors made it more difficult to utilise outdated technologies, such as cloud computing.
However, with the industry growing each day, it has seen growth in overall investments. In theh year 2009, the total investments rose to approx $527.2 billion. Till the year 2015, the industry witnessed only increase in the overall rate with total investmenst being $83.5 billion. However, the industry’s upward graph turned downwards when the total investments suddenly decreased to $77.3 billion. This was the first time the industry saw a downfall.
Fortunately, in the year 2018, the industry witnessed an unprecedented growth and rose to $136.8 billion in just a single year. As per Forbes, it was a total of 713% growth in the sector and it happened to be explosive growth and the total amount of investment became greater than ever before. The industry recovered and has been making only increased profits and greater investments since then.
Later, in the year 2020, the pandemic proved to be a boon for legal tech industry as it strengthened the case for change, and legal departments will certainly continue on this path for many years to come. The pandemic sparked innovations such as e-filings, video calls, digitised documentation, automated workflows, and remote work. Legal authorities were forced by this tendency to reduce spending, reduce staff, and invest in automation. Many legal service providers increased their productivity, even with a decreased headcount. These trends are highlighted in the recently published 2021 Wolters Kluwer Future Ready Lawyer study.
The study found that CEOs who embraced technology outperformed those who relied on antiquated practises or very minor process modifications. Technology-driven businesses and divisions fared better than laggards throughout the pandemic, increasing their profitability to 47% from 28% the year before.
Legal technology was viewed as fintech’s ugly sibling for much of the last ten years, but it is now its own profitable investment sector. Instead of concentrating on hype and buzzwords, legal technology has steadily shifted toward providing comprehensive technological solutions. A lot of investors are deciding to concentrate on software products that are focused on automation, productivity, and orchestration. According to the 2021 Chief Legal Officers Survey, legal operations were the CLOs’ top strategic priority.
When it comes to legal technology, private equity and venture capital investors have been highly active. Contracts management (where 44% of businesses invested), matter management (42%), and governance, risk, and compliance technologies (37%), were the top three legal technology investment categories.
The top-tier VCs are the ones making significant investments in the legal technology sector because to the decrease in time to scale. The industry is primed for disruption by companies that are digitally native and provide lucrative investment prospects because the established legal tech firms got their start in the pre-digital age.
The influx of investors has also fueled a variety of startups, many of which offer point solutions that lack orchestration, adoption, and good integration with established companies. While many of these startups are fighting for survival, others have been able to maintain themselves as numerous incumbents have absorbed them.
As more and more people are adopting legal tech, the industry is expected to expand and rise more and more. Corporate legal departments are leading the way when it comes down to adoption of legal tech. The importance of digital and the client experience has grown, the automation of repetitive processes has accelerated, and the standard for communication and teamwork has been raised and has been expected to rise even more.
Governments and courts have also accepted the digitalized legal system. All this will lead to a significant rise in investments in legal tech sector. ‘Gartner’ has also predicted a 200% increase in legal tech spending by the year 2025.
Hence, it would not be wrong to consider that Legal technology is no longer viewed as a slow-growing, slow-selling industry. In recent times, it has found the appropriate catalysts and investor momentum, leading to numerous companies quickly becoming unicorns and garnering even more attention.
It will be fascinating to see how these trends change over the ensuing years. Blockchain, AI, virtual reality, cybersecurity, drones, and other emerging technologies must be closely monitored by investors, law firms, and businesses as they will be desirable assets to scale up, form partnerships around, and drive acquisitions for. AI and automation use cases for business clients are high-ROI projects that should be adopted for value. This could involve emphasising workflow automation, contract management, and e-discovery.
Now that these issues are in sharp relief, it’s time to quicken your digital transformation.
Go through various legal tech companies listed on our page.