Generative Artificial Intelligence (Generative AI) is a groundbreaking technology that is fundamentally changing how legal tasks are performed and disrupting the conventional relationship between law firms and clients.
It is probable that the generative AI will significantly change corporate legal departments and law firms in profound and distinctive ways within the next ten years, despite the remaining uncertainties.
AI generative’s present influence in the legal industry
Generative AI is currently being utilized in the legal field by various corporate legal departments and law firms, who are exploring a range of tools from ChatGPT to enterprise-focused solutions like Copilot and Microsoft.
The experimentation phase is transitioning into a strategic planning stage, including the development of policies and procedures to govern the use of generative AI in the legal field, indicating an anticipation of significant upcoming changes.
Seventy percent of legal professionals anticipate that AI and AI will significantly change the legal industry in the next five years, surpassing other factors like economics, regulation, and ESG, as per the Thomson Reuters Future of Professionals report.
The legal sector experiences three waves of transformation.
First phase: incorporation and creative AI testing
The initial stage of change is currently in progress, as generative AI is being increasingly utilized and tested in legal departments and law firms of different scales.
Over the next three years, the legal industry is anticipated to gain improved and advanced generative AI tools for a shift from testing to actual use.
Initially, these technologies will first be used in back-office and support roles, aiming to enhance cost-efficiency and minimize the necessity of recruiting new staff.
Initially, generative AI will focus on non-fatable functions, but as technology advances and can handle more intricate tasks, its influence will broaden to different domains.
Corporate legal departments will start demanding quicker and more efficient results from their external providers within three to five years, leading to changes in the business model.
Changes in the legal business model are occurring in the second wave.
The legal sector’s business model is anticipated to undergo substantial changes in the second wave of transformation, projected to take place within three to five years.
AI enables legal tasks to be performed efficiently, prompting law firms to reconsider their billing models to distribute the cost savings from advanced technology.
Large law firms will aim to boost their earnings by assigning their staff, including junior members, to more valuable tasks in light of these developments.
The AI can standardize repetitive tasks that were previously unprofitable. Small and medium-sized offices can utilize generative AI to grow their businesses without hiring more staff, meeting new market demands.
Automation and disintermediation represent the third wave.
Between five and ten years from now, the third wave of change will involve increased automation in legal services, possibly leading to a reduction in the need for legal professionals.
The AI will be capable of managing more intricate tasks as legal professionals oversee and strategize, leaving the routine work to the AI.
Some customers may choose to rely on technological solutions to address their legal needs, bypassing law firms due to the rise of automation.
This position will enable the development of self-help legal options, improving access to justice in underserved areas. Law firms must adapt by integrating AI and human expertise to provide services that align with the tech-savvy expectations of clients.
The application of generative AI in the legal field.
Generative AI adoption and impact will differ based on the size and type of legal firms.
Corporate legal departments
Corporate legal departments are leading in the market due to their advanced technology capabilities and extensive access to data, which can revolutionize their organization and daily output.
Junior positions in legal teams are expected to be automated first as organizations deal with cost pressures, leading to a shift in team composition.
Big legal firms
Large law firms can utilize their technological resources effectively to implement AI-powered tools and capture new work opportunities, gaining a competitive edge in the market by leveraging niche data.
Small and medium-sized businesses
Medium-sized legal practices will utilize artificial intelligence to streamline routine duties, enabling them to grow their operations without requiring additional staff.
Small businesses can utilize generative AI to attract new clients by automating tasks previously done by entry-level employees, enabling them to grow their customer base without adding more staff.
The generative AI is changing the legal industry’s future, leading to significant changes in how legal services are delivered, priced, and used.
Law firms and corporate legal departments should start getting ready for these changes by embracing new technologies to stay competitive in today’s tech-driven market.
In the upcoming post of this series about AI in Law, we will discuss the definition, significance, potential benefits, and drawbacks of AI in legal research. Stay tuned!
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