Artificial intelligence (AI) promises to revolutionise the legal industry, with an extensive assortment of AI products and services already on the legal market – and even more in development.

For law firm clients, the choice of AI-based legal tech has been exciting, but for some it has also presented an overwhelming new set of decisions that need to be made.

Even among the many clients who are enthusiastic about the benefits AI offers, a large proportion of these organisations lack the bandwidth and expertise to meaningfully research and test new products, and others simply do not have the risk appetite.

For these reasons, clients are increasingly turning to their law firms to try out AI-based legal tech on their behalf.

As well asking their law firms to provide feedback on "off the shelf" AI-based legal tech, some clients are eager to be part of pilot projects to try out new solutions being tested by law firms, while others want to co-develop technology tailored to their own legal pain points.

Organisations that are already some distance into their digital transformation journey are generally well-equipped to discuss AI solutions at a sophisticated level and help spur innovative new products powered by generative AI.

Other clients, who are only just starting to explore digital transformation, might approach their legal suppliers with the intention of discussing AI, but find the conversation turns quickly to established technologies, such as document automation and process improvement.

The trifecta effect

As with any technology adoption, simply applying AI in the absence of proper operational analysis and re-design will likely lead to more problems.

To properly test AI tools for their clients, law firms need to carefully balance the right skills and experience – many of which are new to law firms.

These include process improvement specialists, data scientists, AI governance professionals and technology specialists as well as product managers experienced in developing AI tools.

They also need access to high quality external partners who can help support with building the technology.

Due to the huge cache of data most large law firms hold, together with deep legal process experience and understanding, external providers are usually keen to experiment with law firms.

The best AI-based legal tech is therefore emerging out of a trifecta of law firm knowledge and data, specialist tech providers and motivated clients.

Law firm clients have largely been the instigators of co-experimentation with AI. While many clearly see an opportunity to outsource R&D risk to large, well-insured firms that can easily absorb innovation costs, clients also trust law firms will use AI tools responsibly and only expose them to products that have been subject to stringent scrutiny and governance processes.

For their part, law firms increasingly see it as their role to be the interface between the clients and technology developers – monitoring how clients experience a particular tool, the purpose of the tool and whether it is delivering what was expected, before feeding back to the tech providers all managed within a sensible governance framework.

In most firms, this process is managed centrally by law firm's technology, innovation and legal operations leaders, closely overseen by managing partners.

Niche AI solutions are also springing up at individual practice level – a welcome sign of the entrepreneurial enthusiasm for AI-based legal tech among lawyers, but an added challenge when it comes to keeping control of firm's AI product roadmaps and centralised R&D budgets.

Sharing the benefits (and costs)

Law firms have generally been happy to test out AI-based legal tech for and with clients for 'free' (subject to the status of existing relationships) on the assumption that the rewards of these R&D exercises will more than repay the investment. This is particularly true of generative AI.

Traditional licensing of technology becomes much more complex because it goes directly to the heart of how firms charge for services that deploy AI.

Clients paying hourly rates clearly won't accept firms layering product charges or licence fees on top of their service bills for AI products which are purely targeted at efficiency gains and margin benefits.

Finding a billing model that reflects the effort and investment that has gone into developing and maintaining legal AI tools, but which is palatable and fair to clients who, after all, were essential to the development process, is a challenge that law firms will have to resolve.

AI tools that rely on legal data and knowledge will need to be continuously revised and updated, which is a legitimate cost firms can pass on to clients, provided those clients see commensurate value from these tools.

Longer term, it is possible that firms will explore turning this product testing service into an advisory function and revenue generator and indeed some already have. 

For digital transformation consultancy, firms will need to be clear about the shift from co-operative R&D with their clients to running transformation projects for clients, which is a demonstrably different service.

It will be interesting to observe is precisely how law firms charge for these quasi-tech/legal products and services.

Responsibly built and effective AI-powered legal products and services offer a new commercial vehicle for legal knowledge and data and perhaps the first genuine disruption to the traditional legal service model in decades.

Ideally, the solution will emerge via true collaboration with clients and tech partners, which is why it has been so beneficial to go on this AI R&D journey together.

A version of this article was first published by Artificial Lawyer.