Driving change in the legal services sector: Artificial intelligence and automation

Last week Slaughter and May took a 5% stake in Luminance, a due diligence artificial intelligence firm.  This is the latest in a wave of technology investments being made by top-tier law firms, and provides further evidence that technology, and in particular artificial intelligence, is rising to the top of the strategic agenda. This investment, and its consequences, will have a distinct impact on the how, where and what of future legal work. 

Much current debate centres on the impact artificial intelligence advancements will have on legal headcount. Deloitte estimates that 114,000 jobs in the legal sector could be redundant by 2020 in England and Wales. In an alternative reading, the Warwick Institute for Employment Research estimated that 25,000 extra staff would be needed in the legal services sector between 2015 and 2020 as new jobs, such as legal technologists, emerge and legal services become more affordable, thus increasing demand. The truth is likely to be somewhere in-between.  

If process driven work can be automated without a risk to quality, it will be, and clients will demand it. Indeed, a study by Oxford University on the future of employment, estimated that there was a 94% probability of Paralegals and Legal Assistants being automated. In response, real estate will have to be increasingly flexible and adaptable to future changes in headcount.

For lawyers, specific activities within the work flow will be automated as opposed to entire roles (The same Oxford University study estimated that there was a 3.5% probability of lawyers being replaced by machines). The data provided by artificial intelligence will enable lawyers to focus on higher value work. The result will be a new workforce, requiring a different real estate product.  The core in-house team will be much more focused on client-centricity, project management and innovation, bringing human skills that a machine cannot replicate or replace. It will consist of an increasing number of legal technologists and data analysts. It is these very skills that will be in highest demand across all industry sectors, pitching law firms into an ever intensifying war for talent.  

In response the legal office must adapt. We are already seeing a clear flight to quality office space. Greenberg Traurig acquired space in The Shard, SE1, while Freshfields Bruckhaus Deringer is moving to 100 Bishopsgate, EC3 in the City Core. Outside of London law firms are acting early to secure space in the latest top quality city centre developments.  These include Irwin Mitchell and DLA Piper signing up to One St Peters Square in Manchester, Blakes Morgan relocating to One Central Square in Cardiff and Pinsent Masons securing space at 55 Colmore Row, Birmingham. 

More law firms are moving to Activity Based Working with a focus on health and wellbeing, giving the employee the choice of how and where they work. CMS created a modern and collaborative workspace at its Cannon Place HQ; the workspace is designed around clients and defined by sectors with practice-based teams working in an open-plan environment. The workspace includes innovative technology, allowing for total mobility. 

The race to be the front runner in artificial intelligence will put innovation at the heart of the organisation, requiring cultures and real estate that drives collaboration and co-creation. While some law firms are remaining in a cellular environment, there is a move to a more flexible, collaborative, client-centric and efficient space.  Allen & Overy recently announced the opening of Fuse; a dedicated tech innovation space at its London offices, Reed Smith has established dedicated innovation space at its London and New York offices, and DAC Beachcroft has created an innovation lab in its Birmingham office. 

Outside of traditional players, the rise of technology is spawning a new breed of legaltech companies who are more footloose.

It is clear that in order to future-proof themselves, law firms must respond to the technology that is impacting the legal services sector and the opportunities that it presents. They cannot simply stick with the status quo, and investment is required, along with the right real estate product if they are to remain resilient and competitive.  The disruptive force of technology is just one driver of change in the legal services sector.  

To understand how this and other influences will shape the future of legal services, read our latest report: Legal Services Sector Profile: Your Future, Now