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The Rise of Generative AI in the Legal Technology Market: A $50 Billion Opportunity by 2027

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The global legal technology market is undergoing a significant transformation, driven by rapid advancements in generative AI (GenAI). According to a recent report by Gartner, Inc., this growth trajectory will propel the market to a staggering $50 billion valuation by 2027. The integration of GenAI is set to revolutionise the legal landscape, bringing unprecedented levels of automation and efficiency.

The rise of Generative AI is revolutionising legal operations and lawyers are seeing an impact and statistics have improved each year but they're still a balance that needs to be found despite an expected increase in valuation in the next three years.

The Rise of Generative AI in Legal Technology

Generative AI holds immense promise for the legal sector, with its ability to streamline various processes and enhance productivity. Chris Audet, Chief of Research in the Gartner for Legal, Risk & Compliance Leaders practice, emphasises the transformative potential of this technology. "GenAI has huge potential for bringing more automation to the legal space," says Audet. "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."

Growth in Legal Technology Adoption

The adoption of legal technology has already seen significant growth in areas such as spend management, e-billing, contract lifecycle management, legal matter management, and legal document management. As legal departments strive for technology-led efficiencies, the incorporation of GenAI into these applications is expected to accelerate their adoption further. This drive towards automation is not just a trend but a necessity for modern legal departments aiming to stay competitive.

An important point to note is the increased choice in adopting legal technology to thrive as opposed to reducing staff numbers. A report recently conducted by global legal tech firm Litera highlighted six out of ten UK law firms plan to introduce technology into their processes to enhance efficiencies. Technology is evolving within the legal sector and is very much here to stay.

The Imperative for Legal Leaders

Legal leaders are now faced with the imperative to explore and adopt emerging legal technologies to meet business demands and mitigate future budgetary constraints. Audet highlights the critical need for this consideration: “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.” The pressure is mounting for legal departments to embrace these technological advancements to avoid falling behind.

Balancing Potential and Risks

While the potential benefits of GenAI are substantial, it is equally important for legal professionals to understand its limitations and risks. The technology is not yet foolproof, and outputs generated by GenAI require careful review. Legal departments must ensure that these tools are used responsibly and that the results are meticulously checked to avoid errors and inaccuracies. "It is essential to check the output of GenAI. It is not a suitable technology at this stage to complete tasks without review," cautions Audet.

Impact on Legal Department Structures

The integration of GenAI is poised to bring about significant changes in the structure and functioning of legal departments. Traditional metrics such as "billable hours" may become harder to track as legal documents are increasingly generated by AI. This shift will necessitate a reevaluation of the portfolio of legal services, the balance between in-house and external counsel expenses, and the ratio of generalist to specialist lawyers. Furthermore, talent needs within legal departments will evolve, requiring a mix of legal expertise and technological proficiency to successfully implement and leverage GenAI platforms.

Adapting to New Ways of Working

New technologies often promise more than they initially deliver, partly due to the need for adaptation to new workflows. GenAI is no exception. As Audet points out, "New technologies can fundamentally change the way legal organisations do business, and GenAI has enormous potential to do this. While at first technology can promise more than it delivers, that can be as much to do with adapting to new ways of working as it is to do with flaws in the technology."

The Lawtech Software Group has seen the challenges lawyers face when it comes to completing daily tasks and remaining compliant. Our core range of products are making a significant and enabling firms to adapt to an evolving technological sector that is creating effective workflows that are quicker and efficient.

Verify 365, our client onboarding, AML, KYC and compliance solution platform has enabled law to complete lite and enhanced checks in a much faster, more efficient way. Our innovative platform has ensured firms are practicing compliantly within the regulation guidelines but has also adopted important AI techniques especially for our source of funds checks. Combined with our Open Banking technology, advanced AI analytics enable firms to analyse financial data and identify both the source of funds and source of wealth. Crucially, for businesses, our source of funds checks ensure you can identify the Ultimate Beneficial Owner (UBO).

AI is playing a role and will continue to play a role within the legal sector as long as technology continues to innovate and grow as well as continue to have the desired impact on law firms.

A Bright Future in a Growing Market

The future of the legal technology market is bright, with GenAI at the forefront of this evolution. By 2027, the market is expected to reach an impressive $50 billion, driven by the widespread adoption of AI-driven tools. Legal leaders must navigate the challenges and opportunities presented by this technology to remain competitive and efficient. As the legal sector continues to embrace automation, the potential for generative AI to reshape the industry is immense, promising a new era of innovation and efficiency.

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