Legal tech was advancing before the pandemic but looks set to increase.

The COVID-19 pandemic has had an unprecedented impact on businesses of all sizes and across all sectors. In the legal sector, many firms were forced to move their operations from their corporate office to remote working in the space of just a few days.

As a result, what would have taken years of planning – proper project management, definition of objectives and risks, purchasing laptops and tablets, updating and enhancing IT security for remote working, moving to cloud-based solutions – took place across an entire industry in just a matter of weeks.

But the legal industry's evolving use of tech was well-advanced even before Covid-19 induced lockdowns, and it's not only remote working technologies that need to be considered. Workflow management platforms were in widespread use years before the global pandemic sparked broader conversations about the future of work, leaving many law firms to ponder how they can best pursue – and accelerate – their plans for digital transformation.

Fortunately, the legal industry has a rich legal technology sector that can help to modernise and increase efficiency in casework, contract management, and security, to name a few.  While most large law firms are well-equipped to deal with the changes that will be needed to cope with Covid-19, the least technology savvy – the medium and small sized firms, plus chambers and other more traditional areas of the legal market – will need to embrace these technologies very quickly.

Some technology solutions are provided by new market entrants who are intent on disrupting long-established business models, and others by incumbent legal services providers who are transforming their operations to maintain profitability and relevance. Some have even been incubated within law firms themselves.

While some aspects of the legal industry are highly bespoke, many tasks are fairly repetitive: technology can drive efficiency and automation in these areas. Rapid advancements in AI, machine learning, and NLP have accelerated this shift. Combined with greater data processing power, this means that legal tech solutions are increasingly carrying out aspects of the routine tasks previously performed by paralegals and junior lawyers, such as contract drafting, legal research, and contract review. The move of many solutions to the cloud has also made the deployment of solutions easier, bypassing law firms' lack of internal tech expertise.

The value that legal tech can offer goes far beyond basic administrative tasks, however. Over the years, there has been a significant rise in the number of documents lawyers must review for their clients, as well as a growing compliance burden from external factors such as regulatory change (e.g. MiFID II and GDPR). When it comes to gathering case evidence in legal disputes, for example, the growth of email volume has exponentially increased law firms' review requirements, leading to increasingly sophisticated predictive and prescriptive e-discovery solutions.

At the same time, the electronic delivery of core service propositions, provided through web-based platforms and mobile apps, not only improves service quality, but also drives down prices through cost efficiencies. This change is being accelerated by the increasing client resistance to billing  by the hour (and the perception that this incentivises inefficiency) and the push for fixed fee or other alternative pricing arrangements – which encourage greater efficiency in the firm's own operations.

Some solutions, for example, might negate the need to provide basic client updates via phone or email, which can be both time-consuming and costly. As a result, these solutions can simultaneously help to drive cost efficiencies, reduce human error and free up highly-trained employees to focus on the activity most valued by their clients: applying human knowledge and judgement.

The day-to-day applications of legal tech represent only half the story, however. In the post-Covid-19 environment, firms will also need to rethink how physical courts will operate and consider the repercussions of social distancing and travel restrictions. Without a doubt, new solutions will emerge to address these areas as well.

In fact, Cloisters Chambers is already running a pilot initiative using remote video conferencing to deliver multi-party settlement meetings and mediations. In reality, the pandemic has eradicated much of the scepticism surrounding video conferencing, so if pilots like these are successful, we will no doubt see other firms follow suit.

With so many benefits on offer, it's no surprise that there has been a rapid uptick in investment to legal tech companies. Even before the pandemic, investment in legal technology had jumped in the last few years, with start-ups receiving £61m in investment in 2018 compared to just £2.5m in 2016. As a result, the UK is quickly becoming a significant legal technology hub, with 44% of all legal tech start-ups across Europe now based in Britain.

Moreover, as the legal tech market continues to mature, technology is likely to become an increasingly important catalyst for deals within the UK legal services market, as well as a critical enabler for successful completion and post-acquisition integration.

For all these reasons, the legal tech sector will be one to watch in the months and years ahead – not only for investors, but also for the firms that can use this technology to adapt their services to this 'new normal' whilst also reducing costs. For these firms, the message is clear: legal technology will not only enable them to survive in the post-Covid-19 landscape, but also to thrive.

Daniel Domberger is managing director at Arrowpoint Advisory