Man on three size graphs.

Two-thousand and seventeen was a big year for legal tech. As the industry begins to evolve and grow at faster and faster rates, it's more important now than ever for law firms to pay attention to make sure they're harnessing the technologies that will make the biggest impact. The most important legal tech trends of 2017 included:

1. Artificial Intelligence: It became clearer than ever this year that artificial intelligence will have a real impact on many areas of legal practice, reducing the amount of rote work performed by lawyers and freeing them to focus on more strategic issues. Machine learning, which has proven its ability to speed up processes across any number of industries (and perform certain tasks more accurately than humans) has now fully arrived in the legal profession. The ground shifted perceptibly in July, when a true standard-bearer of New York firms, Cravath Swaine Moore, signed with AI-powered Luminance to perform its contract due diligence work. Throughout 2017, AI-powered tools like Kira and Casetext's CARA continued growing in popularity and led to major deals with a number of firms, including several in the AmLaw 100.

2. Automation: In 2017, in-house legal departments demanded automation from their outside counsel to a new degree. And law firms, it appears, are getting the message. According to the Altman Weil 2017 Law Firms in Transition study, 49 percent of firms stated that they are using technology on tasks that can be automated to improve efficiency. Perhaps more significantly, a full 84 percent of law firm respondents believe that trend will be a permanent one.

3. Law Firm Investment in Legal Tech: While VC investment in legal tech may be declining, law firms are waking up to the possibilities that it holds—and putting their own money behind it. Dentons, for instance, has backed an independent accelerator, NextLaw Labs, which calls itself the first legal tech venture created by a law firm. That happened way back in 2015, but similar efforts have multiplied; this year, Orrick Herrington & Sutcliffe created an incubator called Orrick Labs, which “aims to turn lawyers' ideas about how to achieve greater efficiency into reality.” Meanwhile, other firms are trying to bake tech-savvy into their identities. After three months operating under the radar, Atrium LLP publicly launched with the stated goal of building “the technology-first law firm of the future.”

4. Legal Analytics: The global legal analytics market valued at $450 million in 2017 is expected reach $1.8 billion by 2022. This past year—a banner one for the field—witnessed the acquisition of Ravel Lawby LexisNexis and the launch of California-based startup Gavelytics. For litigators, the insights that analytics can provide into judges' ruling patterns could be a game changer.

5. E-Discovery Consolidation: In a trend that has prevailed for multiple years now, consolidation in the legal tech space—among e-discovery providers in particular—continued at a strong clip in 2017. Things tailed off a bit from 2016, a torrid year of deal-making in which there were 36 M&As or investments among e-discovery providers, the three largest of which exceeded $1.5 billion in total value. According to Complex Discovery's tracking, in 2017 thus far there have been 23 mergers or investments. That is still considerable activity, and it may be driven in part by clients' preference for “one stop shops” providing comprehensive e-discovery services. Also playing a role, no doubt, is the fact that acquisitions offer a way for private equity-backed e-discovery providers to maintain strong growth rates in the maturing e-discovery market. You can question whether rampant consolidation in the e-discovery area is a good thing—and some do—but it does not appear to be letting up.

6. Law Firm Consolidation: There were 85 mergers involving U.S. law firms in 2017, according to Altman Weil data—just six shy of the all-time record set in 2015. The full implications of this consolidation for the legal tech industry won't be known for some time. Continued pricing pressure from corporate clients, however, along with firms' need to differentiate themselves in a competitive market, are likely to drive increasing interest among large law firms in technology that can help them serve clients with maximum efficiency.

It's been a busy 2017 in legal tech, and there's no doubt that the industry took significant steps forward over the last year. Going into 2018, it will remain vital for legal tech providers and law firms alike to closely watch the trends shaping it. Those that do will be quicker to spot opportunities that come along.

 

Jake Heller is the founder and CEO of Casetext. Before starting Casetext, Jake was a litigator at Ropes & Gray. He's a Silicon Valley native, and has been programming since childhood. For more information about CARA, Casetext's AI-backed legal research assistant, visit info.casetext.com/cara-ai.