GenAI Continues to Spark More Growth in the Legal Technology Market

It’s no secret that legal technology has been on an incline in recent years. However, recent studies indicate that the industry could experience another sizable spike in growth thanks to the advancements taking place in Generative AI (GenAI) technology.

In this guide, we will cover some of the newest data about the connection between GenAI and legal technology and explore how legal departments should go about handling the changes that come with the adoption of GenAI.

Gartner Forecasts GenAI-Based Growth for Legal Tech

According to a study published by Gartner, GenAI will accelerate the growth of the legal tech industry, pushing the market to reach an astonishing $50 billion in value by 2027. In 2023, the market was valued at $29.54 billion. If the Gartner report proves true, the market will see an increase of 69% over the next few years.

As GenAI tools become more advanced and more accessible, they will increase the number of use cases for legal tech, ultimately leading to the development of more legal-focused tools that employ GenAI. The interplay between these two rapidly growing markets has set the stage for a revolution in the way legal departments carry out their duties. We can expect to see changes in everything from e-billing to contract lifecycle management (CLM).

How Will GenAI Impact Legal Tech?

So, we know that GenAI will push legal tech into a new stage of growth. But, what will that growth look like? What are the potential benefits we can expect from legal tools that use GenAI? What are the flaws and challenges legal departments will have to overcome as they begin implementing these tools?

Let’s explore some of the possible answers to these questions.

Potential Benefits

Legal tools that use GenAI have a wealth of potential benefits for legal departments that can help with everything from speeding up contract cycle times to reducing unnecessary costs.

One of the primary advantages of GenAI is its ability to automate routine tasks. By using AI-driven tools to sift through large volumes of legal documents, legal departments can significantly reduce the time spent on these labor-intensive activities. This not only speeds up the process but also minimizes the potential for human error. Some common examples of automated tasks include document review and contract analysis.

Additionally, GenAI can enhance research and reporting by providing sophisticated search capabilities that go beyond keyword matching. AI algorithms can understand context and semantic meaning, offering more relevant and comprehensive results. This enables legal professionals to quickly find pertinent documents in the company’s contract repository, thereby improving the quality and depth of their legal analysis.

Contract management is another area where GenAI can make a substantial impact. AI can assist in drafting, reviewing, and managing contracts by identifying potential risks, ensuring compliance with regulations, and suggesting clauses based on historical data. These automations help streamline the contract lifecycle all the way from creation to execution.

Furthermore, GenAI can support predictive analytics, allowing legal departments to track important metrics and forecast financial changes like spend. Tools can tap into past data from contracts and reports to provide insights about how resources are being used and the success rates of various processes. These insights can then help legal professionals make more informed decisions that enhance the efficiency of the contract process and save resources.

Internal communication and support also benefit from GenAI through the use of chatbots and virtual assistants. These tools can field common inquiries, provide updates on the status of a contract, and even offer self-service contract capabilities through a series of prompts, freeing up lawyers to focus on more complex tasks.

Flaws and Challenges

GenAI is far from perfect, and legal departments must contend with the current flaws, challenges, and limitations it presents when they use AI-driven legal tools.

A significant challenge for GenAI tools is the issue of accuracy and reliability. Despite advancements, AI systems are not infallible and can produce incorrect or biased results. In legal contexts, where precision and fairness are paramount, relying on flawed AI outputs could lead to serious legal missteps. The inherent biases in training data can also perpetuate systemic biases, leading to skewed results.

Another concern is the lack of transparency and explainability in AI decision-making processes. Legal professionals need to understand how the AI produces suggestions to ensure its compliance with legal standards and ethical guidelines. The “black box” nature of some AI algorithms can make it difficult to control these outcomes. That’s why it’s important to work with vendors who will be upfront and communicative about the way a tool works.

Data privacy and security pose additional challenges. Legal departments often handle sensitive and confidential information, and integrating AI tools necessitates stringent data protection measures. Any breaches or lapses in security could have severe legal and reputational consequences, so legal departments must make sure the tools they use will protect the privacy of the company.

The implementation and integration of GenAI into existing workflows also presents practical difficulties. Legal professionals may face a steep learning curve and require training to effectively make use of a new tool like a CLM. Moreover, the cost of deploying sophisticated AI systems can be prohibitive for legal departments with smaller budgets, which is why it’s essential to first build a business case for a legal tool that will win backing from executives.

How Should Legal Departments Handle GenAI?

The adoption of GenAI and tools that use it will be a major undertaking for many legal departments, especially those that are understaffed or don’t already have a lot of technology in place. Some legal leaders may be hesitant about the use of GenAI, but the fact remains that outright refusing to adapt to these new tools could mean leaving resources on the table.

In recent years, executives have begun to demand more from legal leaders. There is an expectation for legal departments to not only meet the demands of the business, but also contribute toward larger business goals. They must be able to show proof of their contributions in the form of tangible data that demonstrates revenue, cost savings, and more.

Adopting tools that use GenAI could help legal leaders showcase the value of the legal department in more tangible ways. AI tools allow legal professionals to access and process a larger amount of data which can then be used essentially to make a business case for the importance of the legal department as an entity within the business. Legal departments that fail to take advantage of this opportunity could face issues in the future.

For that reason and the multitude of other benefits we already discussed in the sections above, it’s important that legal professionals approach GenAI with an open mind. The technology isn’t yet at a point where it can operate on its own without monitoring and input from humans, but it is situated to make the lives of all legal professionals significantly easier when used correctly.

So, with that open-minded approach, legal departments must also be aware of the limitations and risks that come with using GenAI. Since the technology evolves so rapidly, it can feel difficult or overwhelming to stay on top of the most recent changes. However, one of the best ways to get to know how a tool works is to get your hands on it yourself. 

By slowly implementing legal technology tools that use GenAI into the various pieces of the legal organization within the business, legal professionals can gain a better understanding of how the tool works, what its current limitations are, and how to work around those limitations. Backed by that knowledge, they can then continue to develop new use cases for the technology that make the most sense for their organization.

All that being said, legal departments should be prepared to make significant changes when implementing a GenAI tool. You may need to spend time first fixing any broken processes and restructuring workflows. Even after the tool has been implemented, it may have unexpected impacts on the way the legal organization operates, leading to even more restructuring.

Throughout the implementation process, legal departments must keep in mind that new technology always brings about change. Rather than allowing employees to become caught up in the minutiae of the changes that occur, try to direct attention toward the promising future that a new tool as exciting as GenAI presents.

Navigate Your AI Journey with Koho Consulting

Still feeling overwhelmed by the prospect of implementing an AI-based legal tool? Koho Consulting is here to help! Our experts have led over 150 companies to success on their digital transformation journeys. We will prepare you for every part of the implementation process, from extracting and migrating data to getting ready for a tool to selecting a vendor. We’ll even stay with you after your tool goes live to make sure everything keeps running smoothly!

Book a call today to learn how Koho Consulting can help you find the right tool for your team so you can take back control of your legal and contract processes.