Icertis has published a co-sponsored report by the Blickstein Group (registration required) written in collaboration with Deloitte. The report is titled “The Evolving Legal Service Delivery Model: Generative AI is Already Changing Expectations” and is based on the 2023 Law Department Operations (LDO) Survey, now in its sixteenth year. Demographic details of the survey were unavailable, though the responses came from operations leaders across the US.
The key finding is that generative AI is set to play a key role within legal operations, helping to address financial challenges, business process improvements, long-term strategies, and technology adoption. 85.1% of legal operations professionals believe that most law departments and most law firms will be using generative AI substantially in the next three years.
That statistic is not a reaction to the hype but more carefully considered, with 66.7% believing its use will bring more work in-house and 70.2% believe it will lower legal spend. The survey respondents are already using generative AI and seeing the benefits. 87% of respondents noted that generative AI is either already having an impact on their operations or will in the next 12 months. 35.8% said that it has already impacted budgets and resources.
The report is 33 pages long and contains a good mix of analysis, data points and data visualisations from the survey. It is broken up by commentary from various thought leaders from the different sponsors, including a section by Bernadette Bulacan, Chief Evangelist at Icertis. She makes some insightful insights into the approach that LODs should make when considering generative AI solutions. She comments, “What I am saying is legal operations teams have a massive job ahead of understanding how generative AI works so that their legal colleagues can use it safely and with confidence.”
Generative AI and contract management
Unusually, this report does not have a definitive structure around the data, but it works nonetheless and provides insightful commentary and analysis around the findings. While the “Lead Story“ is around the use of generative AI, there is far more within the content. While 63% of legal operations professionals are encouraging their law firms to use generative AI, 10% forbid it, and 28% discourage it. It infers there are some notes of caution about how firms will use generative AI going forward.
There are concerns about its use still, with only 1.9% of respondents always using it for pre-execution contract management. It is the only use case (of 7 listed) where any firms always use generative AI.
Kiran Mallavarapu, Executive Vice President & Senior Manager, Legal Strategic Services at Liberty Mutual Insurance, reflects the concerns, saying, “By harnessing the power of generative AI, legal professionals can focus their energy on higher complexity and high-risk tasks, providing better quality services to clients and fostering innovation.
“However, concerns regarding bias, errors, data ownership and privacy require careful management of the implementation and testing of generative AI tools and technology. The industry must balance the productivity and consistency generated with the mitigation of risks.”
While the early adopters are few, several LODs are considering using generative AI for Pre-execution contract management (67.3), Post-Execution Contract management (66.6%) and Document/Contract assembly (75%). What is surprising is that while 23.1% are sometimes using generative AI for document management, 25% are never using or even considering using it. When this survey is run next year, it should be interesting to note the changes.
There is still considerable discomfort about generative AI tools, with 11.1% very uncomfortable and another 25.9% uneasy about them.
What else is in the report
The report also notes how law firm rates have changed over the last years, with 89.5% increasing rates 31.8% by more than 5%. 84.5% of respondents also expect further increases in the coming year. One factor in that increase might be the use of outsourcing providers, including the big four; 55.1% are using outsourcing providers, up 14.4% from 2022.
The report also takes a look at technology use. It found that 33% still feel they do not have access to appropriate technology. This is up from 21.3% in 2022. The report fails slightly without a qualitative element, though the authors postulated that it might be because LDO professionals are raising their standards or are due for a tech refresh. It could also be with the rapid emergence of generative AI; there is uncertainty about this new technology.
The report has a fascinating section about what metrics LODs track. The most common were outside spend (93.9%), Cost Savings (77.6%) and Timekeeps rate and hour data (77.6%). Perhaps surprisingly, for professional services organisations, internal performance/utilisation was the lowest at 14.3%. For any other PSF, this would be the highest.
Enterprise Times: What does this mean?
The report is a worthwhile read, if at times, a bit eclectic in its approach. There are a large number of data points that legal professionals will find interesting, and most of the sponsor content is thought leadership rather than a product pitch and asks questions of the reader.
There is little doubt that the legal industry is on the cusp of great change with the emergence of generative AI and the maturation of its functionality within contract management from firms like Icertis. the big question is what will it use generative AI for within legal processes? There does not appear to be complete trust in AI yet. That is a question for next year’s survey around the amount of trust LODs and legal professionals have in generative AI.
As Bernadette Bulacan, Chief Evangelist, Icertis, noted, “Legal professionals have an opportunity not only to establish policies for AI use but also to assert their leadership by embracing generative AI to address financial challenges, improve efficiency, and create greater value while upholding compliance standards.
“The opportunities stemming from generative AI are apparent, particularly in contract management, which is ripe for enabling enterprise-wide transformation. Icertis provides a significant advancement in contract-driven operations through AI by tapping into contract data to create more revenue, bigger savings, and less risk.”
The full report is available on the Icertis site here.