UK law firm leaders and their clients see efficiency and profitability gains through data and AI

March 29, 2024

As expected, artificial intelligence (AI) dominated the conversations at the 9^th Annual Sandpiper Partners UK Law Firm Profitability, Pricing & AI Conference. Nick Morgan, Chief Technology Officer, Williams Lea, joined a panel of top leaders of law firms in the UK including COOs, heads of technology and innovation, heads of pricing, and law firm clients to discuss a wide range of paramount topics, including: the benefits and challenges of AI adoption, data-driven decision making and how law firms and their clients should collaborate to drive change and find common ground on legal fees and services. Here are the top three takeaways from the conference.

Law firms and clients will need to collaborate differently to avoid a clash over AI related efficiency and cost benefits

Law firm clients shared their views on AI and its impact on the legal profession. One of the panelists, a COO of the legal department at a large international investment bank who is also a major client, expects law firms and alternative legal service providers to use AI to be more efficient and pass those cost savings on to their clients. “What do I expect from my mind? I’m a [Legal] COO, so let me put it out there: cheaper costs.” They continued, “If you’re using AI, I want to know how you are using it, how it is saving you time, and have you passed that onto me. I think that we need to be more efficient and for the first time in probably a long time, I think this gives us an opportunity. But rather than just cut partnerships, we want to work together as there are advantages to be made. I think it’s going to assist the work we’ve done and augment the work you (the law firm) do to be more efficient.”

On the back of this, two of the other panelists, who provide consultancy services to law firms, agreed that there could be a clash over AI-related efficiency gains and costs, as law firms may see investment in AI technology as a huge upcoming expense that they need to cover by raising their prices. He suggested the best way to avoid this conflict is to have a dialogue and a partnership with the clients, “The collaboration piece for me is one way it comes down to in the relationship. This idea of partnership between the client and the law firm is critical.” Said one of the consultants on the panel, “How do you understand what’s going on internally within your clients’ organizations unless you spend the time with them and understand they have huge challenges they have to overcome. They are having to do more work with less resources. So, AI brings a fabulous opportunity.”

Law firms must adopt a data-driven approach to improve efficiency and profitability

The panel also focused on how financial discipline makes a difference and highlighted the disconnect between lawyers and budgets, and the need for managing the business side of law firms. The panelists, comprising top COOs and chairpersons at leading law firms, emphasized the importance of using data to track costs, budget and scope of work, and leveraging AI and new technologies to reduce costs. “It is an educative and cultural change,” said a COO of a leading law firm on the panel. “We started with a pilot, and now we use data to help us have this conversation with our clients around scope, and around phasing, and we’re having the research piece on the front end. The lawyers now see how brilliant it is. Margins have improved and we are now managing inputs much better. There are no surprises with clients because they are able to have that data available in real time. We are taking a much more data-driven approach.”

“What we’re really talking about is efficiency.”

Another law firm COO said, “How efficient are we? Every step of the way, we should be challenging ourselves. How can we be more efficient, how can we do more with less? Can we do what we do better? And I think that’s the more positive way of looking at things.”

Law firms need to invest in AI-enabled technology now, or risk falling behind the competition

The integration of AI into legal applications raises ethical and practical challenges. However, technology and innovation leaders pointed out the growing importance of AI as a practice, and agreed that there is an even bigger risk if law firms don’t invest now in new technologies.

One of the panelists, a Head of Technology at a leading UK law firm said, “The pace of change is really significant. No one really knows where this is going to take us in two years’ time. What we do have is a choice: you either get on that journey, and be there in two years’ time, so your lawyers and your business professionals are able to adapt and use the more sophisticated tools that will be available, or you don’t. I think the biggest gain is to have an adaptive workforce that’s resilient to future changes. There’s a big risk that if you don’t invest early as an organization, you can’t adapt.”

The panelists also provided some insight into how they are currently using AI in a variety of ways, including document analysis, contract drafting, and legal research. However, the panelists agreed that law firms are still in the early stages of AI adoption and that the focus should be on understanding the appropriate use of each tool for different tasks.

Nick Morgan, Williams Lea CTO, emphasized the importance of using the right tool for the right task, “What we have at Williams Lea is our automation and AI center of excellence. Being a service provider of business processes, operational excellence is key to that. Our key driver is to use the right technology for the job by taking an AI and automation-first approach. We are having conversations with our law firm clients about generative AI, but robotic process automation, for example, still has a role to play in improving efficiency. We also partner with our clients to understand what’s acceptable for them and what’s not in terms of information security, business risk, and compliance, so we can ultimately build a customized solution that drives a faster and better service, and will ultimately help law firms drive profit and become more scalable and flexible.”

If you are interested in learning more about what operational leaders at UK law firms are expecting for the year ahead, download our latest industry snapshot from our Legal Operations and Administration Forum (LOAF), What UK law firm leaders expect in 2024.