“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”
Charles Dickens, A Tale of Two Cities
Two recent studies, one by LexisNexis and one by LawPay-MyCase, looked at the use of AI and Gen AI at two ends of the legal market. The LexisNexis study, entitled 2024 Investing in Legal Innovation Survey, looked at very large law firms and businesses. LexisNexis talked to 266 managing partners and c-suite leaders at AmLaw 200 law firms. LexisNexis also spoke to 50 legal professionals at Fortune 1000 companies and large law firms outside the AmLaw 200. The survey was done between December 6, 2023, and January 9, 2024, so it’s pretty recent.
The LawPay-MyCase Survey, entitled Legal Industry Report 2024, looked at the other side of the market. This survey was of more than 2600 legal professionals at smaller firms. 44% of which were solos, and the rest were primarily from firms of less than 20 lawyers. Like the LexisNexis Survey, it was conducted relatively recently during August and September 2023.
Use and Familiarity
Half of the AmLaw 200 firms surveyed by LexisNexis reported having already purchased Gen AI tools (only 20% of the larger firms outside of the AmLaw 200 had).
The larger law firms and companies surveyed are using Gen AI tools (close to 50% for both). Quite a few of these firms and companies will have a dedicated budget for legal AI tools in 2024. But of those, most will spend only 1% of their total revenue on them.
Of the smaller firms surveyed by LawPay-MyCase, 73% confessed to having at least some familiarity with AI. Solos seemed to have a slightly higher level of familiarity than those at the larger firms surveyed. However, the bigger firms had a slightly higher level of interest.
Across the board, though, those surveyed reported that they were not personally using Gen AI (73%) for work purposes. Most of those not using reported that their firms had no specific legal Gen AI software as of yet. (66%). Only 3% said their firms had adopted public tools like ChatGPT (probably a good thing). However, 55% of the firms stated they had plans to adopt additional GenAI tools; 45% were unsure or had no such plans.
Not surprisingly, then, AmLaw 200 firms are ahead of smaller firms in using GenAI tools. This disparity could be attributed to the firms’ greater resources, increased sophistication, and handling of more complex matters, or a combination of all three. Suffice to say, as we have frequently seen, the rich get richer when it comes to law firms.
Use Cases
Both Surveys looked at the uses the firms were putting GenAI tools to or what they thought the tools could be used for.
When the LexisNexis respondents were asked what they thought GenAI could be used for:
- 55% said legal research (despite the horror stories of lawyers getting in trouble for using ChatGPT to do their work for them in this regard).
- 52% said document summarization
- 39% said document drafting
- 31% said contract drafting (I am not sure how the survey distinguished between document drafting and contract drafting
- 31% said contract analytics (although this was the number 1 choice by companies)
- 28% said conducting due diligence
The LawPay-MyCase respondents viewed GenAI use cases slightly differently:
- 58% said they used it for brainstorming
- 55% said they used it for drafting correspeonace
- 46% said they used it for general research
- 42% said they used it for drafting documents
- 39% said they used it for drafting templates
- 38% said they used it for summarizing documents
The most significant disparity between the very large and very small firms is in summarising documents and contract analytics. But those disparities may be due to the different types of work and clients between the big and small firms.
Small firms, by a considerable measure, see GenAI as a tool for brainstorming
The most interesting finding is that small firms, by a considerable measure, see GenAI as a tool for brainstorming. The very large firms, on the other hand, do not even mention that use. Whether that lack of identification by the large firms is due to that option not being provided by the LexisNexis survey or because lawyers in large law firms “brainstorm” in other ways is unknown.
Concerns
The biggest concerns among the very large firms about using GenAI were what you would expect: trustworthiness, quality of current solutions, and hallucinations. Only 25% of those surveyed trust Gen AI for legal work.
The concerns of the very small firms as reflected by the LawPay-MyCase Study:
- 52% said lack of knowledge of the technology was the main impediment
- 39% identified ethical issues
- 39% said a lack of trustworthiness
It’s not particularly surprising that the large firm respondents didn’t mention a lack of knowledge as an issue. It is a bit surprising that the large firm respondents didn’t mention ethical issues. Perhaps not mentioning both issues identified by the very small firms reflects a greater awareness and understanding of GenAI tools among the bigs.
The Future
Some interesting findings from the LexisNexis Study:
- 47% believe GenAI will decrease their costs
- 30% think it will increase revenue.
- 43% think it will reduce billable hours
- 20% somehow believe it will increase firm revenue.
- 27% of the really big firms think they will need to hire more technologists in 2024, and
- 1 in 5 AmLaw 200 expect a reduction in the need for associates in the future
Solos and small firms, on the other hand, saw things a little differently.
Solos and small firms, on the other hand, saw things a little differently. Of those who had used GenAI, 81% said it had increased their productivity and efficiency. And many respondents who used the tools said they used them frequently.
And, like the bigs, many of the firms in the LawPay-MyCase Study believed using Gen AI would save them costs. The cost smaller firms believed the cost savings would come from the replacement of job functions or the elimination of administrative jobs. Unlike the big firms, however, only 2 % thought it would allow them to replace a lawyer.
Large firms are thinking about what new lines of business and billing opportunities GenAI tools may provide.
Business Planning
According to the LexisNexis Study, large firms are thinking about what new lines of business and billing opportunities GenAI tools may provide. The larger firms are interested in using the tools to pursue work previously considered unprofitable and flat fees or billing by the task v. by time. The firms are also focusing on greater efficiency for existing services.
Among the large firms, 70% think GenAI will enable them to do more “value-added” work for their clients. Having said all that, only 11% think that their billing practices will change as a result of GenAI.
(By the way, when the executives at the companies were asked about the impact, you got a different picture. 76% believe GenAi will decrease costs for their department, and 72% think it will allow them to do more work in-house. And 80% expect to see reduced legal fees from their outside counsel. Another disconnect: 2/3rds of companies approve of the use of Gen AI by outside lawyers. But only 1/3rd of the outside lawyers think their clients will approve their use. I have written about this kind of disconnect before).
The smaller firms studied by LawPay-MyCase have perhaps a little less opportunistic view. According to the Study. “there was also a lot of uncertainty regarding the path to Gen implementation” among the respondents. 74% said they had not yet adopted AI tools and were unsure when (and perhaps even if) they planned to do so. 45% of the respondents were unsure what their firm’s plans were.
Interestingly, when asked about technology adoption in general, 44% said it was too time consuming to learn about new software, 33% said there was a lack of need, and 28% said there was a lack of information allowing them to evaluate the option effectively. In short, they are overwhelmed. Cost was not specifically mentioned.
A Tale of Two Cities
The two studies show some key differences between how the very large and small firms view GenAI and its use. The bigger firms see some business opportunities, while the very small firms appear to be much more cautious in their approach. Use cases and concerns about use also differ.
The two Studies confirm what I have previously discussed: the legal market is far from monolithic