Most market commentators agree that 2023 will see continued and increasing volatility, with many forecasting another global recession. Focusing a little more locally, Ireland is exposed to this volatility in some areas, but is insulated in others.
This broad context matters because it is important to remember that the legal sector does not exist in a vacuum.
Lawyers, both those that work in-house and those that work in private practice, will be facing the future with a mixed outlook. This is because it is their areas of specialisation, and the industries that they work in, that will have the greatest impact on their short-term prosperity.
For example, in 2010 (a couple of years into the last recession) a specialist in property law would have been far less optimistic on their upcoming prospects than a lawyer specialising in technology. Likewise, the last few years (at least in Ireland) have been a boon for data privacy experts and those working in aircraft leasing.
Like with most periods of volatility, we’re heading for a two-speed market, with winners and losers.
Below, we’ll examine who will be the winners and who will be the losers in the Irish Legal Market in 2023.
What challenges are facing the legal industry in 2023?
In addition to the new issues posed by market volatility, many of the challenges facing the legal industry in 2023 are the same ones they have had for past couple of years. Although, in 2023, the urgency is much greater.
Most of these challenges are related to difficulties in coping with transformation. The legal industry, which is famously deeply rooted in tradition, is being forced to rapidly modernise. The covid pandemic was an accelerant for many changes, but the drive for better ways of working had already begun before we all got an enforced crash-course in epidemiology.
The introduction of Artificial Intelligence
This increasing role for technology in legal departments is something that we expect not only to continue in 2023, but to accelerate. And the elephant in the room, here, is Artificial Intelligence.
The predictions made in the rest of this article are ones that we have a high degree of confidence in. Whereas gauging how much disruption AI will cause, is substantially more difficult. Part of the reason for this is that significant breakthroughs in AI have really only come to wider attention in the past few months.
Take ChatGPT for example. It’s a tool that is really only in its testing phase, but it has shown us something that wouldn’t have seemed possible barely a year ago. For those who don’t know, ChatGPT describes itself as “a natural language processing model developed by OpenAI. It is based on the GPT (Generative Pre-training Transformer) architecture, which uses unsupervised learning to pre-train a model on a massive amount of text data.”
We’ve used the phrase “describes itself” here because that is exactly what it said when we asked it to describe itself.
So, in case you were worried that AI was coming for your job, you can rest easy because we decided to ask it.
Below is the answer ChatGPT gave, verbatim, to the simple question:
“How can an in-house lawyer justify their job in case their employer is considering replacing them with AI tools?”
An in-house lawyer can justify their job by highlighting the unique value they bring to the company that cannot be replicated by AI tools. Here are a few potential arguments they could make:
- Legal expertise: In-house lawyers have a deep understanding of the law and its application to the specific industry and business of their employer. They can provide guidance on legal compliance and advise on potential legal risks, something that AI tools may not be able to do as accurately.
- Strategic thinking: In-house lawyers can offer strategic advice on legal issues, which can help the company to make better decisions and achieve its business objectives. They can also help to anticipate and mitigate potential legal risks, which can be crucial for protecting the company’s reputation and bottom line.
- Human perspective: In-house lawyers can provide a human perspective on legal issues, and can be more effective in communicating with clients, vendors and other parties. They can also be more flexible and responsive to changing business needs, which can be especially important in fast-paced industries.
- Interpersonal skills: In-house lawyers can provide guidance and support to employees, and can be a valuable resource for training and educating employees on legal matters. They can also be effective in building relationships with outside counsel and other legal professionals.
- Cost-effective: In-house lawyers can provide a more cost-effective solution than hiring outside counsel for every legal issue. They already have an in-depth knowledge of the company’s operations and can provide legal services in a more timely and efficient manner.
It’s worth noting that AI tools can be used as a complementary tool to support in-house lawyers but they cannot replace the human touch, expertise and perspective that a lawyer can bring to the table.
Perhaps it’s just me but that reads eerily well. Almost like an infinitely strong mechanical hand patting me on the back, just a little too hard, and telling me not to worry. That it’s just here to help. But I digress.
Those that are familiar with the tool will already have seen many well-articulated answers like the one above. Those that haven’t may be reeling a bit from the new knowledge that a computer can generate a reasoned argument about why you shouldn’t fear it, from thin air, in less than ten seconds.
So, what are the applications for AI in legal departments?
As mentioned above, because the technology is so new, it’s hard to predict where will be adopted most completely and therefore where it will cause the most disruption. But some of the more straightforward aspects of legal advice do seem like potential targets.
Because it can produce work almost instantly, because it currently costs nothing and, in any eventuality, will cost less that human lawyers, it is difficult not to imagine a world where AI tools aren’t used to generate simple template contracts, in draft form at least.
Perhaps, for now though, the role of AI will be kept at the ideation stage. It can spit out hundreds of contracts, but ones that need to be reviewed by a qualified, experienced, human lawyer. And, despite the example above, the content generated by ChatGPT does tend to stay high-level, and it often misses the point.
And this is where we believe it will become like all other technologies: a useful and powerful tool, but only as good as the person wielding it. And that takes a person with a specific skillset. (We’re thinking qualified project managers, specialist lawyers, or dedicated technologists here, rather than Liam Neeson.)
Changing ways of working in the legal profession
While AI is a new disruptor, the most obvious existing disruptor is remote working. While some quarters had been loudly agitating for flexibility in the location of work for some time, the universality with which remote working was embraced (due to necessity) in March 2020, has meant that demands from both law firms and some corporates for lawyers to be full-time office-based have been met with some resistance.
In 2023, we see that trend continuing. Something that we’re experiencing already is how location-agnostic many of our clients are. They really don’t mind where our consultants are working from, so long as they’re the right consultants with the right skillsets.
A more emotive example is the newly released data on the gender pay gap at several leading Irish law firms. The data, published by the Irish Times, has long been known, but seeing it in print will have a significant impact and will lead to renewed calls for transparency.
Increasing demands for transparency in the legal industry
Unlike Alternative Legal Solution Providers (ALSPs), transparency has always been anathema to traditional law firms. As we discussed in a previous article, one of the reasons for this is related to costs, although the philosophy of secrecy within law firms seems to run deeper than that.
But while the gender pay gap report is leading to increasing calls for transparency from their own lawyers, their clients are also starting to demand transparency on what precisely they are being charged for.
Lawyers are increasingly having to defend their costs
In companies, the legal department had historically been somewhat insulated from the pressures of cost analysis. And while this began to change after the global financial crisis, it is only now that we are heading into the next phase of global volatility that the true impact of this new scrutiny will be felt.
For in-house lawyers, the mantra has often been to add value by removing risk, and that is a worthy aim. But increasingly they are being asked to demonstrate that value, and to justify the line items on their balance sheets. This, in turn, squeezes law firms.
The effect on the wider market is similar. In essence, everyone has to justify their costs. But that isn’t a negative for all businesses. Certainly, what we’re seeing at least, is that where a company helps reduce costs, demand for services are only getting stronger.
Despite the slowdown in the tech sector, for example, our technology partners (who tend to be more niche and specialised) are seeing ever increasing demand because overall, they lower costs, not add to them.
Overall, then, will 2023 be a good year for lawyers?
As discussed above, the themes we expect are market volatility and technological disruption, and this will likely cause a bifurcation in fortunes. In other words, there will be winners and losers.
The winners will be those who can meet the increasing demands for transparency, those who can justify their costs, and those who can best adapt to new technologies. The flip side of this is the pressure will be heaped on legacy companies, those who are bloated or complacent.
As the cycle continues, lawyers, like others, will have both opportunities and risks to navigate through 2023. The key, really, is to ensure that you don’t get left behind.
About Johnson Hana
Johnson Hana is Ireland’s leading alternative legal solutions provider. That means we disaggregate legal advisory and legal process work, and focus on the latter.
Legal Process Outsourcing – whereby a specific legal process is carved out and outsourced to us
Legal Process Secondments – to augment a busy legal team or fulfil a temporary requirement for an experienced legal professional.
Historically, legal advisory and legal process work were tackled and billed in the same way. This means that all legal work has been as costly and time consuming as legal advice.
It doesn’t need to be.
We deliver legal process work through a combination of innovative legal technologies, robust project management methodologies, and expert lawyers. This approach reduces client legal spend by over 50%, while also providing totally transparent reporting and billing. This leaves our clients free to focus on the strategic, advisory work that really adds value.