5 Themes That Will Define the Legal Services Industry for the Next 5 Years

After spending months researching the industry, speaking with operators of both growth-stage and established businesses in the space, and tracking adjacent macroeconomic trends, we are excited to present Full In’s observations on and predictions for the Legal Services industry. Our investment team has had in depth experience across various aspects of the legal tech space – our Founding Partner and CEO Elodie Dupuy was an early investor in Conga (contract and document automation) and oversaw subsequent acquisitions of Novatus, CRM Culture, and Appgrid. More recently, Full In Partners invested in Usercentrics , a consent management platform helping website operators ensure compliance with ePR and GDPR requirements. As we discuss below, the legal services (and more specifically, legal technology) industry is multi-faceted and includes offerings that span from consumer through enterprise markets. Our experience covers a substantial part of the market but we are eager to expand our portfolio in the subsectors outlined below.

1. Market demand for legal services has increased and is expected to continue increasing as individuals, businesses, and government require legal services in a growing number of areas. Following the disruption caused by COVID, 2021 and 2022 saw a dramatic increase in the demand for legal services, especially in the corporate, M&A, and real estate practice areas. While we expect this demand growth to slow down slightly in 2023, demand for legal services in the fields of compliance, data security, and other areas will drive overall growth in the industry. There are also an increasing number of organizations that are leveraging legal solutions to achieve broader strategic goals – companies increasingly view the law as a way to confront competition, regulators litigate to enforce statutes, and nonprofits are expanding their presence in the courtroom in order to drive beneficial outcomes for their stakeholders. The demand across different practice areas will require corporate legal departments and law firms to carefully manage staffing and resource allocation and reduce time spent on purely administrative tasks that add limited value to clients.
2. Operational costs will continue to rise for law firms and in-house legal departments. The post-pandemic boom in demand for legal services led firms to hire a greater number of associates and operational staff. The subsequent “Great Resignation” and shifting power dynamic also created an expensive talent war, with law firms and legal departments increasing salaries and benefits to attract new talent. Finally, the ever-increasing amount of data required to run a modern legal practice has created additional expenses around collecting, securing, analyzing, disseminating, and storing said data. Legal departments and law firms will likely continue to see overhead increase on both a relative and absolute basis as inflation and the labor market cools. Legal management will need to adapt by (a) increasing revenue through client acquisition and higher rates and/or (b) identifying cost-saving opportunities such as headcount reduction and/or streamlining processes.
3. The pandemic induced a transformative and permanent shift in where, when, and how legal professionals work. Many organizations have struggled to find the right balance for employees regarding in-office requirements even as COVID restrictions were lifted. 2022 witnessed the emergence of the hybrid model as the default working environment for knowledge workers across industries – legal professionals were no exception. According to data collected by Clio, roughly 40% of lawyers “worked exclusively from an office” before 2020 compared to just 23% in 2022. Perhaps more significantly, research shows law firm/department clients actually prefer virtual meetings over in-person meetings. There are also several industry-agnostic tailwinds that will bolster the new work-life dynamic including, but not limited to, the proliferation of cloud-based technology (which enables collaboration among distributed workforces), increased attention to employee satisfaction, a tight labor market, and generational differences as it relates to the importance of work-life balance.
4. Consumers will benefit from lower legal costs and greater optionality as technology democratizes access to legal knowledge and services. Legal services have historically been exorbitantly expensive and tedious to procure. An individual or small business owners would have to find a lawyer through a friend, colleague, family member, or phone book, which gets increasingly complex as you dive into more esoteric practice areas or expertise needs. Once the individual finds a lawyer/legal team that fits their needs, they are faced with high hourly rates and complex legal processes that often drag on for longer than anticipated. The simple fact is that quality legal services have historically been inaccessible to many individuals and small businesses. While top-tier legal talent is still available primarily to high-income individuals and groups, various technological innovations has gradually made legal services more affordable and available to a broader segment of the population. Platforms like DocuSign, LegalZoom, and FormSwift give consumers unlimited access to customizable legal documents (lease agreements, bills of sale, estate planning, etc.) for a fraction of the cost it would take a lawyer to draft. In cases where professional legal advice is absolutely necessary, companies like RocketLawyer, LegalMatch, Priori, and UpCounsel offer consumers and businesses (a) access to lawyers that are best suited for their specific need, (b) transparency and optionality around pricing, and (c) user-friendly interfaces that keeps all relevant documentation and contact information in a single place. The advent of these platforms has already expanded access to legal services, but we anticipate this trend to accelerate as younger, more tech-savvy generations age into jobs/life events that require legal services. As both individuals and businesses opt for more affordable, on-demand, and personalized online legal services, law firms will be forced to expand their client reach and likely lower prices to compete.
5. Legal departments and law firms will accelerate the adoption and implementation of technology solutions. Legal professionals have historically been slow to adopt new technologies, especially compared to other professional service industries such as accounting, consulting, HR, and financial services. The acceleration of consumer behavior to digital paired with rising operating costs and increased demand for legal service has created an environment where a modern tech stack is a must have rather than a nice to have. Over the past five years, the legal industry at large has indeed started to invest in software and tech-enabled services that enhance the accuracy and efficiency of their work. Examples include tools that streamline eDiscovery, Research, IP Management, Contract Lifecycle Management, Knowledge Management, Billing, Staffing, Translation, and Payroll (among others) (would be cool to call out examples of successful software players for some of these categories but understand it could get unwieldy) . Legal departments and law firms will become increasingly willing and eager to implement software/tech-enabled solutions. Technology alone will not save legal professionals and departments of course, and the lawyers who integrate technology with human service are best positioned to succeed and grow. However, with spend on Legal Tech by law departments expected to triple by 2025 (according to Gartner), we foresee a dramatic proliferation of technology solutions across the legal services industry.

While this post only provides a high-level overview of technology’s role in the legal services industry, we would be happy to share additional thoughts on the state of the Legal Tech market. Our outlook on opportunities remains very positive and we’re excited to support Legal Tech founders, entrepreneurs, and teams in their mission to disrupt an industry that is still in the early innings of tech adoption. We also welcome the opportunity to speak with lawyers, bankers, software founders, or anyone else interested in chatting about our thoughts on the space!?