We are in an AI gold rush. AI companies are consistently promising the riches of artificial intelligence, and productivity inflation beyond our wildest imaginations. Every sector is scrambling to find a way to identify how Generative AI (GenAI) can be integrated into their workflows. Yes, AI is transformative, we know that. Amongst the market rhetoric, what’s clear is that the legal sector is a prime runner in this race to harness the power of AI, with unique demands, and massive volumes of data requiring analysis and insight.
However, there are strings attached. AI, despite promising to democratise economies, isn’t free. It comes at a cost. There’s the cost of integrating LLM technology into the workflow, the cost of processing prompts, and the cost of hiring the right engineers to keep it all running. We must look at the spending patterns on AI in the legal sector, and compare these with expenditures in other industries and the broader economy.
We also need to be pragmatic when we assess the cost of using AI in law. There must be a practical application, but it also must sit within the stringent requirements and framework set out by the legal industry.
Beware of the hype cycle
The hype cycle profoundly influences investment decisions within the legal sector compared to other industries. The speed at which GenAI evolves often causes hesitation among legal firms, which contrasts with the urgency seen in sectors like finance and healthcare that have more swiftly embraced these technologies. The legal sector’s cautious approach is understandable given the high stakes of compliance and accuracy.
This is especially prevalent given the pace of upgrades and dramatic iterations in LLM capabilities, bearing the risk that the next new algorithm could supersede any sort of development work firms may have committed to, and invested in, on a previous model.
However, this caution can also lead to missed opportunities. Understanding where GenAI can genuinely add value, beyond the initial hype, is crucial for making informed investment decisions. Investing in AI isn’t solely based on the academic exercise of how good an LLM is, but also the entire infrastructure surrounding the ability to build LLMs into your workflows. That means that even when new versions are released, you already have the infrastructure in place to make the most of it, without falling behind and wasting development time.
The politics of GenAI
The amount spent on GenAI largely depends on how executives perceive the technology, and where financially that investment is coming from. Firms generally fall into four broad categories and budgetary sources when it comes to engaging with GenAI:
- Anti-AI: viewing GenAI as a distraction from “real work” leads to minimal to no investment. These firms risk falling behind as competitors leverage AI for efficiency and innovation. There’s no determined source of budget to invest here.
- Human-led AI-assisted: these firms see GenAI as a necessary cost to stay relevant, which results in modest spending. This approach keeps firms safe but may not fully capitalise on AI’s potential. Budgets tend to be sourced from a general IT budget.
- AI-led-human-assisted: a step-up. Recognising GenAI as a powerful innovation opportunity leads to significant investment, treating it as a crucial part of R&D and innovation. As this could be perceived as more of an operational cost, it’s more likely to fall under the COO, or if not a dedicated R&D/innovation ‘pot’.
- AI transformation: Perceiving GenAI as a transformational turning point in the industry drives substantial investment as a “special measure” for long-term success. Often here there will already be a dedicated AI budget in place, if not otherwise sourced from an innovation or R&D fund.
Each approach has implications for a firm’s competitive edge and operational efficiency. It’s important to reflect on which category your firm falls into; this can not only help set targets and a budget but also set AI policies that govern how AI is used in the workplace.
The risk of doing nothing
Delaying GenAI investment incurs tangible and intangible losses. The legal industry, which prides itself on precision and thoroughness, is extremely competitive, and I would argue that the edge to be gained here is particularly high. There are upfront costs and considerations for most legal firms – in terms of the time and resources in getting the use of GenAI approved and integrated – and so any first-mover advantage can set a law firm well ahead of the pack.
There are plenty of real-world examples from other sectors that can serve as a blueprint on how to successfully integrate the use of GenAI but, as with any other SaaS product, it comes down to the usual question of: build or buy? Each has its own distinct set of advantages (and trade-offs between convenience, customisation, deployment times, and control) and so decision-makers must have this in mind when looking for a solution. Also, think about what category you fall into; if you perceive AI as being transformative, then a build solution might better match your customisation needs.
“What good looks like” in GenAI investment involves understanding current industry behaviours and future trends. Integrating GenAI into the highly regulated legal environment presents challenges, but with careful planning, these can be managed. As a legal firm, you should aim for investments that harness the transformative potential of GenAI while being grounded in the practical realities of your legal work. The key is to follow the money – identify where you currently make money, how you can make more of it, where the investment is going, and how AI can help you do it better, faster, and cheaper.
The most successful firms are those that combine their unique strengths with AI-enabled solutions to create value for their clients in ways that surpass traditional methods. In almost all these cases, human involvement remains crucial. By focusing on areas where AI can drive meaningful improvements in efficiency and innovation, you can ensure your investments deliver tangible benefits to both your firm and your clients.
