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The Singapore Law Gazette

LegalTech Strategies for Singapore Law Firms

Headline grabbing articles like “Machines are going to replace lawyers” or “Robo-lawyers are here to take your jobs” have become du jour in the legal industry. In the midst of the buzz and hype around LegalTech, it is important for us to have an educated discourse on the realities of LegalTech and to explore strategies for law firms.

The LegalTech market is estimated to be a $15.9 billion industry selling solutions to both corporate legal departments and law firms. Some industry observers and commentators have been quick to prophesise the end of law firms as LegalTech firms take centre stage. As has been the case historically, I see the business of law going through its natural evolution cycle as LegalTech is being integrated into practices across the globe.

Law firms as we know today have evolved from sole traders to partnerships as firms transitioned from time telling1“Time telling” companies are enterprises that are successful because of a great idea or have a charismatic visionary leader. They do not survive beyond the presence of the single leader or through multiple product lifecycles. to clock building2“Clock building” companies are enterprises that are successful beyond multiple product lifecycles and leadership changes. Their greatest creation is the company itself and what it stands for. enterprises. Competition in the legal market has also evolved law firm management teams’ strategic efforts from building expertise (as practice groups became the norm) to scale (geographic expansion to globalisation), sector specialisation (as industry specialisation became a competitive advantage) and now, business models diversification (expertise-driven law firm, labour-driven NewLaw firm and technology-driven LegalTech firm).

When technology first touched the legal profession, codified legal knowledge in the form of regulation, statutes and precedents were locked away in leather bound books in law libraries. Lexis (LexisNexis’ predecessor company) was founded in the 1970s and converted them into electronic forms, making it easier for legal research.

Today, LegalTech solutions combine data analytics and machine learning to equip lawyers with relevant case and probabilities of case outcomes based on case parameters, the opposing counsel and the presiding judge. There are also LegalTech solutions that enable law firm managing partners and management teams to better manage legal operations through knowledge management solutions, matter management solutions, contract management solutions, practice management solutions, billing solutions, communication and collaboration solutions.

State of the Global LegalTech Market

To truly understand the effect of LegalTech and its impact on the market, I have conducted an analysis of the LegalTech segment by tracking LegalTech firms listed on Stanford Law’s CodeX Techindex and cross referencing them with information on Crunchbase and Index.co.

The research was carried out at the end of February 2018 when the CodeX Techindex had 790 LegalTech firms listed and each entry was reviewed and then cross-referenced with Crunchbase, index.co and company websites.

The research and analysis reveals 692 out of the 790 entries on CodeX Techindex in February 2018 were verified LegalTech firms. The following chart is a geographic breakdown of LegalTech firms showing markets at different stages of development. The countries with the largest number of CodeX Techindex population were the US with 460, followed by Canada with 52, the UK with 35, Germany with 15 and Australia with 13.

Through this research, I was also able to trace $2.49 billion invested into 200 LegalTech firms by 436 LegalTech investors globally. The following chart is a geographic breakdown of the funds raised by LegalTech firms globally. Similar to the previous analysis, the five countries that have raised the most funding for CodeX LegalTech firms were the US with $2.1 billion, followed by the UK with $249m, Australia with $36m, Canada with $34m and Germany with $24m.

The analysis reveals a heat map of activity driven out of mature markets like the US, UK, Canada, Germany and Australia. While majority of the global narrative is driven by those mature markets, the South East Asian region is also home to an emerging LegalTech segment.

State of the South East Asian LegalTech Market

To better understand the nuances of the South East Asian markets, the team at ASEAN LegalTech has collaborated to provide an analytical excursion of the LegalTech. Our South East Asian legal market is served by 248,067 lawyers spread out across the region.

Further breakdown reveals Thailand is home to the most number of lawyers, with 72,000, followed by Philippines’ 64,764 lawyers and Indonesia’s 60,000 lawyers. At the other end of the spectrum, meanwhile, Laos and Brunei only have 243 and 123 lawyers respectively. Across the region, Thailand (959:1), Singapore (1,008:1) and Malaysia (1,595:1) lead the ASEAN states on the population to lawyer ratio measurement while frontier markets like Laos (28,222:1), Cambodia (11,490:1) and Vietnam (7,643:1) lag their peers. This reveals capacity issue for lawyers in ASEAN and of course there are implications too, for access to justice.

With the rise of LegalTech in the South East Asian region, lawyers could to leverage LegalTech solutions to democratise legal services for the wider population. To shed further light on South East Asia’s LegalTech market, the team at ASEAN LegalTech has recently conducted a research into the market to identify 89 LegalTech firms in seven of the 10 South East Asian countries. Singapore has the largest LegalTech ecosystem with 25 firms, followed by Indonesia with 21 and Malaysia with 15. The LegalTech markets in Philippines and Thailand are currently in the emerging phase, with 13 and eight firms identified respectively.

Our ongoing research of the LegalTech market in South East Asia reveals that the first LegalTech firm in the region can trace its origins to the launch of Singapore’s LawNet in 1990. Since its humble beginnings, LegalTech startups are now mushrooming in jurisdictions that provide the best climates for them to thrive.

Similar to other regions, a spike in number of LegalTech firms in ASEAN can be observed from mid 2010s. This timing coincided with an explosion in the lean startup movement of rapid prototyping, early release and testing of minimum viable products in the market, courtesy of Silicon Valley. It also coincides with widespread availability of affordable Software as a Service (SaaS) tools, making it possible for legal entrepreneurs to cheaply produce and test their own solutions.

A further breakdown of the data reveals each of the ASEAN markets at different stages of development. Singapore, by far, is the most mature courtesy of a LegalTech friendly regulator. Another driving factor for LegalTech in the market is the relative globalisation of each jurisdiction’s legal industry. In international markets like Singapore, where the highest concentration of multinational companies and international law firms can be found, ideas are borderless, and we see LegalTech solutions being imported into the city state from mature financial markets like London, New York and Hong Kong. This is encouraged by the Singapore government whose vision is to build the city state into the Asia-Pacific hub for LegalTech.

A breakdown of the LegalTech solutions in the South East Asian markets reveal legal research as the largest segment, with 25 companies presence across the 10 countries, followed by legal marketplace firms (17) and legal document automation companies (16). In other words, LegalTech firms are focused on providing lawyer efficiency solutions.

State of Singapore’s LegalTech Market

Singapore’s estimated $2.1 billion3Lin TX and Tay A, 2018, Profile of Singapore’s Legal Industry, Singapore Department of Statistics, (ONLINE) Available at: https://www.singstat.gov.sg/-/media/files/publications/industry/ssnsep18-pg1-3.pdf (Accessed 3rd May 2019) legal market is served by its 5,666 lawyers and 922 law firms. Adoption of technology varies across the board. Law Society of Singapore’s Tech Start for Law and SmartLaw Assist programs have put LegalTech in law firm boardrooms’ agenda as 1904The Law Society of Singapore and Ministry of Law Singapore, 2019, Legal Technology in Singapore, The Law Society of Singapore, (ONLINE) Available at: https://www.lawsociety.org.sg/portals/0/eblasts/pdf/LawSociety_LegalTech_Summary_Report.pdf (Accessed 3rd May 2019) of the 922 law firms in the city state has now accessed those subsidies.

ASEAN LegalTech’s research into the Singapore LegalTech market reveals 25 LegalTech firms and to further shed a light, the team has also sort the LegalTech firms by their primary solutions. The document automation is the largest segment in the LegalTech market, followed by marketplace and practice management segments. This is in pace with mature markets like Australia where the largest LegalTech segment is also legal document automation.

The launch of Tech Start for Law and now Tech-celerate is unprecedented in the world. Law firms and law societies from around the world are envious of Singapore’s achievements here. Of note also is the launch of Legal Productivity and Innovation website, another proactive move by the Law Society of Singapore to help lawyers and law firms with LegalTech adoption.

Running in parallel are Singapore Academy of Law’s key initiatives like the launch of SAL Ventures to invest in LegalTech and NewLaw startups in the Singapore market. The launch of Future Legal Innovation Programme (FLIP) to build a grassroots movement in the market for legal innovation and LegalTech adoption has also contributed to a vibrant and healthy ecosystem.

LegalTech Strategies for Law Firms

In short, the LegalTech market that is growing, fuelled by mushrooming LegalTech startups, companies and an encouraging regulator. In a profession built on precedents, we have already seen firms rolling out on LegalTech strategies. Some are implementing LegalTech solutions, others are building their own LegalTech capabilities while a handful have acquired or invested in LegalTech firms.

For firms who are just embarking on their LegalTech journey, what strategic options should they consider? In Build, Borrow or Buy: Solving the Growth Dilemma, authors, Laurence Capron and Will Mitchell explored the three strategic growth paths for successful companies and their strategic considerations. Using the build, borrow or buy concept, here are three strategies for law firms to consider for LegalTech.

1. Build: Develop internal LegalTech capabilities

Developing new capabilities like LegalTech solutions can be a resource straining exercise in law firms. For some, the absence of existing solution combined with access to existing resources (software developers, data analysts and coders that currently work in different parts of the business) could create the perfect condition for firms to explore this strategic option.

For some law firms, it is possible to build internal LegalTech capabilities. Firms that have chosen this path are either consuming the LegalTech solutions they have built or are commercialising those LegalTech solutions. Examples of firms that are commercialising their LegalTech solutions include Allens Linklaters’ e-Discovery service and Corrs Chambers Westgarth’s Telesto.

The caveat for firms to successfully commercialise internally built LegalTech solutions is that they have to ensure those solutions are managed as separate business entities. The LegalTech software-as-a-service (SaaS) business model is completely different to the law firm partnership business model with different sales cycle and profit expectations and therefore different key performance indicators.

2. Borrow: Borrow LegalTech capabilities via contracting or alliancing

Once law firms have identified the need to engage external LegalTech firms, they must decide the kind of sourcing mode to use. The first is through licensing (easiest way to borrow resources another firm has created) and the second is through strategic alliance (whether they are co-marketing partnerships, research and development partnerships or joint ventures).

For majority of law firms, licensing LegalTech solutions is the easiest route as the onus is on the LegalTech provider to be accountable for the software’s performance. Firms can leverage multiple LegalTech solutions to better manage their practice and better service their clients. In this case, firms become the consumer of Legaltech solutions.

For some firms, there are opportunities to engage in strategic alliance through equity alliance or joint venture to leverage the LegalTech capabilities to go to market. An example of this is the Corrs Chambers Westgarth and Canadian LegalTech firm, Beagle’s 50:50 joint venture of Beagle Asia Pacific to provide artificial intelligence technology for contract review and analysis in the region. Another include Allens’ collaboration with Kira Systems and Neota Logic that combined legal expertise, machine learning review capability and expert system software to automate lease review. Others include Norton Rose Fulbright’s alliance with LawPath to target the startup market.

3. Buy: Acquire LegalTech capabilities

If done properly, acquisition is a viable option for firms to integrate LegalTech into their practice and business. Successful deals are those where the LegalTech solutions are geared towards solving corporate legal departments’ pain points.

Only a handful of firms have embarked on this strategy by investing in LegalTech firms directly or through an accelerator. Gilbert + Tobin’s equity stake in LegalVision is an example of firms investing directly in LegalTech startups to fund growth. Accelerators like Dentons’ NextLaw Labs and Mills Oakley’s Accelerator are screening the LegalTech startup market for opportunities to take an equity stake in up and coming LegalTech firms.

Lastly at Alpha Creates we have two insights for law firms in Singapore embarking on your LegalTech strategies:

  1. Start with the problem not the technology

    The biggest mistake we see with law firms is to start with the technology because the partner or managing partner read a news article about legal artificial intelligence and thought they should use artificial intelligence in their practice.What tends to happen then is firms would start their journey by looking at the technology then retrospectively fit the technology to the problem they are looking to solve before reviewing and changing the underlying process and then engaging the lawyers into the LegalTech project for change management.Instead, firms should start with defining the problem, then working with the lawyers to look at how they are currently addressing that problem statement before reviewing the underlying process and finally reviewing and finding the best fit technology that enables the process and people to solve the problem.

  2. Decide on LegalTech for the practice of law versus the business of law

    There are a many different ways to look at law firms, we think about the world of law firms as the practice of law versus the business of law. The practice of law is the process in which legal advice is produced by lawyers. In other words how the legal work is done.The business of law as the economics and systems in which legal service is provided. The LegalTech landscape is vastly different for both sides of the equation and an intimate understanding of the market is required.

  3. Make sure the LegalTech platforms have APIs

    We also find that because partners and managing partners do talk to each other from different firms and they get word of mouth recommendations on technology to use. What then happens is once they have gone through the process of testing and then buying the LegalTech product, they find that the new LegalTech solutions don’t API with their existing technology systems.So, always make sure you do the test not just in a vacuum but also to ensure it works with the rest of your internal IT system.

Endnotes   [ + ]

1.“Time telling” companies are enterprises that are successful because of a great idea or have a charismatic visionary leader. They do not survive beyond the presence of the single leader or through multiple product lifecycles.
2.“Clock building” companies are enterprises that are successful beyond multiple product lifecycles and leadership changes. Their greatest creation is the company itself and what it stands for.
3.Lin TX and Tay A, 2018, Profile of Singapore’s Legal Industry, Singapore Department of Statistics, (ONLINE) Available at: https://www.singstat.gov.sg/-/media/files/publications/industry/ssnsep18-pg1-3.pdf (Accessed 3rd May 2019)
4.The Law Society of Singapore and Ministry of Law Singapore, 2019, Legal Technology in Singapore, The Law Society of Singapore, (ONLINE) Available at: https://www.lawsociety.org.sg/portals/0/eblasts/pdf/LawSociety_LegalTech_Summary_Report.pdf (Accessed 3rd May 2019)

Principal
Alpha Creates and Founding Board at ASEAN LegalTech

Eric is a strategy consultant that specialises in the legal industry. With close to 10 years of experience working with legal executives across the Asia-Pacific region. Eric is a Principal at Alpha Creates, an innovation, strategy and technology firm. He is also engaged in building grassroots LegalTech and legal innovation movement in the Asia-Pacific region through his work with Legal Hackers Melbourne and ASEAN LegalTech Association. Eric also introduced ‘NewLaw’ as a neologism in 2013.