Major advancements in artificial intelligence (AI) technology are rapidly transforming the ways that law firms and accounting firms work.
The world’s top professional services firms are now increasingly starting to use increasingly sophisticated AI tech in their everyday work.
However, increased use of AI technology is not just the inevitable result of technological innovation, but instead an outcome of the shifts have transformed the legal and professional services sectors in recent years.
While law firms and accounting firms have in many ways been sheltered from previous waves of technological innovation, the current conditions are now prime for a widespread shift.
Although developments in large language models (LLMs) have created the means through which legal work can be automated, economic pressures are now driving actual uptake of the tech as a means of boosting profits in law and accounting firms.
Specifically, with the City’s talent war having driven up salaries throughout the law and professional services sectors, firms have a major incentive, now more than ever, to automate work and cut costs through use of AI.
At the same time, with the global economy set to enter a downturn, law and accounting firms are set to face mounting pressure to boost efficiency in their own processes by investing in the new tech.
San Francisco tech company OpenAI has led the way in advancing LLM technology, particularly through the development of its GPT technology.
In a blog post, OpenAI noted its newly launched GPT-4 chatbot is now able to pass the US bar exam with a score in the top 10 per cent of test takers.
By contrast, Open AI’s previous chatbot, GPT-3.5, which was launched in November 2022, was only able to achieve scores equivalent to those gained by the bottom 10 per cent of exam takers.
The huge improvements in the chatbot’s abilities, over just a five-month period, come as another sign of the rapid pace at which AI tech is developing.
The advancements in the world of AI have already led to much speculation that lawyers may soon be replaced by chatbots and other tech-driven tools.
However, the developments being made in Silicon Valley startups have not gone unnoticed by the world’s top law firms and accounting firms, who are now increasingly using the tech themselves.
Top players in the world of professional services including Magic Circle law firm Allen & Overy and Big Four accounting firm PwC have both in recent months struck deals to start using the AI chatbot Harvey in their work.
For reference, Harvey is an AI chatbot based on OpenAI’s GPT technology, that was created using $5m in funding from OpenAI’s startup investment fund.
In both cases, PwC and Allen & Overy said that in using the Harvey AI platform they are aiming to boost the “efficiency” of their businesses by delivering more “cost-efficient” solutions to clients.
This uptake is, in many ways, being driven by competition between firms themselves, as clients are increasingly seeking out cheaper providers of legal and professional services.
At the same time, more widespread uptake of the ‘fixed fee’ model, amid a shift away from the billable hours system, has introduced a new wave of cost competition in the legal sector, which is set to heighten as the global economy enters a slump.
However, the advancements in AI have also come as law firms and accounting firms have recently undergone major transformations driven, by the shifts brought about by Covid-19.
In particular, the pandemic majorly increased uptake of technology in the law and professional services sector, as firms were forced to adapt to widespread working from home.
At the same time, Covid-19 significantly drove up lawyers and accountants’ salaries, as fierce competition for professional talent, on the back of a boom in demand for professional services, saw firms offer increasingly high salaries in seeking to recruit and retain staff.
Notably, the City’s talent war saw salaries given out to newly-qualified lawyers hit heights of up to £179,000 a year.
Now, with the M&A market starting to slow and the boom in demand starting to subside, this pressure to cut costs, by making use of technology, is increasingly starting to bite.
In the view of Thomson Reuters legal technology expert Kriti Sharma the advancements in AI technology have come at the “perfect” time.
Now, with AI technology set to become increasingly affordable, the economic incentive to start using it will likely become increasingly hard to resist.