Lawtech: Levelling the Playing Field in Legal Services?

John Armour and Mari Sako

[email protected] [email protected]
University of Oxford*

20 April 2021

The legal services market is commonly thought of as divided into two “hemispheres”--
PeopleLaw and BigLaw (Heinz and Laumann 1982, Heinz, Laumann et al. 1998). These
segments represent, respectively, individuals and corporate clients. The last few decades have
seen an increasing concentration of resources within the legal profession toward serving
corporate clients, to the alleged detriment of consumer clients. At the same time, the costs of
accessing legal representation exceed the financial resources of many ordinary citizens and
small businesses, compromising their access to the legal system (Clementi 2004, Hadfield 2010,
CMA 2020).

We ask: will the adoption of new digital technologies lead to a levelling of the playing field
between the PeopleLaw and BigLaw sectors? We consider this in three related dimensions.
First, for users of legal services: will technology deliver reductions in cost sufficient to enable
affordable access to the legal system for consumer clients whose legal needs are currently
unmet? Second, for legal services firms: will the deployment of technology to capture
economies of scale mean that firms delivering legal services across the two segments become
more similar? And third, for the structure of the legal services market: will the pursuit of
economies of scale trigger consolidation that leads both segments toward a more concentrated
market structure?

Technology is not the only causally relevant factor in play, however. To situate its impact in
context, we consider a range of other factors also relevant to future potential convergence
across these three dimensions between PeopleLaw and BigLaw. We seek to unravel the
conditions for convergence (or continued divergence) and draw implications for practice and
policy. Our analysis focuses not only on the direct impact of digital technology on meeting
legal needs, but also effects on what lawyers do (Remus and Levy 2017), emergent business
models (Teece 2010, Sako 2012, Armour and Sako 2020), and complementary governance
changes (Armour, Parnham et al. 2020). Adding these considerations to the causal framework
allows us to gauge not only what legal technology may in theory be capable of doing, but which
use cases for such technology are likely to emerge in practice and take root.

We also include regulation in our causal framework. In particular, we leverage the regulatory
differences between the UK and the US to gauge the relative importance of regulatory shifts in
meeting unmet legal needs (Genn 1997, Sandefur 2015). In 2007, the UK enacted a bold set of

*
This research is funded by UKRI pursuant to the Next Generation Services Industrial Strategy Challenge Fund.
It forms part of the program Unlocking the Potential of AI in English Law: https://www.law.ox.ac.uk/unlocking-
potential-artificial-intelligence-english-law. We are grateful for comments on earlier drafts from Ben Barton,
Justice Mariano-Florentino Cuéllar, David Engstrom, Jens Frankenreiter, Gillian Hadfield, Dan Linna, Julian
Nyarko and participants in the Legal Tech and the Future of Civil Justice webinar.

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reforms to the regulation of the legal profession.1 These reduced the substantive domain over
which qualified lawyers have exclusive service rights and opened up the sector to multi-
disciplinary organizations. The explicit motivation was to stimulate competition and thereby
more cost-effective legal services to meet latent demand (Clementi 2004). Similar proposals
have long been debated in the US (Hadfield 2000, Hadfield 2007, Hadfield and Rhode 2015,
Henderson 2018), and some states have taken tentative first steps.2 Our primary focus is on the
UK (England and Wales, strictly speaking), but we draw comparative insights with the US.

This paper proceeds as follows. Section 1 sets the scene with an overview of the development
of the PeopleLaw and BigLaw sectors in Britain and the United States in the last few decades.
Section 2 examines the adoption of digital technology (including artificial intelligence (AI)) in
the BigLaw sector, to identify specific use cases and emergent business models, while giving
regard to complementary changes taking place (or not taking place) in organizational
governance. Section 3 conducts a similar exercise for the PeopleLaw sector, before Section 4
provides an explicit comparison of the two sectors to address the question of whether or not
legal technology will enable a convergence in the extent to which consumer or client needs are
met. To do so, we use a causal framework that takes account of organizational complements
and regulatory constraints to the adoption of emergent business models, which will in turn
affect the market size and industry structure of PeopleLaw and BigLaw sectors. Our conclusion
is that while legal technology and data aggregation have enormous potential to meet unmet
legal needs, different constraints continue to hold back realizing such potential. Major barriers
in BigLaw are human capital and data aggregation. In PeopleLaw, major barriers include
financial capital and the technological limits to automating human lawyers. We discuss some
regulatory policy options that might promote greater convergence between the two sectors via
the use of lawtech.

Section 1: Overview of PeopleLaw and BigLaw Sectors

This section provides a macro-level overview of the state of PeopleLaw and BigLaw sectors.3
Differences in data availability mean the contours of these sectors can be outlined in sharper
focus for the US than the UK. But in both countries, there is evidence that the share of
PeopleLaw activities relative to BigLaw has been in secular decline over the past few decades.

In the United States, lawyers have long been aware of a distinction made between the part of
the legal sector that provides services to sizeable corporate clients and the part that does not.
This divide was brought to prominence in the seminal work Chicago Lawyers: The Social
Structure of the Bar (Heinz and Laumann, 1982), which studied legal practice in the 1970s,
and found empirical evidence for the delineation between what might now be called BigLaw
and PeopleLaw. A number of commentators since have charted a decline over time of both the

1
Legal Services Act 2007 (UK).
2
See ARIZONA 2019. Task Force on the Delivery of Legal Services: Report and Recommendations. Supreme
Court, State of Arizona; CALIFORNIA 2020. State Bar of California Task Force on Access through Innovation
of Legal Services: Final Report and Recommendations. State Bar of California; UTAH 2019. Narrowing the
Access-to-Justice Gap by Reimagining Regulation: Report and Recommendations. Utah State Bar Working Group
on Regulatory Reform.
3
We are aware that there are other segments including the government and the third sector (non-profit
organizations) providing legal services. But we focus in this paper on BigLaw vs PeopleLaw to simplify and
sharpen our analyses.

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proportion of the total legal services market, and in recent years the absolute dollar amount
spent, attributable to PeopleLaw (Heinz, Laumann et al. 1998, Hadfield 2010, Henderson 2018).

In particular, the Chicago Lawyer Survey in 1975 showed that lawyers devoted 45% of their
total effort to services for individual or small business clients, unions, environmental plaintiffs,
and state administrative agencies or municipalities. Updating evidence in the 1990s, the survey
repeated in 1995 showed that this PeopleLaw proportion had declined to 35% of lawyers’ total
effort (Heinz, Laumann et al. 1998).

US Economic Census Data report spending on services provided by lawyers employed in

private practice. In 2005, 39% of this was attributable to individual clients (Hadfield 2010).4
By 2007, the share of PeopleLaw in total revenue was 29%; by 2012 it had declined to 24%,
while the share of BigLaw (Henderson calls this the Organizational Client sector) grew over
the same period from 68% to 73% (see Figure 1). The Census Data, however, exclude lawyers
working outside private practice—in particular, those working in-house in corporations. The
vast majority of corporate in-house lawyers operate in the BigLaw sector.5 This practice setting
has seen by far the greatest relative growth over the past two decades (203.1% compared to
29.5% for lawyers in law firms) (Henderson 2018). Hadfield uses the fraction of lawyers
working outside private practice to “gross up” the overall value of legal services spend in 2005
to $277 billion, of which then 31% was attributable to individual clients. If we perform the
same exercise for the 2012 Census data, the overall spend is approximately $335 billion, of
which only 18% was attributable to PeopleLaw.6

Henderson also reminds us of the striking differences between the economics of PeopleLaw
and BigLaw. In PeopleLaw, lawyers (typically sole practitioners) charged an average $260 per
hour (data source: Clio), but billed for only 1.6 hours per day, amounting to $422 a day, or
$105,000 in gross receipts over a 50-week year. In BigLaw by contrast, Am Law 100 total
gross revenue in 2012 was $71.0 billion, with a total lawyer headcount of 86,272. So, average
gross revenue per lawyer was $822,978, while average profit per partner was $1.48 million
(Henderson 2018: 14-15).

The problem of access to justice for consumers is a central policy concern that has led a handful
of state bars (Arizona, Utah, California) to address this issue, in part by encouraging the
adoption of legal technology. Henderson, commissioned to produce a report for the California
State Bar, described developments in legal technology and documented cases of unauthorized
practice of law by technology providers (Barton and Rhode 2018, Henderson 2018).7

4
The total figure was $221.6bn, of which $85.6bn was spent by individual clients.
5
In-house lawyers are primarily recruited by large corporations. A 2017 survey prepared for the UK’s Legal
Services Board found that only 5% of SMEs had any internal legal capacity BMG Research (2017). The Legal
Needs of Small Businesses 2013-217: A Report Prepared for the Legal Services Board. L. S. Board. Birmingham,
Legal Services Board.

6
Total legal services spend reported in the 2012 Census was $246.2bn, of which only $58.8bn was spent by
individual clients. Of a total 628,370 lawyers employed as W-2 employees in the US in 2017, 388,670 (62%) were
in private practice. Grossing up the total spend to include the 38% working in other practice contexts yields and
estimated total of $335bn. Henderson, W. D. (2018). Legal Market Landscape Report: commissioned by the State
Bar of California.

7
See also Barton (2021) in this volume.

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Figure 1: Henderson analysis of PeopleLaw and BigLaw in the United States

Source: Henderson 2018

In the United Kingdom, a similar policy concern over the unmet legal needs of consumers lay
behind the enactment of the Legal Services Act in 2007 (Office of Fair Trading 2001, Clementi
2004, Department of Constitutional Affairs 2005). This Act implemented three major changes
intended to stimulate competition within the legal services sector. First, it facilitated the
ownership of law firms by non-lawyers through so-called Alternative Business Structures
(ABS).8 This was intended to facilitate access to capital and new multi-disciplinary business
models, thereby stimulating innovation. Second, it introduced a new regulatory regime that
shifted licensing power away from self-governing professional bodies such as the Law Society
of England and Wales in favor of public regulatory agencies.9 And third, it introduced a new
complaints-handling mechanism, the Legal Ombudsman, intended to make it easier for
consumers to seek redress for poor service. However, despite these reforms, the UK’s Legal
Services Board (LSB), the overseer of front-line regulators created by the Act, and Competition
and Market Authority (CMA) have continued to find evidence of considerable latent demand
for legal services (CMA 2020, LSB 2020).

The UK legal services market is about a sixth the size of the US market (17%): in 2017, the
total turnover in the UK legal activities sector was £24 billion.10 Unfortunately, UK national
statistics do not shed light directly on the relative size of PeopleLaw and BigLaw sectors, as
the Office of National Statistics does not provide a sufficiently detailed classification to break
down the SIC code for “legal activities” by class of client. There are past attempts at developing
a methodology for market segmentation by type of consumer, type of consumer problem, and
type of legal activity (OXERA 2011), but only the PeopleLaw sector has been taken into
consideration, making it impossible to weigh the relative importance of the two sectors.

8
In lieu of the traditional lawyer-only partnership requirements for law firms, managers of ABS must meet a “fit
and proper person” standard set by regulators, as must “significant” owners (deemed to be more than 10 per cent
of equity). Moreover, ABS must avoid involvement in any cases posing a conflict with the interests of any
significant owner.
9
These are established in a two-tier structure: an overarching regulatory framework set by the Legal Services
Board (LSB), under which a series of “frontline” regulators govern discrete professional types. The most
relevant of these for our enquiry is the Solicitors Regulation Authority (SRA).
10
This is slightly less than the ratio of population (67 million to 328 million, or 20%) but more than the ratio of
GDP ($2.83 tn to $21.43 tn in 2019, or 13%).

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An alternative approach, for which data do exist, is to break down lawyers’ activity by type of
work, on the assumption that some areas of practice predominantly serve individuals (family
law, criminal law, residential conveyancing, wills and trust and probate), whereas others
predominantly serve corporate clients (commercial/corporate, litigation/dispute resolution and
commercial property and planning). A recent study by KPMG for the Law Society of England
and Wales reports that 60% of law firm turnover is in corporate client work (which they term
“B2B”) and 20% in individual client work (which they term “B2C”) (KPMG 2020).11 This
20% for B2C was as high as 50% in 1997/8, according to an analysis using the same Law
Society data source (Office of Fair Trading 2001, page 44). Moreover, the Solicitors Regulation
Authority estimate that only 11% of law firm revenues in England and Wales come from work
provided to vulnerable, or potentially vulnerable, individuals (Solicitors Regulation Authority
2019). Similarly to the US, there has been significant growth in the numbers of lawyers
working in-house for corporations, rising from 16% of all solicitors in 2004 to 23% by 2019
(Law Society 2020). Because this growth is directed at corporate work, it is strongly suggestive
of a corresponding decline of PeopleLaw’s relative share of the overall legal services market
during the same period.

Figure 2: PeopleLaw and BigLaw services provided by Law Firms in England and Wales

Source: KPMG (2020)

However, a more direct measure of latent demand is available for the UK. Regular surveys on
individual legal needs, following the OECD methodology,12 have been carried out to gauge the
extent of unmet legal needs. Adults based in England and Wales were asked about the legal
11
In this study, client types are presumed but not explicit in the Law Society data. Therefore, PeopleLaw (B2C)
clients are assumed to include not only individuals but also small businesses. BigLaw (B2B) clients are primarily
corporate legal departments and big law firms. And a third category, HybridLaw (B2H), has as its clients the
public sector (national and local governments), the judiciary, the not-for-profit sectors, and a combination of B2C
and B2B clients, for example in the case of employment law applied to both employers and employees. These
three categories cover a wide range of clients, but do not make explicit where for example wealthy individuals,
start-up founders, and individual inventors (who need to file and defend intellectual property rights) fit.
12
See https://www.oecd.org/governance/legal-needs-surveys-and-access-to-justice-g2g9a36c-en.htm (accessed
on 8 April 2021)

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issues they experienced in the four years prior to the survey, the action they took and the help
they sought to resolve them. In the most recent survey in 2019, the top six areas of legal needs
encountered by survey respondents were: “family”, “employment, finance, welfare and
benefits”, “rights of individuals”, “property, construction, and planning”,
“conveyancing/residential”, and “wills, trusts and probate.” In all cases, those whose legal
needs remain unmet exceed those whose needs were met (see Figure 3). The underlying
reasons for why legal needs remain unmet are numerous, but a significant issue lies in the
perceived inaccessibility of the civil justice system (see Figure 4). In the same survey, the
majority opinion was that the justice system is not for ordinary citizens, and as many as 88
percent of respondents agreed that “for issues like these, law is like a game in which skillful
and resourceful are more likely to get what they want.”

Figure 3: Met and unmet legal needs by legal issue type in England and Wales

Source: LSB (2020)

Figure 4: Perceived inaccessibility of the justice system in England and Wales

Source: LSB (2020)

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To summarize, the PeopleLaw sector represents only a small fraction – estimated to be about
a fifth to a quarter -- of the overall legal services market in both the US and the UK. The
evidence suggests that this fraction has been in secular decline in both countries for the past
few decades. Moreover, UK citizens’ unmet legal needs are not adequately addressed despite
the major overhaul in legal services regulation a decade ago. We now turn to consider how
technology has been impacting the provision of legal services in each of the two hemispheres,
BigLaw and PeopleLaw, respectively.

Section 2: Digital Technology in the BigLaw Sector

This section analyses how digital technology is influencing the work of lawyers and emergent
business models adopted by law firms and other providers. A “business model” is a focused
way of understanding how client needs – here the needs of corporate clients and big law firms
-- are met, in ways that translate into sustainable profit-making for providers (Teece 2010, Sako
2012). We first briefly survey the sort of digital technology being developed by providers and
adopted by users in BigLaw. While lawtech may be defined as technology that supports or
enables the provision of legal services, it is a broad category, encompassing the use of
interactive websites, electronic documents, and elements of artificial intelligence (AI) to
automate the review and prediction from text, and automation of workflow and matter
management. We distinguish between an earlier wave of routinized automation, and more
recent ongoing adoption of AI technologies.

Technology use cases in BigLaw

In the BigLaw context, users distinguish between technologies supporting the “practice of
law”—that is, supporting the delivery of legal services themselves—and those supporting the
“business of law”—that is, supporting the management of client relationships and the allocation
of human resource internally.

In the practice of law, a core system for most law firms and corporate in-house teams is
document management, which provides digital indexing for legal services work product.
Closely related to this, but more varied in their implementation, are knowledge management
systems, which seek to aggregate content, including prior work done by the firm, in ways that
are relevant and accessible for busy professionals. Increasingly, firms and corporate in-house
teams are also making use of workflow automation platforms applying what in other industries
might be referred to as robotic process automation (RPA), that is, the automation of scalable
and repetitive tasks. Increasingly common too are the use of extranets or digital deal-rooms—
that is secure repositories of data that are accessible by the lawyers and clients or others outside
their team. In large-scale litigation, or corporate transactions, there are typically huge volumes
of digital documents that are provided by outside parties and need to be reviewable by a range
of personnel across organizational boundaries (Sako, Armour et al. 2020).

The deployment of AI differs from earlier generations of automation in that it requires training
to parameterize a model that best classifies items of a particular category.13 Training is done

13
Many current deployments of AI in legal services rely on machine learning, or deep learning, coupled with
natural language processing (NLP) (Frankenreiter and Nyarko, this volume). However, some systems in operation
make use of an earlier rules-based approach, and leading-edge applications seek to combine elements of both to
deliver greater explainability: Armour, J. and A. Petrova (2021). AI and Judicial Precedents: A Review. University
of Oxford.

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using a set of data labelled according to the variable of interest. This training requires data—
the more the better—that is relevant and accurately labelled. In the litigation context, AI is now
commonly used to identify potentially relevant documents in a pre-trial discovery exercise.
This necessitates the training of new models for each suit, based on aspects identified as
“relevant” by expert human reviewers. In the transactional context, AI is increasingly deployed
to review contracts. In-house teams train AI systems to review their company’s every day or
“business as usual” contracts; BigLaw firms by contrast train AI systems to do due diligence,
reviewing a large corpus of an M&A target’s contracts to identify clauses that may pose
problems for buyers (such as change of control clauses). In each case, the training requires
legal expertise.14 Moreover, increasing numbers of legal practitioners are making use of AI in
support of their legal research, training tools that complement the offerings of the big legal data
providers (Armour, Parnham et al. 2020, Sako, Armour et al. 2020).

In the “business of law”, technology is widely used to support accounts and time recording.
BigLaw firms are beginning to deploy AI-based systems both to enhance and leverage the data
from these earlier systems. An appropriately-trained model can both help to fill gaps in time
recordings and predict the likely time budget for new instructions. This opens up the possibility
of output-based pricing, as opposed to the traditional input-based model of the billable hour.
Similarly, lawyers are increasingly turning to CRM (customer relationship management),
systems to support marketing and client relationships. These systems themselves increasingly
make us of AI (Sako, Armour et al. 2020).

The deployment of AI makes economic sense where the fixed costs of training a model can be
amortized across a large number of similar exercises. This “scaling” of the trained model’s
application can be done either on a very large process flow for a single user, or by deploying
the same model across multiple similar processes from different users. These can be termed
“within-user” and “between-user” scaling, respectively. In each case, the model’s performance
is continually updated through feedback from review of its output. In contexts where “between-
user” scaling is efficient, problems may arise where users are uncomfortable about their data
being used to train a model that can go on to generate value for other users. Legal users—
especially law firms—are highly sensitive to this issue, which can in some cases act as a block
on scaling. Corporate clients may also be cautious about between-user sharing of data due to
commercial sensitivity, particularly if the data are not about back-office but front-office,
potentially revealing the essence of their competitive advantage.

Augmented lawyering and business models in BigLaw

Focusing on the adoption of artificial intelligence (AI), survey and interview evidence suggests
that the impact of AI on lawyers has multiple components (Armour, Parnham et al. 2020). First,
by disaggregating lawyers’ work into tasks, the most well-understood effect is substitution, that
is, AI machines automating and replacing tasks which are repetitive and scalable. Second,
lawyers’ work of giving bespoke advice is augmented by the use of AI; here, lawyers are
consumers of AI to augment the quality of their advisory work. Third, AI creates the need for
new tasks such as in data science, information security, process and project management, and
user experience. In this context of legal service delivery pipeline, lawyers are producers of AI,
working as part of a multi-disciplinary team (MDT).

14
It is an open question whether this legal expertise necessarily has to be supplied by a person qualified as a
“lawyer”: see Armour, J., et al. (2020). "Augmented Lawyering." Available at SSRN 3688896.

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These three distinctive AI effects on lawyers’ work -- substitution, augmentation, and new task
creation – raise questions about where in the BigLaw ecosystem these effects are taking place.
The ecosystem consists of corporate clients as the ultimate customer, serviced on the one hand
by law firms—the traditional “outside counsel”—and on the other by a rapidly-changing
congeries of other types of legal services firms (sometimes referred to as “Alternative Legal
Service Providers” (ALSPs) to differentiate them from law firms) including law companies
and legal tech providers (see Figure 5). In prior work, we sought to organize these relationships
by reference to business models, which clarify how value is created for clients (Armour and
Sako 2020). We distinguish between a traditional “Legal Advisory” business model which
entails the provision of bespoke or customized advice or analysis, a “Legal Operations”
business model, which focuses on leveraging efficiencies in the execution of frequently-
repeated legal tasks, and an emerging “Legal Technology” business model focuses on the
development of technology platforms for legal services (Armour and Sako 2020).

The Legal Operations business model, when it first emerged, was largely driven by reductions
in labor costs through process management and outsourcing, but in recent years has become
increasingly enabled by the deployment of technology. In this context, technology substitutes
for humans, both within the Legal Operations business and for its clients. The Legal Advisory
model, in contrast, focuses on work that requires skills that for the foreseeable future remain
distinctively human. Technology in this context can augment the work of human lawyers, by
freeing them up from doing repetitive work to focus on the activities for which their human
capital is most valuable. Technology is also creating new tasks, most obviously in firms
(including young ventures) adopting the Legal Technology business model, but also in firms
adopting the Legal Operations business model.

Figure 5: the BigLaw Ecosystem

Corporate client

Legal Technology: develops software tools,

technology platforms
Lawyers augmenting AI, substituted by AI

Legal Advisory Legal Ops Legal Tech

Legal Operations: uses process management

Legal Advisory: offers bespoke legal advice, + tech to scale delivery of standardised
key asset human capital services
Lawyers Augmented by AI Lawyers augmenting AI, substituted by AI

We characterize these business models as ideal types; in practice, experimentation in

combining different business models is rife. For instance, some law firms have developed
internal legal operations expertise, and/or have an in-house legal technology firm either via
organic growth or acquisition. For example, in the US, Wilson Sonsini has an in-house
technology division in the form of SixFifty, and in the UK, Simmons & Simmons acquired
Wavelength Law, a lawtech provider. At the same time, notable law companies have used legal

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operations excellence as a launch pad to move into legal advisory work; for example, Elevate
has its in-house law firm Elevate Next, and UnitedLex created a law firm Marshall Denning.
In the meantime, ALSPs and legal tech providers are partnering with law firms to access
premier corporate clients (ThomsonReuters 2021). Combining all three business models –
Legal Advisory, Legal Operations, and Legal Technology – under one roof in an integrated
legal management company might be desirable from the point of view of providing a one-stop
shop for corporate clients. However, such integration creates tensions in strategic focus and
reputational capital. In particular, employing both lawyers-as-consumers of AI and lawyers-as-
producers of AI under one roof is challenging, not least due to the need to establish career paths
to integrate, or segregate, the two types of lawyers. As it stands, these career paths are yet to
be clarified. And some firms are implicitly signaling which type of lawyer -- lawyer-as-
consumer or lawyers-as-producer of AI – they prioritize as their core human capital.

Our empirical findings suggest that such human capital challenges, rather than the challenge of
accessing external finance, are more central to the difficulty of law firms as lawyer-only
partnerships to sustain the effective deployment of digital technology including AI (Armour,
Parnham et al. 2020).

Section 3: Digital Technology in the PeopleLaw Sector

Using digital technology in PeopleLaw, just as for BigLaw, potentially unlocks enormous value
to meet the legal needs of consumers. Common across the two sectors, technology is generally
seen to contribute to increasing the efficiency of, and lowering the cost of, delivery. This is
done, in part by automation that cuts out the need for human lawyers, and in part by exploiting
economies of scale. Because data aggregation is possible across individual consumers, service
providers for PeopleLaw would likely face fewer barriers to scaling were they to deploy AI
than their counterparts in BigLaw.

Against these advantages arising from the application of digital technology are some significant
barriers that account for the fragmented nature of PeopleLaw service delivery. It is important
to untangle these barriers from the demand side and the supply side of the PeopleLaw market.
The demand side is well understood with systematic evidence discussed earlier in Section 1.
This can be summarized in terms of persistently high degree of unmet legal needs in many
issue areas (see Figure 3), due to the perceived inaccessibility of the civil justice system and
the cost of accessing lawyers to solve legal problems that ordinary citizens face. Survey
evidence (see Figure 4) shows that consumers’ budget constraints are significant. In particular,
some consumers are unable to afford a lawyer to advise them whenever they have a problem
at home (divorce, child custody, debt collection, etc.), at work (employment dispute), or when
moving home (immigration, conveyancing, etc.). These problems or disputes have a legal
dimension, and translate into legal needs that households encounter, that could be addressed
through the civil legal system. The adoption of legal technology is seen to solve the issue of
unmet legal needs, in part by lowering the unit cost of legal service delivery, particularly in
areas where such legal service can be productized. In transactional contexts, this can take the
form of providing standardized document templates or transaction processing pipelines. In the
context of dispute resolution, this could involve facilitating online dispute resolution (“ODR”)
mechanisms that are quicker and simpler to execute than traditional court proceedings.

Despite the clear potential for technology to meet latent demand, adoption of technology by
solo practitioners and small law firms – the sort that traditionally service individual clients –

10

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remains lower than in larger firms. The Legal Services Board’s 2018 survey of Technology
and Innovation in Legal Services asked firms about deployment of ten emerging technologies
(see Figure 6), and in each case found that firms with more than 50 employees were much more
likely to have done so (Legal Services Board 2018). The ABA’s 2019 report on technology
adoption by small firms presents a similar picture (ABA 2019). Moreover, the evidence
discussed in Section 1 suggests there are still considerable unmet legal needs. Why, despite the
UK’s reforms designed to liberalize legal services for the benefit of consumers, does this
pattern emerge so consistently?

Inability to exploit economies of scale likely plays a role. The deployment of automated
systems has fixed costs, which make them relatively more costly for smaller than larger firms
to adopt. This means that technology is likely to penetrate first into BigLaw firms. It also
implies that deployment in PeopleLaw is likely to necessitate consolidation of service providers.

Figure 6: Use of Digital Technology by Type in the UK in 2018

Source: LSB (2018) survey.

There also appears to be a challenge of translation between how lay clients speak about their
problems and the way in which the legal system frames these same issues. This translation
exercise is a core part of a human lawyer’s “client skills”. Social intelligence—including the
ability to empathize and communicate with a with range of backgrounds—remains particularly
elusive for AI systems (Frey and Osborne 2017). In the BigLaw context, the users of technical
systems are typically themselves lawyers, and so able to deliver such translation for their
ultimate clients. The costs of having human lawyers provide this are typically small relative to
the value of the service in question. For PeopleLaw, the cost of having a human lawyer remain
in the loop may be prohibitive. This suggests that at least part of the unmet legal needs may be
beyond the current technical possibility frontier.

Use cases in PeopleLaw

For the reasons described above, deployment of technology in the PeopleLaw context remains
relatively modest. One key use case is document automation. In particular, it is the only
technology of the ten considered in the LSB’s 2018 survey for which law firm respondents
serving individuals were more likely to report adoption than those serving large businesses
(25% vs 11%)(Legal Services Board 2018). And transaction management tools are increasingly

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widely deployed to assist in residential real estate, which is by far the largest throughput of
transactions for which individuals need legal services.15

These tools are in many cases complemented by a platform model that facilitates the connection
of a user to a relevant human lawyer. These are typically fronted by a portal that offers users
simple Q&A on basic legal issues relating to their concerns, accompanied with document
templates – perhaps automatically generated – along with referrals to human lawyers where the
service requires moves beyond the basics. The platform retains a network of lawyers whose
work is ranked by users and to whom referrals are made.

Chatbots may seem a promising solution to the problem of engaging with lay users, but they
need to be supported by systems capable of dealing with a sufficiently wide range of user inputs.
Expert system approaches are constrained by the need to hard-code the relevant knowledge
frameworks, creating limitations where user queries go outside this. Machine learning
approaches trained on legal materials must not only be able to dispense and classify legal advice
– beyond the capabilities of current systems (Frankenreiter and Nyarko, in this volume)—but
also to be able to translate this into how lay people understand legal issues. There is evidently
a serious gap between ordinary parlance used by laypersons and the specialized terminology
of legal discourse. This gap tests the frontier of applying natural language processing (NLP) to
use laypersons’ statements or queries as data for prediction.16 Making progress with these
technological challenges will permit chatbots and virtual assistants to give wider-ranging
advice to consumers. This current technological bottleneck may explain the relatively low rate
of use of chatbots and virtual assistants (only 5% of respondents in firms servicing
individuals)(see Figure 6), even compared to the use of other types of legal technology in the
LSB’s 2018 survey (Legal Services Board 2018).

Augmented lawyering and business models in PeopleLaw

Lawyers in PeopleLaw face the same dynamics of substitution, augmentation, and new task
creation associated with technology adoption as do those working in BigLaw. The PeopleLaw
ecosystem, however, is somewhat different in both the stakeholders and the key emergent
business models (see Figure 7). In the PeopleLaw ecosystem, clients are individual consumers
and small businesses, rather than large corporate clients. Thus, all the lawyers in the ecosystem
are on the supply side, offering advice to consumers (contrast the BigLaw ecosystem, where
the demand side is driven by in-house lawyers). Traditionally, lawyers, whether as sole
practitioners or as members of law firms or on behalf of legal aid or other organizations,
transacted directly with consumers.

With legal technology, the ecosystem is extended with the providers of two new business
models, namely Legal Technology and Transactional Platforms. Substitution of lawyers is a

15
Legal issues in most other significant consumer transactions – for example, financial products or car payment
plans – are managed by the firm on the other side.
16
For example, a study using a corpus of 5842 cases of attorney misconduct initiated by citizen complaints in
the US, reports that fact statements by unguided self-represented litigants are far less amenable to machine-
learning techniques to predict outcomes than are judicially-drafted statements of facts Branting, K., et al. (2020).
Judges Are from Mars, Pro Se Litigants Are from Venus: Predicting Decisions from Lay Text. Legal
Knowledge and Information Systems: JURIX 2020: The Thirty-third Annual Conference, Brno, Czech
Republic, December 9-11, 2020, IOS Press.
, Branting, L. K., et al. (2020). "Scalable and explainable legal prediction." Artificial Intelligence and
Law: 1-26.
.

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key aim of Legal Technology model and requires lawyers-as-producers working as part of
multi-disciplinary teams to develop new technology tools, including virtual assistants and
chatbots, and document template generation. Humans-out-of-the-loop in providing legal
advice would lower the cost of legal service provision. A separate technology use exists in
providing Transactional Platforms, which is aimed at not substituting lawyers but by matching
lawyers to clients, just as e-Bay provides a marketplace for buyers and sellers to come together
and engage in transaction. Thus, a lawtech firm offering such a marketplace acts as a two-
sided platform (Rochet and Tirole 2003, Sundararajan 2016, Van Alstyne, Parker et al. 2016)
to lower costs of matching lawyers to consumer needs.

Moreover, some providers define consumer needs, not as legal needs, but as something broader,
thus leading to integrating legal services with other services for the convenience of being a
“one stop shop”. Such consumer service providers combine technology and human capital to
offer legal services as part of a bundle of complementary services. For example, Farewill offers
“death” services, combining will writing and funeral services; other providers may offer a
service in “moving home”, combining conveyancing and mortgage brokerage, or in “injury”
combining advice on personal injury law with insurance services.

As of the 2010s, legal technology is not yet capable of substituting effectively for human
lawyers except in very simple tasks, such as generating standardized documents for wills or
small business incorporation. Thus, there so far appears to be more value created by technology
augmenting human lawyers and lowering the search cost for end-users, than by technology
substituting human lawyers. While augmenting human lawyers brings the overall costs of legal
services down by increasing productivity, there is still a need for human lawyer input in many
cases.17 In future, if and when the review part can be also automated, PeopleLaw providers
would better be able to meet additional latent demand for legal and associated services.

Figure 7: the PeopleLaw Ecosystem

Individual/SME
client

Legal Technology: develops

technology tools, templates, virtual
assistants & chatbots
Lawyers augmenting AI,
substituted by AI

Transactional
Lawyers platform
Legal Tech

Legal Transactional Platform: develops a

Legal Advisory: offers bespoke legal marketplace to match supply (lawyers
advice for consumers and other professionals) and demand by
Lawyers augmented by AI clients
Lawyers’ work unaffected by AI

17
For example, NetLawman provides a co-habitation (living together) agreement template for only £26.40, but
the price rises to £176.40 for a “template + review” package:.NetLawman.co.uk. Thus, the document template is
only 15 percent of the cost of template + human lawyer review.

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Section 4: Implications for Levelling the Playing Field

We are now in a position to return to our central question: will the adoption of legal technology
level the playing field in the two sectors, PeopleLaw and BigLaw? In order to address this
convergence-divergence question, this section examines several areas, namely the extent to
which consumer or client needs are met, access to external capital (Hadfield 2014), emergent
business models, organizational governance, and industry structure. We discuss each
dimension below, highlighting the necessary market and technological conditions for
convergence, contrasting these with others that would suggest divergence in the coming years.

The causal framework used to discuss the convergence of two sectors is based on the following
elements. First, we summarize the emergent business models that are theoretically possible
given the nature of legal technology and the availability of data. Second, we examine factors
that encourage or discourage the adoption of these business models, including regulation,
access to financial capital and relevant human capital, mediated by organizational governance
of law firms and other providers. Third, to the extent that it is possible, we draw implications
for the market size and industry structure (the degree of concentration or fragmentation) of
PeopleLaw and BigLaw markets.

Convergence in meeting client needs?

Before we delve into the analysis using the causal framework, a high-level overview of the
possibility of convergence and divergence may be provided with an economic lens, prior to
situation in the organizational context. This amounts to looking primarily at the black boxes in
Figure 8, imputing causal links between legal technology and data on the one hand, and market
size and industry structure on the other, while assuming that latent demand is more or less fixed.

Digital technology is a double-edged sword when it comes to levelling the playing field with
respect to meeting client or consumer needs. On the one hand, the possibility for convergence
relative to the past lies in technology’s ability to reduce costs of delivery, expanding the “legal
production possibility frontier” given user budget constraints. The reduction in cost per unit
of legal service delivery derives from both supply-side economies of scale, with technology
facilitating automation (substituting human lawyers) and better workflows, and from demand-
side economies of scale, the so-called network effects.

Figure 8: Causal framework for examining convergence-divergence

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Other factors, however, suggest we may still be a long way from absolute convergence, and
the two sectors may continue to diverge in meeting latent legal needs. Convergence would
require the demand curve to remain fixed, which may not be the case. For example, in the
BigLaw context, while technology assisted review (TAR) lowers the unit cost of document
review, its availability may simultaneously increase the level of effective demand (that is, the
numbers of documents sought to be reviewed), thus raising the capacity needed to meet the
overall demand. Thus, while the per-unit cost is lowered by technology, the equilibrium price
might increase due to an increase in the size of the pie (this assumes a relatively high price
elasticity of demand or an outward shift in the demand curve). This type of effect requires users
to have significant financial resources, more readily available in BigLaw than in PeopleLaw.
In PeopleLaw, notwithstanding consumers’ meagre financial resources, inability (yet) to
automate interfaces with end-users due to the translation challenge (from lay language to legal
framing as discussed in Section 3) means that unmet legal needs are likely to remain
significantly high.18 In short, this is a scenario in which PeopleLaw will be left behind in the
artificial intelligence revolution, while BigLaw leapfrogs in the scale and scope of AI adoption.

Thus, to predict convergence or continued divergence necessitates attributing different

conditions to each side of the market. On the supply side, the case for convergence is based
on technology’s capacity to reduce the cost of service delivery, but this may operate
asymmetrically between the sectors—implying continued divergence—because of the
uncertainty around technological capacity to translate lay language into legal framing. On the
demand side, convergence would come about if latent legal demand is more or less fixed; by
contrast, the divergence perspective is grounded in a view that unmet legal needs are a
moveable feast, with latent demand turning into effective demand not only through a change
in the price but also through outward shifts in the demand curve arising from societal and
commercial forces.

Below, we start by comparing emergent business models and their complements in PeopleLaw
and BigLaw, to unravel some of these differing conditions.

Technological possibilities, business models, and data: BigLaw and PeopleLaw compared
Our first task is to compare the technological possibility offered by legal technology and data
to develop new business models in the two segments of legal services market. In both BigLaw
and PeopleLaw sectors, the current phase of legal technology is based not only on rule-based
expert systems to generate documents based on templates, but also machine learning that
enables the generation of prediction. With this in mind, we identify five business models which
exist in both sectors (see Figure 9) but with some variations in relative importance. In particular,
Legal Advisory given by lawyers-as-consumers-of-AI is plausible for both sectors but likely
remains unaffordable for many of the PeopleLaw consumers. Given this, the application of
Legal Technology to bypass lawyers-in-the-loop by using chatbots and virtual assistants has
high latent demand in PeopleLaw. But the aforementioned technological problem of translating
lay language into legal framing using NLP is a barrier to the wide diffusion of chatbots in
PeopleLaw, but not in BigLaw.

18
Moreover, there remain considerable uncertainties regarding how great the savings in cost must be before
technological solutions become attractive to consumer users: the documented identification of unmet legal need
may not translate straightforwardly into willingness to pay: see Prescott, J. (2010). "The challenges of
calculating the benefits of providing access to legal services." Fordham Urb. LJ 37: 303.
.

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In making a distinction between legal advice (more bespoke) and legal services (subject to
repeated and scalable delivery), the Legal Operations business model has wider application in
BigLaw than in PeopleLaw. This is because large law firms and corporations in BigLaw would
wish to exploit workflow efficiency and automation within their organizations, while solo
practitioners and law firms in PeopleLaw have less need or opportunity due to their small scale.
In other words, opportunities to seek efficiency and lower costs exist due to both supply side
and demand side reasons, but BigLaw is in a position to benefit more from supply side
economies of scale than PeopleLaw.

With respect to demand-side economies (Brynjolfsson and McAfee 2016), network effects
could be leveraged in both sectors by using the Transactional Platform business model. Not
only do such marketplaces lower search costs, the possibilities of finding appropriate
transactional partners rise exponentially with more users of the platform. Separately, another
demand-side aggregation may occur as a result of adopting what we call an Integrated Service
Delivery model, in which legal service is delivered as part of a larger bundle of services. This
model has applications in both sectors.

Figure 9: Business models in BigLaw and PeopleLaw compared

Business model BigLaw PeopleLaw

Legal Advisory Bespoke legal advice by lawyers as Bespoke legal advice by lawyers for
consumers of AI for corporate individual consumers, but it may be
clients unaffordable
Legal Operations Improve workflow of legal service Less important as both consumers
delivery at law firms and and providers do not have large
corporations via automation organizations
Legal Technology Develop software tools, to Develop and provide software
generate documents, to predict tools, document templates, virtual
outcomes, etc. assistants & chatbots
Transactional Platform Lawyers-on-demand for corporate Marketplace to lower search costs
clients wanting contract lawyers on for consumers to find lawyers
a project-by-project basis
Integrated Service Delivery Corporate clients framing their Consumer framing their need in
demand in business services (”tax “moving home” (conveyancing +
restructuring”, M&A, government mortgage), “breakup” (divorce +
investigation & regulatory child custody), ”injury” (insurance +
compliance, etc.) employment), “death” (wills
+probate + funerals).

Last and not least, the central importance of “big data” in artificial intelligence is likely to give
advantages to providers that can scale in both BigLaw and PeopleLaw. First-mover advantage
may accrue to data aggregators that have a head start in training their AI models using data.
Both sectors face similar challenges in turning unstructured data into machine-readable
structured data, while also developing NLP methods to analyze less structured data. However,
there are different dynamics that should be noted here. In PeopleLaw, between-user data
aggregation appears possible with access to consumer data being in theory much easier,
although this may be subject to growing background constitutional data governance concerning
privacy. For now, it is curious that LegalZoom appears to be the only PeopleLaw startup that
has scaled, which indicates that we need to investigate barriers to scale up other than in the
nature of data. In BigLaw, between-user data aggregation requires careful negotiation that
takes account of commercial sensitivity. For now, much of the data aggregation taking place
is within-user, for example for a specific corporate client, be it a bank or an insurance company.

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Between-user data aggregation in BigLaw will require both further pushing the technology
possibility frontier – by eliminating the need to unencrypt data via federated machine learning
– and the setting of industry-wide standards for data sharing.

Another possible route to scaling up, leading to convergence, is the emergence of providers
that serve both BigLaw and PeopleLaw clients. If a machine learning algorithm can be used
for contract analytics in BigLaw, why not deploy the same algorithm for tenancy agreements,
employment contracts, and other documents in PeopleLaw? In reality, providers serving both
market segments are not a common trend, reasons for which may include the vastly different
price points to generate demand in the two market segments, and the importance of cultivating
a client base as a market entry barrier.

Access to finance including external capital

We now shift our analysis to the orange boxes in Figure 9, namely studying any differences in
financial capital constraint and human capital constraint to the effective deployment of new
business models that arise from organizational governance of law firms and other entities
providing legal services in BigLaw and PeopleLaw. Our analysis suggests that the financial
capital constraint is not an issue in BigLaw in the way that it might be in PeopleLaw, whereas
the human capital constraint may be more of a problem in BigLaw than in PeopleLaw.

From a corporate governance perspective, the inability of traditional law firm partnerships to
raise external capital was considered a major challenge preventing law firms from adopting
technology (Hadfield 2014). Our research suggests that rather, the main challenge for law firms
in the BigLaw sector is in human capital, and in recruiting and motivating non-lawyers working
in multi-disciplinary teams to deploy digital technology for legal service delivery (Armour,
Parnham et al. 2020). In PeopleLaw, by contrast, sole practitioners and small firms likely suffer
from financial constraints, if they wish to access legal technology.

Given the absence of publicly available information on spending on digital technology by law
firms and corporate legal departments, it is difficult to estimate the difference in investments
made between the PeopleLaw and BigLaw sectors. Instead, we resort to comparing the amount
of external funds that have been invested in lawtech startups, using the Crunchbase Pro
database. We focused, in our analysis, on 139 lawtech startups in London (45), New York (37),
and San Francisco Bay Area (47). We manually classified these 139 lawtech startups in
PeopleLaw, BigLaw, and HybridLaw by reading the company description in Crunchbase,
LinkedIn and company websites. The areas of legal work that these startups addressed with
their technology are wide-ranging. In BigLaw, startups in all three locations were in contract
analytics, knowledge management, practice management, or lawyers-on-demand marketplaces.
In PeopleLaw, tech startups existed typically in will-writing, residential conveyancing, and
simplifying the process of setting up a new business for startup founders. HybridLaw startups
included those with tools for patenting and patent search, and tools for clients who were not-
for-profit or for government organizations.

As shown in Figure 10, there are more BigLaw startups than PeopleLaw startups in each
location. But the difference between the number of BigLaw startups and the number of
PeopleLaw startups is bigger in San Francisco than in New York or London. In terms of money
raised (including angel and venture capital financing) over the lifetime of all startups in our
sample, what is most striking is the disproportionately large sums that San Francisco startups
have attracted in all areas of law, as compared to startups in London and New York (see Figure

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11). Money raised by BigLaw startups is more than money raised by PeopleLaw startups in all
three locations, but the difference appears marginal in London and New York.

While these figures are only indicative of the underlying trends, we believe there are plausible
explanations for the funding patterns. First, the disproportionately large amount of funding in
San Francisco may be due to the supply side – there are simply a larger pool of startup founder
talent with more serial entrepreneurs who target markets beyond legal, and a larger pool of
angel and venture capital funding in San Francisco than in New York or London (Sako, Qian
et al. 2020). Second, fundraising by startups in BigLaw captures only a portion of the total
investment in technology for BigLaw. Not only do BigLaw startups attract venture capital
funding; they also receive complementary investment by law firm and corporate clients to co-
create new technology and share data. For example, according to the annual financial statement
submitted to Companies House, the English magic circle firm Allen & Overy LLP invested
approximately £20 million in internally-generated software in 2018/19. This is more than two-
thirds of the total amount raised (£28m) by BigLaw lawtech startups in London, as shown in
Figure 11. Thus, in BigLaw, the startup fundraising figures significantly understate the total
investment in technology, whereas in PeopleLaw there is no corresponding investment by
individual consumers.

To summarize, financial capital appears not to be a binding constraint for the BigLaw sector,
given that law firms organized as partnerships are able to invest more in technology than the
fundraising by startups. Turning to PeopleLaw, because law firms serving the sector tend to be
smaller and have fewer financial resources, outside capital is plausibly more important to
enable more lawtech startups to emerge in this market segment.

Figure 10: Lawtech startups in PeopleLaw, BigLaw and HybridLaw

Number of lawtech startups by
category
30
20
10
0
BL PL HL

Lonon New York San Francisco

Figure 11: Money raised by lawtech startups in three locations

Money raised in USD
200000000

150000000

100000000

50000000

0
BL money raised PL money raised HL money raised

London New York San Francisco

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Access to multi-disciplinary human capital
We argued that an effective use of multidisciplinary teams (MDTs) in which lawyers-as-
producers-of-AI work alongside non-legal professionals was essential for the effective
deployment of legal technology. Here, we argue also that the problem of accessing multi-
disciplinary human capital to enable MDTs is more pertinent in BigLaw than in PeopleLaw.

In BigLaw, clients are large law firms as lawyer-only partnerships and corporate legal
departments. Within law firms, human lawyers are required for bespoke work, and these
lawyers-as-consumers-of-AI do very different work from lawyers-as-producers-of-AI working
in MDTs. Other non-legal professionals are also not given opportunities for promotion to top
management, making it challenging to recruit and retain the best talent in data science,
management, and other disciplines (Armour, Parnham et al. 2020). Thus, there is likely to be a
bifurcation in legal service delivery, between law firm partnerships that focus on the human
capital business, and corporations that are aligned better to implement MDTs.

In PeopleLaw, the transformative impact of legal technology is likely to come about through
lawtech startups which employ lawyers-as-producers-of-AI. There are of course law firm
partnerships in PeopleLaw sector also, but the absence of career paths for multi-disciplinary
non-legal professionals does not hit small law firms and sole-practice lawyers as much as large
law firms which are more prevalent in BigLaw. PeopleLaw may also be delivered by
professionals other than lawyers, for example experts in tax, insurance, real estate, and human
resources.

In short, by comparing BigLaw and PeopleLaw, BigLaw faces a greater human capital
challenge than PeopleLaw. BigLaw law firms’ challenge lies in aligning its human capital
investment as a complement to their newly adopted business models other than the Legal
Advisory model. PeopleLaw lawyers can also take advantage of the Transactional Platform,
that enhances individual lawyers’ reputational transparency for consumers, thus reducing the
significance of reputation pooling at the firm level.

Regulation
From the foregoing discussion, the financial constraint appeared to be more binding, and the
human capital constraint less binding, in PeopleLaw than BigLaw. This suggests that the UK’s
relaxation of rules that prohibited ownership of law firms by non-lawyers—which would
facilitate the raising of outside capital—should have had more of an impact in the PeopleLaw
than the BigLaw sector.

There are now over 1,000 licensed ABSs in the UK, as against a total population of over 10,000
law firms. For England and Wales, the Solicitors Regulation Authority (SRA) approved 1089
ABSs by December 2020. Of these, 73 percent are limited companies, and 22 percent are
limited liability partnerships. 19 About half of these ABSs have transformed from law firm
partnerships (Legal Services Board 2017), and a sizeable number have consequently changed
the way in which they raise finance, to invest more in technology and innovation (Solicitors
Regulation Authority 2014). Consistently with the foregoing account, the vast majority of these
law-firm-to-ABS moves have been very small firms whose clients are individuals rather than

19
Calculations are based on the SRA’s Solicitors Register datashare data accessed on 30/12/2020.

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businesses (Legal Services Board 2017). Among the new entrants are large players in both
PeopleLaw and BigLaw, notably Co-op Legal Services, a division of the retailing Co-op Group,
offering probate and family law services, and the Big Four audit firms each with their legal
ABSs. ABS conversion by large incumbent law firms that focus on the corporate sector, such
as DWF which underwent an IPO in 2019 (DWF 2019, Armour and Sako 2020), has been very
much the exception (Aulakh and Kirkpatrick 2016). Thus, ABSs have a bifurcated distribution,
with a small number of BigLaw ABSs and a vast majority of PeopleLaw ABSs.

This seems to suggest the UK’s regulatory reforms had an impact on the PeopleLaw sector.
Yet if so, we might expect this to translate into more capital being raised by lawtech startups
in the UK than in the US, for which Figure 11 gives no support. While supply-side
considerations may explain the greater levels of investment in San Francisco, this evidence
does suggest that the impact of the UK’s deregulation has been less than transformative. Access
to financial capital may be necessary but not sufficient to bring about such transformation in
PeopleLaw. Hence, UK policy initiatives such as the SRA’s Legal Access Challenge20 and the
LawTech UK’s sandbox hosted by TechNation.21 These sandboxes are intended to not only
give providers better access to granular regulatory expertise to test new service offerings, but
also to enhance legitimacy and consumer confidence in the robustness of the underlying
lawtech. This is consistent with the conclusion by Barton (in this volume) that in the US, the
speed of lawtech adoption, ironically led by providers serving the poor and corporate clients,
is bounded by the technological barriers rather than the regulatory barriers alone.

Future of market size and industry structure

Pulling these various strands together, what is the likely future for PeopleLaw and BigLaw in
terms of their relative market size and industry structure? We attempt to address this question
in the context of no change in current regulation, and first identify the scaleup possibilities and
advantage of each identified business model. Simply put, the Legal Advisory model does not
scale. By contrast, the Legal Operations and Transactional Platform models are subject to
supply-side and demand-side economies respectively. Legal Technology that has a platform
characteristic has the potential to scale and dominate (Cusumano, Gawer et al. 2019), while
other technologies such as software tools may remain “point solutions” what do not scale
without a platform. Integrated Service Delivery is promising in wrapping legal services in
wider service offerings and will blur the boundaries between legal and non-legal markets.

In BigLaw, technology solutions that are specific to legal industry are already wired into cross-
sector technology solutions – for example DocuSign with its e-signature, Salesforce, contract
analytics tools that use the Microsoft Office platform, etc. Moreover, data providers such as
Thomson Reuters and LexisNexis are vying to become technology platform leaders via the
acquisition of lawtech providers. One possibility is that legal technology for BigLaw will
become more and more subject to the platform logic, leading to greater market concentration
of technology providers, many of which hail from outside the legal industry. If that is the case,
the UK Competition and Markets Authority’s recent recommendation for a unified register of
lawtech providers may be necessary but not sufficient as effective public policy (CMA 2020).
At a minimum, what is a lawtech provider, as opposed to a tech provider, needs to be defined.
Also, market concentration requires a bigger push to restrain anti-competitive behavior of big
tech companies.

20
https://www.sra.org.uk/sra/news/press/2020-press-release-archive/legal-access-challenge-final-reports/
21
https://technation.io/lawtechsandboxpilot/

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In PeopleLaw, market growth (and concentration) would take place only if two things happen
– the growth of Transactional Platforms and technological solutions to the lay-to-legal-framing
translation problem. While platforms may take off to provide a launching pad for scaling up,
one side of the marketplace will remain human lawyers, rather than chatbots or virtual
assistants until this translation problem is addressed and resolved by data scientists and
linguists. In the meantime, blurring the boundary between BigLaw and PeopleLaw market
segments would not happen for some time to come in spite of the theoretical possibility of
sharing the same platform and the same algorithms across segments. The reasons stated earlier
include the difficulty of aggregating across-user data, the vastly different price points to solicit
demand, and client base cultivation as a market entry barrier. Moreover, convergence is more
likely to come about via “trickling up” rather than “trickling down”, consistent with
Christensen’s idea of disruptive innovation (Christensen 1997, Christensen, Wang et al. 2013).
That is, it is more likely for legal service innovation that starts by addressing the low end of
the market whose needs are currently not met by incumbents, to move up the value chain, than
for expensive high-end solutions to be adapted for low end markets by stripping down
functionality to achieve lower costs.

Conclusion

This paper addressed a question of central importance to public policy, namely whether or not
the adoption of legal technology will level the playing field between two hemispheres of the
legal services sector—PeopleLaw and BigLaw. In the late 2010s, PeopleLaw constituted only
a fifth to a quarter of the total revenues in legal services markets in the US and UK. We argue
in this paper that to level the playing field and to make PeopleLaw thrive relative to BigLaw,
the use of legal technology is necessary but not sufficient.

Legal technology, together with the aggregation of data, has enormous potential to transform
the way legal services and legal advice are delivered in both hemispheres. Repetitive and
scalable tasks can be automated, substituting technology for human lawyers and lowering unit
costs. Tasks requiring extensive customization or social intelligence remain in the exclusive
competence of human lawyers, but their capacity is augmented by the deployment of
technology for repetitive tasks. Through these channels, technology offers the potential to
lower the costs of legal service delivery and thus reach consumers and clients whose needs had
gone unmet. This would most obviously play out through the adoption of new business models
(such as legal operations, transactional platforms, and legal technology) that focus on capturing
economies of scale. In turn, these economies of scale would drive market concentration, with
emerging winners likely being those who can best combine network externalities associated
with both usage and data aggregation. This is a dynamic increasingly familiar from tech firms
in other sectors. The change would be most obvious in PeopleLaw, which traditionally operates
at a much smaller scale, but the underlying dynamic would be similar, and the process would
lead to convergence both in meeting client needs, business model adoption, and market
structure.

However, the reality is far more complex, because—at least for now—various constraints
create obstacles to market participants’ ability to leverage technology through the adoption of
new business models. In BigLaw, key barriers lie in the human capital constraints associated
with mixing Legal Advisory with other business models. Legal Advisory is, by definition,
focused on work that is human-centric, and so organizational and management structures that
appeal to the humans with the relevant capital will be crucial for competitive advantage.

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However, these institutions correspondingly constrain the deployment of Legal Operations and
Legal Technology business models, creating a constraint on concentration. Alongside this,
users’ hesitancy about data aggregation, at least for now, constrain the extent to which Legal
Technology platforms are able to achieve concentration.

In PeopleLaw, the process of concentration appears to be well under way, with transactional
platforms and integrated service delivery offerings capturing economies of scale and scope.
However, there remains a seemingly significant obstacle to meeting latent demand, through the
fact that the “client-facing” aspect of service delivery still eludes complete automation.
Because human lawyers have high costs, this translates into high prices that raise the bar on
the extent to which demand remains latent. There is some evidence that financial constraints
are also an obstacle, but this is challenged by the greater levels of lawtech investment in the
US (where law firms are not permitted to raise outside equity) than in the UK (where they have
been for a decade under the Alternative Business Structure model). This suggests that the stakes
in the US regulatory debate may be lower than participants imagine. At the same time, these
constraints are unlikely to be eased by a policy focus on price transparency and comparison
shopping emphasized by the UK’s Competition and Markets Authority (CMA 2020). Legal
services, however productized, are after all credence goods, and consumers and clients who
purchase them must overcome information asymmetry and/or behavioral biases.

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