Updated: Sep 16, 2019
Contracts are at the core of every business. They cement commercial relationships and ensure you get what you bargained for. Failing to keep your legal documentation in order can prove expensive in the long run. According to the International Association for Contract & Commercial Management, organizations lose 9.2% of revenue every year due to poor contract management and oversight.
But resorting to traditional law firms to assist you in putting in place the legal agreements can be slow and expensive. Legal counsel can charge companies fees as high as $2,000-5,000 for relatively standard agreements, like freelancing contracts and non-disclosure agreements.
This causes businesses to face a difficult dilemma. They can either go about their business without appropriate legally binding contracts in place risking big losses, or overspend time and money trying to find a traditional lawyer to pay them $400 per hour to draft the relevant legal documents. For many start-ups and SMEs in particular the latter is simply unaffordable.
So why are traditional legal service providers so expensive? Going back to fundamentals, the legal sector is in the business of commercialising legal expertise. The traditional way has been for lawyers to take a bespoke service-based approach to addressing clients’ needs and charge you by the hour, even in cases where your situation is fairly standard.
When you ask a law firm to have an employment contract drafted, you are assigned $300 per hour junior lawyer billing you for every email and call to gather factual information about the engagement, for swapping out names and dates from a previous contract, and for tweaking the few clauses that typically change on a standard employment agreement. A bill for 10 hours of his time then sums up to $3,000 (that’s not including the review by the partner at $800-1,000 an hour).
This has been the case for many years, as it was largely assumed by both firms and clients that legal work was too bespoke and could only be performed by lawyers. That no longer reflects the realities of the legal industry, where new competition, technology and innovative legal service delivery models are rapidly transforming how legal services are provided. According to Thompson Reuters’ 2019 Report on the State of the Legal Market, services accounting for ~15% of the legal market by revenues are ‘ancillary support services that can easily be performed by non-law firm providers’, and this can only be expected to rise over time.
Technology is standardizing, automating, and ‘productizing’ what were once labour-intensive tasks performed by lawyers. This allows the legal sector to adopt a new way to commercialize legal expertise, encoded into technology products consumed by clients, rather than as bespoke services.
This is exactly what up-and-rising legal technology firms like Lexknights are doing in the area of contract management. The LexKnights platform equips businesses with intelligent contract generators enabling them create professionally drafted legally binding agreements and electronically sign them with their counterparts in minutes, seamlessly and at a low cost. Lexknights’ automated business contract platform tailors the agreements to the factual and commercial context based on plain English inputs provided directly by business users, to ensure that the right contract terms are in place.
Contract management has been one of the leading areas where we can see this transformation happening, particularly as more and more legal work is being done in-house and many are eyeing technologies that can help cultivate a more strategic or proactive approach to legal work as opposed to the reactive stance - not just to get out of trouble, but making sure that there is no trouble in the first place.
Many enterprises are using contract management technologies already. Contract management and e-signature are in the top three tools used by corporate legal departments, according to the Association of Corporate Counsel. And this trend is expected to continue, as Wolters Kluwer’s 2019 General Counsel Barometer survey revealed corporates see contract management as the technology solution expected to deliver the largest productivity gain.
Willingness to adopt legal technologies among smaller consumers is also growing strong. Companies increasingly see the upside potential of a well-oiled legal function, capable of creating measurable business value for the organization in forms such as reduced turnaround time for contracts and clear risk guidelines for entering new markets, rather than as a pure cost centre. A recent study by Olive Communications also revealed that 70% of consumers would choose a ‘lawbot’ – an automated online system – to handle their legal affairs over a human lawyer because it’s cheaper, faster and simpler.
With solutions like LexKnights designed for start-ups and SMEs, it will not be long before automated contract management technologies are adopted ‘en masse’.
Regulators worldwide are also supporting the technology revolution in the legal sector. In Singapore, for example, the Singapore Academy of Law articulated one of the most comprehensive legal technology visions in the world and has been steadily promoting the adoption of technology by businesses and law firms, and at the same time continues to foster a strong ecosystem of legal technology start-ups to drive disruptive innovations through initiatives like the Future Law Innovation Program (FLIP) and legaltech start-up accelerator GLIDE. Other examples include the recent proposal by the California Bar, to introduce new rules that would allow non-lawyers to invest in law firms and tech companies to provide certain legal services, following the UK’s pioneering liberalization of the sector with the Legal Services Act back in 2007.
Institutional investor money is also flowing into legaltech faster than ever. Venture capital funding of legaltech start-ups crossed the $1 billion threshold in a single year in 2018, a 7x increase over the previous two years, according to Forbes. Legaltech-specific investment funds are also emerging, like the launch of Bright Minds Capital Partners - the first evergreen fund specializing in early-stage investments in legal technology.
The legal industry is in a time ripe with tremendous new opportunities for agile, innovative technology-based providers, and end-consumers of legal services stand to benefit greatly from reduced costs and better service, finally taking the centre stage within the legal sector.
If you are ready to make improvements in your legal processes by adopting contract automation in your business to make contracting easier, faster and more affordable please visit the LexKnights website. Please also feel free to reach out to us at email@example.com!