This article was originally published by Legaltech News.
Every year has its fair share of twists and turns, and 2023 has been no exception for corporate legal departments (CLDs). In the first half of the year, we witnessed everything from handwringing and uncertainty to unbridled optimism.
Where do things stand now? To find the answer, let’s revisit three predictions I and others made at the beginning of the year regarding artificial intelligence (AI), cybersecurity, and the economy, and see where things are headed as 2023 winds down.
Artificial intelligence
Initial prediction: Demand for AI products will ramp up in 2023.
Where we are: Demand is surging, but CLDs are beginning to refine how they use AI.
While AI has indeed been the talk of the town, thanks largely to buzz around ChatGPT, supply has grown more dramatically than demand. AI-enabled solutions are proliferating in the legal industry, but the tough reality is that the vast majority will fail. As a result, CLDs must be savvy and selective regarding AI products going forward.
Regarding products powered by ChatGPT and ChatGPT-like large language models, keep in mind that precisely zero legal technology companies currently have access to that kind of processing power in-house. As such, customers must purchase from providers who may seize on an opportunity to increase prices, especially if demand stays high. Many legal technology companies will find the market unwilling to bear those price increases, meaning they may not be viable businesses.
The situation is akin to the irresponsible lending that led to the Great Recession, where long-term consequences were ignored (the high risk of mortgages eventually going into default) in favor of keeping up with short-term trends (“Hey, the VPs at XYZ Bank are getting huge bonuses for writing risky loans—we should do that here at ABC Bank, too!”). Without proper due diligence, CLDs run the risk of buying a product, building processes around it, doing all the necessary change management—and then having the product, and their AI futures, go into default.
CLDs who want to avoid such trouble will have to play the long game, rather than the short one. They should consider building in-house AI models or partnering with vendors that have a history of building tried-and-true AI legal technology solutions. The former option is more expensive and may not be possible, while the latter is the easier and possibly more efficient route. But both will be more financially feasible and sustainable than chasing a product just because it has AI branding under its name.
Cybersecurity
Initial prediction: Cybersecurity technology will prove to be a necessity, and investments in cybersecurity tools will ramp up.
Where we are: CLDs will continue to treat cybersecurity seriously, but they need to go beyond their own walls.
We’ve witnessed a growing number of cyberattacks this year. So far in 2023, three major law firms have been breached, and a slew of class-action lawsuits followed. This comes on the heels of one of the biggest law firm cybersecurity breaches ever, resulting in a law firm agreeing to pay $1.95 million to settle a class-action lawsuit related to a prior data breach.
Expect CLDs to adopt easy and effective ways to vet law firms for their security postures. Cybersecurity audit tools, for example, let CLDs send surveys and questionnaires to law firms to get a full picture of their cybersecurity capabilities. They should also prioritize site visits to their top firms to ensure that they are maintaining high-security standards. These visits should be performed no less than twice a year.
The economy
Initial prediction: While the U.S. economy is sending mixed signals, many analysts believe it will continue an upward trajectory.
Where we are: CLDs have had to significantly adjust expectations and budgets during a wildly turbulent 2023. But the initial rosy prediction may be coming back around.
At the start of the year, many experts predicted that the legal industry was poised for growth. Early on in 2023, that prediction seemed off the mark, as the first quarter saw many analysts predicting doom and gloom, which became a self-fulfilling prophecy through layoffs and cutbacks. Since then, though, optimism has returned. Inflation has stabilized, and it looks like we may avoid a recession after all.
With momentum returning, CLDs once again will shift from short-term to long-term thinking and adjust their investments accordingly. For example, many CLDs needed to increase headcount this year but couldn’t get authorization. With things looking up, now is the time to start building the case to bring on new people in 2024 to fill in the gaps.
The bottom line is that it’s time to start planning. Fortunately, with new technology capabilities and a sounder economic outlook, that future is looking a little brighter than it did back in January.
