In case anyone wasn’t listening, Legora, the legal AI provider, and Laurel, a work intelligence platform provider, recently announced a “partnership.” A partnership that reportedly has two main parts. It will offer what sounds like a fairly standard timekeeping tool. But it holds out the promise of an intriguing future tool that raises some possibilities.
And for users, the latter prompts some that suggest they may need to be careful what they ask for. (As a bit of an aside, I always wonder what these tech vendor partnerships really mean and what obligations come with them. Especially when the key announcement hinges on something the partners plan to do together.)
Automated Time Entry (Yawn)
The first part is an automated time entry program that turns every task a lawyer performs in Legora into a time entry. Reportedly, it will provide the client, the matter, and what was done for subsequent review.
That part of the partnership isn’t all that remarkable. Other vendors and providers have offered similar time entry programs for some time. Presumably the pitch is that those tools may not work as well with Legora. But Legora itself announced a similar integration with Intapp Time not long ago.
And I can just hear a Legora/Laurel representative going, “But ours is so much better.” Maybe it is. Maybe it’s the greatest thing to happen to timekeeping since the invention of the six-minute increment. I can’t really speak to that but do know that other products are out there.
The Bigger Piece
The more interesting part of the announcement is something considerably more than an automated time entry program. And it raises some questions that may make firms a little uncomfortable.
According to the Legora press release, “Laurel and Legora will jointly develop ways to measure how Legora is used, and the value that AI-powered legal work brings to law firms.”
The Legora press release goes on to say that the goal is to give law firm leaders “a clearer view of how their lawyers work, how much they rely on Legora, what work is done on Legora, and the value that Legora delivers.”
Laurel is even more blunt in its release: “Every firm adopting legal AI eventually asks the same thing. They know what it costs, but what are they getting back?… Laurel and Legora will keep working together beyond the timesheet, developing ways to measure how AI-powered legal work is used and what it is worth to a firm…”
What Legora and Laurel are promising is to give law firm management the ability to determine the ROI on their purchase of Legora. The ROI for most AI platforms has indeed proven elusive, except for administrative and nonbillable work where AI replaces human work. I can only assume those trying to determine Legora’s ROI have faced the same difficulty. Hence the effort.
I get it. Law firms spend a lot of money on an AI tool. So it might be nice to be able to say, “Here is the value that we got for it” to those partners who may be scratching their heads and saying, “What the hell did we spend so much money on?”
ROI. To Who?
But calculating the ROI, which is assumed to be the time saved by AI, presents some interesting issues for firms. As I have written, for firms billing by the hour, the ROI of AI platforms that replace substantive legal work really accrues to the client. Or should.
The whole premise is that the AI will do work, perhaps much of which had previously been done by paralegals or associates. That’s billable work, and for firms that use the billable hour model, that’s hardly a return on investment. To the contrary, it’s a loss. Try explaining at the next partners’ meeting that you’ve just spent a ton of money on something that reduces their year-end shares. And be ready for the question: is it too late to back out of this deal? Time saved is not necessarily money earned.
The Legora/Laurel partnership presumably will measure the time saved by Legora AI. Which is easily convertible to dollars. The question then becomes: What does a law firm do with those dollars? Does it pass them on to the client? And what if clients want to see those numbers?
As in, “We want to see the savings your tools came up with so we can determine whether our bills reflect that reduction.” What happens when the tool for justifying the technology investment becomes negotiating leverage for the client? Once you start measuring AI’s value, the next question is who gets to keep it.
There Is Value. For a Different Model
The real value in knowing these numbers, however, is to use them under a different sort of billing system. Like flat fee or outcome-based systems. There, knowing the value of what the AI tools have provided becomes critical. Either in calculating the fee or in running a cost-benefit analysis that compares the savings to the outcome.
That’s a good thing. Especially if it pushes firms to adopt those models and the clients accept them. (Don’t be too hasty to conclude all clients will want alternative billing. They’re not dumb. If they believe AI is dramatically reducing the time required to perform legal work, some may develop a sudden intense affection for hourly billing.)
A Tricky Calculation?
I also wonder how the savings are going to be calculated. It’s a bit tricky and prone to generalization. Suppose it’s determined that it would have taken an associate 10 hours to draft a brief, but using Legora, it only took 6 minutes. That, in and of itself, would reflect a tremendous savings. At $400 an hour, that’s almost $4,000. (Although I’m not sure what the associate would be doing for the other 9 hours 54 minutes.)
It’s easy to say that the time not spent by the associate times their rate is the savings and the ROI. But what about the time spent revising the brief? Checking the citations? (You damn well better check Legora’s or any other vendor’s AI citations if you want to avoid embarrassment, sanctions, or even worse.)
Will that time be netted against the time the AI saved? How will the complexity of the matter factor into the calculation? Should it? It’s a complicated matrix, and it will be interesting to see what Legora and Laurel come up with and how firms treat it.
Another Fly in the Ointment
Another fly in the ointment. By determining the ROI and the savings from AI, will firms unknowingly encourage additional overreliance on AI? In other words, will a partner tell an associate to simply use Legora to do everything, instead of doing the part of the work a human should do? This could particularly be an issue when the work is billed on a flat fee basis where the firm keeps part or all of the savings.
Or perhaps even more problematic. Will clients demand that AI tools be used once they see the savings, to the exclusion or reduction of the needed human work? The reasonable human inquiry that the attorney, by signing a pleading, certifies took place.
Here’s a chilling thought for firm management: What if the numbers show that clients should be paying less? What if they expose inefficiencies management would rather not acknowledge? Few places to run. Few places to hide.
So don’t think that this is nirvana.
That Does Not Necessarily Make It A Bad Thing
That’s not to say calculating the ROI is a bad thing. And it’s not to say Legora and Laurel aren’t providing a helpful tool. (Of course, both have a self-interest in demonstrating the dollar savings.) The questions, though, as with most technologies, primarily fall to the users of these tools.
There are real savings out there from the use of AI. And firm management needs to know what those savings are. They need to know to be transparent with their partners. Particularly in a ponderous consensus-driven decision-making model like most law firms use. They need to know the numbers to be transparent with their clients. And to have any hope of competing on price and quality in the post-AI world.
So what Legora and Laurel are doing is a good thing. But law firm management might want to be damn sure it understands what it’s asking for. You never know, it might just get it. And then what will it do?
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
The post Finally, A Way To Measure AI ROI: Be Careful What You Ask For appeared first on Above the Law.