Sunday, March 19, 2023 6:00 a.m.
Major advances in artificial intelligence (AI) technology are rapidly transforming the way law firms and accounting firms work.
The world’s largest professional services companies are beginning to use increasingly sophisticated artificial intelligence technologies in their day-to-day work.
However, the increased use of AI technology is not just the inevitable result of technological innovation, but rather the result of the changes that have transformed the legal and professional services sectors in recent years.
While law firms and accounting firms have in many ways been immune to previous waves of technological innovation, current conditions are now ripe for widespread change.
Although developments in large language models (LLMs) have created the means by which legal work can be automated, economic pressures are now driving the actual adoption of technology as a means of increasing law firm profits and compatible.
Specifically, with the City’s talent wars having driven up salaries in the legal and professional services sectors, companies have more incentive than ever to automate work and cut costs through the use of AI. .
At the same time, as the global economy is on the verge of entering a recession, law and accounting firms are facing increasing pressure to increase the efficiency of their own processes by investing in new technologies.
San Francisco technology company OpenAI has paved the way for the advancement of LLM technology, particularly through the development of its GPT technology.
In a blog post, OpenAI noted that its newly launched GPT-4 chatbot is now able to pass the US bar exam with a score in the top 10%.
In contrast, Open AI’s previous chatbot, GPT-3.5, which launched in November 2022, was only able to achieve scores equivalent to those achieved by the bottom 10% of exam takers.
The huge improvements in chatbot capabilities, over a period of just five months, are another sign of the rapid pace at which AI technology is developing.
Advances in the world of AI have already led to much speculation that lawyers may soon be replaced by chatbots and other technological tools.
However, the developments made in Silicon Valley startups have not gone unnoticed by the world’s top law and accounting firms, who are now increasingly using the technology themselves.
Major players in the professional services world, including law firm Magic Circle Allen & Overy and accounting firm Big Four PwC, have both struck deals in recent months to start using the IA Harvey chatbot in their work.
For reference, Harvey is an AI chatbot based on OpenAI’s GPT technology, which was created with $5 million in funding from OpenAI’s seed investment fund.
In both cases, PwC and Allen & Overy said that by using the Harvey AI platform, they aim to boost the “efficiency” of their businesses by offering more “cost-effective” solutions to their clients.
This adoption is, in many ways, driven by competition among businesses themselves, with clients increasingly seeking cheaper legal and professional service providers.
At the same time, the more widespread adoption of the “flat fee” model, as part of a move away from the billable hours system, has introduced a new wave of cost competition in the legal industry, which is expected to grow. intensify as the global economy enters a slump.
However, advances in AI have also come as law firms and accounting firms have recently undergone major transformations, driven by the changes caused by Covid-19.
In particular, the pandemic has dramatically increased the adoption of technology in the legal and professional services sector, as businesses have been forced to adapt to widespread working from home.
At the same time, Covid-19 has driven up salaries for lawyers and accountants dramatically, as fierce competition for professional talent, following a boom in demand for professional services, has seen companies offer salaries increasingly high in seeking to recruit and retain staff.
Notably, the city’s talent war has seen salaries paid to newly qualified solicitors soar to highs of up to £179,000 a year.
Today, with the M&A market slowing and the demand boom slowing, this pressure to cut costs, using technology, is increasingly beginning to be felt.
In the opinion of Thomson Reuters legal technology expert Kriti Sharma, advances 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 difficult to resist.