AI in Legal Tech Market To Hit USD 16.5 Bn by 2033

Tajammul Pangarkar
Tajammul Pangarkar

Updated · Jun 6, 2024

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Introduction

The Global AI in Legal Tech Market is expected to see significant expansion, with its size projected to increase from USD 1.6 billion in 2023 to around USD 16.5 billion by 2033. This growth is anticipated to be driven by the increasing adoption of AI technologies aimed at improving efficiency and productivity in legal practices. AI applications such as e-discovery, legal analytics, and predictive analysis are gaining traction due to their ability to process large volumes of data quickly and accurately, reducing manual labor and error rates.

Key growth factors include the rising demand for AI-powered tools that streamline legal processes, improve decision-making, and provide strategic insights. For instance, AI’s role in e-discovery, which accounted for over 20% of the market in 2022, is significant due to the proliferation of electronic data and the need for efficient data management during litigation. Additionally, the integration of AI in corporate legal departments and law firms is transforming traditional workflows, enhancing client service, and reducing operational costs.

Recent developments in the AI in Legal Tech market highlight significant mergers, acquisitions, and funding activities that are reshaping the industry. Notable acquisitions include Thomson Reuters’ purchase of Casetext, an AI-powered legal research technology company, for USD 650 million, as part of its strategy to enhance generative AI capabilities and expand legal tech offerings. PwC also formed an alliance with ContractPodAi to launch a new legal generative AI platform named Leah, aimed at improving contract lifecycle management.

In terms of funding, the legal AI startup sector has seen substantial investment, with venture funding in the AI space surpassing USD 50 billion last year. Notable transactions include Veradigm’s acquisition of ScienceIO for USD 140 million, a company that develops a biomedical language platform transforming medical text into data and insights.

These activities suggest a dynamic market environment spurred by the increasing demand for advanced AI solutions to streamline legal processes and enhance operational efficiencies.

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Key Takeaways

  • The global AI in Legal Tech market is projected to reach a substantial size of USD 16.5 billion by the year 2033, with a robust compound annual growth rate (CAGR) of 26.3% during the forecast period from 2024 to 2033.
  • The market was valued at USD 1.6 billion in 2023, indicating a significant growth trajectory over the forecast period.
  • The machine learning segment held the largest market share, accounting for 32% in 2023, showcasing this technology’s dominance in the AI in the Legal Tech market.
  • Cloud-based deployment emerged as the preferred choice, capturing a substantial market share of 70% in 2023, attributed to its flexibility, scalability, and cost-efficiency.
  • Legal research stood out as the leading application segment, commanding a significant market share of 20% in 2023, underscoring the importance of AI in enhancing research efficiency and accuracy.
  • Among end-users, law firms led the market with a notable share of 40% in 2023, indicating widespread adoption of AI technologies within this sector.
  • The adoption of AI-powered legal technology has the potential to cut law firms’ costs by approximately 50%, highlighting the substantial cost-saving benefits associated with AI integration.
  • By 2030, AI is expected to contribute approximately USD 13 trillion to the global economy, with significant gains anticipated for law firms as well.
  • Around 34% of legal departments in major corporations have plans to automate important tasks using AI, demonstrating a growing recognition of AI’s value in improving operational efficiency.
  • Despite significant adoption, 68% of legal professionals believe that the legal sector lags behind other industries in AI adoption, suggesting ample room for growth and innovation.
  • In 2023, North America held a dominant market position, capturing over 37.2% of the global AI in the Legal Tech market, driven by its robust technological infrastructure and early adoption of advanced technologies.
  • Top players in the market include IBM Corporation, Thomson Reuters, LexisNexis, ROSS Intelligence, Luminance, Kira Systems, Neota Logic, and Eigen Technologies, among others, contributing to the innovation and adoption of AI technologies in legal services.

AI in Legal Tech Statistics

  • AI adoption in legal tech has surged significantly in recent years, with a 17% projected growth over the next five years, reaching a valuation of USD 548.44 million presently.
  • In-house legal departments spend approximately 50% of their time reviewing contracts, highlighting the pressing need for AI-driven solutions to streamline workflows.
  • Gartner reports that 74% of the most efficient legal departments have implemented plans for legal transformation, leading to enhanced guidance and governance development in 79% of efficient companies.
  • The 2020 Legal Analytics Study by LexisNexis reveals that 92% of law firms plan to increase AI adoption, with 57% motivated by business excellence and 56% by client expectations.
  • Over 70% of young lawyers express concerns about work-life balance and mental health, emphasizing the importance of leveraging AI to reduce repetitive tasks and enhance job satisfaction.
  • Thomson Reuters predicts significant changes in the legal workforce, with some roles being eliminated while others, such as legal engineers or AI algorithm writers, are created to complement human expertise.
  • LexCheck’s AI-powered contract review solution facilitates contract redlining within five minutes, accelerates contract execution times by 33%, and reduces contract review time by over 80% for legal teams.

Recent Developments

Acquisitions and Mergers

  • Thomson Reuters acquired Casetext, an AI-powered legal research technology company, for USD 650 million. This acquisition aims to enhance Thomson Reuters’s generative AI capabilities.
  • Veradigm acquired ScienceIO for USD 140 million. ScienceIO develops a biomedical language platform that transforms medical text into data and insights, which can be applied in the legal tech domain.
  • Travelers Insurance acquired Corvus Insurance for USD 435 million. Corvus uses AI to help brokers predict and prevent complex cyber risks, showcasing the application of AI in legal risk management.

New Product Launches

  • PwC partnered with ContractPodAi to launch a new generative AI platform named Leah, designed to improve contract lifecycle management.
  • Agiloft announced a partnership with Kroll to enhance their global services network. This partnership aims to improve contract management systems using AI technologies.

Funding and Investments

  • Venture funding in the AI sector exceeded USD 50 billion last year, with significant rounds raised by startups like Figure and Lambda. This funding surge reflects strong investor interest in AI capabilities applicable to legal tech.
  • Lex Machina, a LexisNexis company, launched its highly demanded API system for state court Legal Analytics, further expanding their AI-driven legal analytics capabilities.

Partnerships and Alliances

  • Thomson Reuters updated its generative AI strategy, focusing on expanding AI capabilities across various legal tech applications, including legal research and document automation.
  • Kroll joined Agiloft’s network of service partners, aiming to leverage AI for enhanced contract management solutions.

Use Cases

  • Document Review and Analysis: AI technologies, such as generative AI, are significantly enhancing document review processes. Legal professionals use AI to sift through vast amounts of documents quickly, identifying relevant information and ensuring accuracy. This technology reduces manual labor and speeds up the review process by up to 50%.
  • Contract Drafting and Management: AI tools are employed to automate contract drafting, leveraging extensive databases of legal templates and ensuring compliance with legal standards. Approximately 88% of corporate legal departments use AI for contract drafting, which enhances efficiency and reduces errors.
  • Legal Research: AI-powered legal research tools enable lawyers to find precedents, case laws, and legal documents more efficiently. AI algorithms can analyze large datasets to provide relevant legal insights, cutting down research time by nearly 60%.
  • Predictive Analytics: AI applications in predictive analytics help forecast case outcomes by analyzing historical data and patterns in legal rulings. This technology assists lawyers in making informed decisions and strategizing effectively for their cases.
  • E-Discovery: E-discovery involves the identification, collection, and analysis of electronic data for litigation purposes. AI enhances e-discovery processes by automating the search for pertinent information within large datasets, which is crucial given the increasing volume of electronic communications.
  • Litigation Support: AI tools support litigation processes by automating routine tasks, such as document drafting, scheduling, and case management. This enables legal professionals to focus on more complex and strategic aspects of litigation.
  • Client Interaction and Virtual Assistants: AI-driven virtual assistants are used to interact with clients, answer routine queries, and provide updates on case statuses. These tools improve client engagement and satisfaction by ensuring timely and accurate communication.
  • Regulatory Compliance: AI helps legal departments ensure compliance with various regulations by monitoring legal changes and updating compliance protocols accordingly. This proactive approach helps avoid legal penalties and stay ahead of regulatory requirements.
  • Fraud Detection and Risk Management: AI systems are used to detect fraudulent activities and manage risks by analyzing transaction patterns and identifying anomalies. This application is particularly beneficial in corporate legal departments and financial institutions.
  • Document Summarization: AI technologies can summarize lengthy legal documents, making it easier for legal professionals to understand the key points and implications quickly. This enhances productivity and ensures that critical information is not overlooked.

Conclusion

In conclusion, the AI in Legal Tech Market is poised for substantial growth over the next decade, driven by advancements in AI technology and increasing demand for efficient legal solutions. While challenges remain, the benefits of AI adoption in enhancing legal services and operational efficiency are likely to outweigh the hurdles, paving the way for a transformative impact on the legal industry.

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Tajammul Pangarkar

Tajammul Pangarkar

Tajammul Pangarkar is a CMO at Prudour Pvt Ltd. Tajammul longstanding experience in the fields of mobile technology and industry research is often reflected in his insightful body of work. His interest lies in understanding tech trends, dissecting mobile applications, and raising general awareness of technical know-how. He frequently contributes to numerous industry-specific magazines and forums. When he’s not ruminating about various happenings in the tech world, he can usually be found indulging in his next favorite interest - table tennis.