Law firms are moving away from solely relying on off-the-shelf AI solutions and are increasingly investing in developing their own proprietary AI tools or heavily customizing existing ones. This trend is driven by a desire for greater control over data security, the ability to fine-tune tools to specific practice needs, and to gain a competitive edge. Firms like Inkling Legal Design and Singapore's Allen & Gledhill have built internal AI systems, such as A&GEL, to automate tasks like drafting contracts and reviewing documents, leading to significant time and cost savings.
Some law firms are taking this a step further by licensing their internally developed AI tools to clients, transforming technology investments into new revenue streams. Rajah & Tann, for instance, offers a subscription-based AI-powered contract review service to clients, with an "off-ramp" to their lawyers for more complex issues. This model allows clients to cut costs on routine tasks while potentially driving more complex advisory work back to the firm, according to Rajesh Sreenivasan, head of technology, media and telecommunications at Rajah & Tann. Ashurst is also rethinking its business model, putting AI at the core of its services and developing alternative billing models.
Developing custom AI offers several benefits, including enhanced data security and the ability to quickly address issues like AI "hallucinations"—a problem that could be slower to resolve with third-party products. While some firms, like Irell & Manella with its IP3 platform, have successfully built bespoke tools, many in-house legal teams may lack the staff or resources to undertake such extensive development. However, firms like McDermott Will & Emery are demonstrating a hybrid approach, custom-training licensed AI models with their own proprietary data, such as market analysis from over 750 healthcare deals, to provide specialized insights and advice to clients. This allows them to offer highly relevant data that many other firms cannot match. Legal AI start-ups like Harvey, with an $11 billion valuation, and Legora, as well as companies like Anthropic, are also shaking up the sector, with firms increasingly adopting a hybrid model, using different providers for different needs.
