The following article is based on predictions that professionals from the KPMG Legal Operations Transformation Services practice in member firms around the world have made in relation to how the legal function will evolve from the present to 2025. By their very nature as predictions, they are not intended to provide any guarantees to future outcomes.
The role of in-house legal teams is changing quickly. The businesses they support are going digital. The regulatory environment is getting more complex. Pressure to cut costs is at an all-time high, while standardization and automation are creating new routes to efficiency and insight. COVID-19 has ramped up these challenges even more, but the sudden move to remote work is also proof of concept for relying even more on connectivity, centralization and technology.
Amid the disruption and uncertainty that’s marked the year 2020, it’s hard to tell the long-term outcome of these accelerating changes. How are these forces shaping the legal functions of tomorrow?
Half of the legal team will not be lawyers.
In the new reality, the composition of legal teams transform alongside the business. As processes are improved and standardized, as technology enables new strategies for sourcing legal services, and as demands intensify to do more with less, the traditional legal function hierarchy will likely morph into a more agile and cost-effective structure.
Use of automated solutions, chatbots and other forms of productized legal services will increase, and these will need support from lawyers as well as a more multi-disciplinary workforce with different skill sets. In fact, the proportion of legal work done by paralegals, data analysts, operational experts and other specialists in the legal function might rise to the point where legal professionals become almost a minority.
CLM will be as ubiquitous as ERP and CRM.
By 2025, every organization can rely on their contract lifecycle management (CLM) to be the central source of truth for all contracts.
Many organizations today have already done the work to centralize their finance and resource-related activities within single systems, as well as their customer relations and sales. Centralizing how they manage contracts — from negotiation through execution and after termination — will similarly boost the organization’s ability to reduce cost, manage risk and improve performance.
For example, when a company is confronted with litigation or needs to update masses of contracts due to a regulatory change, the work to find and address all affected agreements will be done more quickly and accurately when the contracts were centrally available and their terms properly tagged.
There will be no line between Legal Tech and Tech.
Enterprise technology continues to broaden out into legal functions, blurring the line between legal tech providers and just tech.
As 2025 gets closer and digitalization of legal functions continues, organizations may increasingly eschew high-cost, stand-alone technologies that serve specific legal niches. Instead, they’ll look to larger providers for solutions that mesh holistically with their broader technology ecosystem.
Like medical tech and fintech providers, legal tech providers will likely either cease to exist or be subsumed by bigger players with broader offerings.
Reading data will be as important as reading legal terms.
The terms of a contract drive the value it produces. Once those terms are in play, it’s important to understand how they perform in reality — such as whether the value produced is as expected, whether terms should be added or amended, or whether a relationship should be terminated.
Businesses are increasingly relying on their legal team to help them identify opportunities to increase revenue and decrease cost and risk. CLMs can provide the visibility and data they need to know how their contracts are performing. For example, business units may receive alerts when contracts are coming due so they can take the opportunity to end poorly performing contracts or negotiate better terms.
Over time, pools of legal data can grow richer and legal teams will get better at analyzing it for strategic insight. For example, with all procurement, sales and other contracts processed and negotiated on one platform, data can be extracted to show the typical results of standard terms and deviations, enabling legal teams to identify opportunities for improving future contracts.
Legal teams will be measured on strict KPIs such as the money they make for the business.
Legal functions are transforming from defenders of the business to also become drivers of financial results. The value they create may be measured by key performance indicators (KPI) that assess not only how well the legal team helps the organization reduce cost and risk — for example, by avoiding litigation — but also the revenue they help generate — for example, by accepting some litigation risk when the potential reward warrants it.
In the past, gathering this type of performance data could take up enormous amounts of employee time. By 2025, maturing technological platforms and tools can give access to this data within seconds. This will likely open opportunities to assess and manage how people and contracts are performing with ever greater precision and detail.
Client experience will be at the heart of legal delivery.
The more personalized, user-centric experience pioneered in the business-to-consumer space (B2C) has set new standards for all forms of business interaction. In-house legal services will likely be no exception. Internal clients have come to expect the ease of use and customization that user-centric design brings. As the market for legal services evolves, business units may have more options to seek help from external legal service providers, creating new competitive threats for lawyers in-house.
Factors like these may compel legal functions to improve their clients’ dealings with them by building their services around the key drivers and challenges from across the organization. Again, data will be a key to enabling this shift. Like many of the world’s most successful B2C businesses, legal teams will use detailed analytics to constantly refine their processes and improve their service delivery.
All standardized legal work will be permanently subsumed into the business.
Pressure to reduce costs and growing comfort with automated solutions will likely combine to see routine legal work move out of the legal team’s hands and into the business. Any legal processes that are not bespoke will be automated and self-service enabled. This will permanently change the scope of legal services that legal functions deliver, tightening risk management and producing efficiency gains while freeing up time for leaner legal teams to focus on higher value work.
In step with how client experience will be at the heart of legal delivery, however, legal teams will need to take care that any self-service options for the business are easy to use and provide a good quality experience for internal clients.
Contracting processes will go completely online, slashing time to complete deals.
Contract negotiation may migrate to technology platforms that enable faster communication, better collaboration and access to market data in real time. Electronic processes that mimic manual ones, like redlining and email, will become things of the past.
Instead, online platforms enables legal teams to standardize the process across the organization, with uniform practices for contract design, internal approvals, and the signing and archiving of agreements. Integration with other information systems can help ensure relevant data is on tap to strengthen negotiating positions.
Standardizing contract creation processes also helps reduce risk by ensuring the legal team and business units are using up-to-date templates, with controls over deviations from standard wording, automated escalation points and robust version control.
Automating and standardizing these processes also lays the ground for closer monitoring of the value generated by contract over its lifetime, leading to our next prediction.
Managing culture and shifting mindsets will be essential.
With legal operating models undergoing tremendous change, it’s important to recognize the amount of potential effort that’s needed for success. Whether you’re installing new technology or redefining a process, organizations often need to devote enormous energy in terms of resources, budget and time taken to actually get things off the ground.
To drive successful legal operating models built on continuous innovation and improvement, legal teams will need to lead a huge shift in mindset across the organization. They’ll need to arm themselves with new skills and their leaders will need to demonstrate their commitment to realizing the transformation’s benefits. Putting implementation in the hands of a dedicated change management team, championed by management, will be critical.
Legal Chief Operations Officers will be just as important as General Counsels.
The scale of transformation predicted above will put legal function leadership to the test. It’s unlikely that people occupying the traditional General Counsel role would have the time or skill set to ensure their operating models can fulfill the full slate of traditional and new demands.
Leadership of the legal function will likely need to expand to allow more focus on getting the operating model right and seeing that it runs efficiently, while continuously seeking ways to improve processes, balance risk with reward, and deliver more value. As getting things done well takes priority, the rise of the legal chief operating officer is expected to be rapid and game changing.
Overall, 2025 may see legal functions transformed into true partners with the business, offering advice that’s more proactive, evidence-based and strategic. Heads of Legal and their teams will support a growing spectrum of risk, compliance, governance, operations and regulatory issues. At the same time, they’ll apply new processes, technologies and skills to service their company’s ongoing need for practical legal advice and support the business with more efficiency, more user-friendly approaches and more focus on adding value.
Legal services may not be offered to SEC registrant audit clients or where otherwise prohibited by law. KPMG LLP, the US member firm does not provide legal services.
Throughout this document, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved.
KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. For more detail about our structure please visit home.kpmg/governance.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.