10 predictions: The legal department of the future

This article highlights predictions from professionals from the KPMG Legal Operations Transformation Services practice in member firms around the world about how the legal function will evolve. By their very nature as predictions, they are not intended to provide any guarantees to future outcomes.

The role of corporate legal departments is constantly evolving. With C-level executives focused on the mix of geopolitical crises, business performance and digital and AI transformation, they are looking to their legal departments to broaden their priorities, focus on the bigger picture and deliver strategic value — all while doing more for the same or even less.

Amid the disruption and uncertainty that has marked the early 2020s, it’s hard to tell the long-term outcome of these accelerating changes. How are these forces shaping the legal departments of tomorrow?

The composition of legal departments will transform more quickly as technology and generative AI (“genAI”) redefine strategies for insourcing and outsourcing legal services. Demands for efficiency, agility and value-for-money will transform legal departments at an even faster speed, with more work being done by paralegals, prompt engineers, data scientists, operational and project experts, and other non-legal specialists.

Use of automated solutions, chatbots and other forms of genAI-enabled legal services will increase faster than predicted only a year ago. Each of these services will need support from lawyers, an infusion of technology and law, and a genuinely multidisciplinary workforce with new sets of skills.

GenAI will create new roles in knowledge management, data curation and data prompting. Output quality will depend more than ever on the quality of the inputs. A modern-day equivalent of the outmoded law librarian will emerge to steward the highest-quality data. Prompt engineering capabilities will be crucial, and they will become table stakes.

By 2030, contract lifecycle management (CLM) systems will be a universal feature of legal departments, providing a central source of truth for all contracts.

Unlike the standalone, bespoke systems in place today, future CLM technology will be embedded within the wider suite of genAI-infused enterprise technology platforms. This will empower an organization to manage the value of its core asset — its contracts — within one platform, boosting its ability to reduce cost, manage risk, extract value and improve performance.

Legal departments will inevitably become the owner of an organization’s contracts. The need to respond quickly to litigation or regulatory intervention will make this imperative, and genAI will enable it in new ways. GenAI’s value relies heavily on data quality, and the need for a central source of truth for an organization’s contracts will create this business opportunity for those legal departments that are brave enough to embrace it.

Changing technology and business models are transforming the market for legal services. Demand for legal “advice” has been overtaken by the need for a broader range of legal “services”, which include legal and risk advisory and consulting, the implementation of legal technology, legal operating model transformation, and legal managed services.

In the coming years, alternative legal service providers will no longer be alternative. They will be a core part of the market for legal services, growing faster and serving a broader cross-section of the market than traditional law firms. Enterprise technology and genAI will obliterate the line between legal tech providers and technology. Specialized and bespoke legal tech will fall to the wayside or be acquired by the enterprise offerings.

Organizations will look to larger providers for solutions that can seamlessly integrate with their technological ecosystem. Corporate legal departments will acquire legal services from a range of providers, not only to drive efficiency and cost but also to access a mix of capabilities to meet their business needs.

The terms of a contract drive the value it produces. Once those terms are set, it’s important to understand how they perform in reality — whether the value produced is as expected, whether service levels are met, whether terms should be added or amended, or whether a relationship should be terminated.

Businesses are increasingly relying on their legal department to identify opportunities to accelerate revenue and decrease cost and risk. Embedded CLMs can provide the visibility and data needed to know how 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, or whether service levels are due and have not been met, producing a stronger business outcome.

Over time, pools of legal data will grow richer and interconnect with data points from all other parts of business, including finance, sales and risk management. Legal departments will get better at analyzing these data for strategic insight – by having a data strategy, employing data specialists, and training their lawyers to better understand and use data in their legal work. 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 departments are transforming from defenders of the business into drivers of business outcomes and financial results. The value they create will be measured by factors that assess how well the legal department helps the organization to manage and reduce cost and risk — for example, by avoiding litigation — as well as the revenue they help accelerate — for example, by accepting risk when the potential reward warrants it, or by simplifying processes and delivery of contracts. The business will generate revenue faster than before as a result.

In the past, gathering this type of performance data could take up enormous amounts of employee time. In the future, maturing technological platforms and tools will give access to this data within seconds. Rather than waiting for users to enter search terms or questions, genAI will deliver insights proactively and in real time. This will likely open opportunities to assess and manage how people and contracts are performing with ever more precision and detail. 

The ability to quantify and demonstrate the value that legal departments generate will also help legal leaders make the business case for further investment in the legal function’s technological systems, people and capabilities. A measurable return on investment in the legal department is needed to secure the level of investment that a legal department need now and into the future.

The more personalized, user-centric experience pioneered in the business-to-consumer space has set new standards for all forms of business interaction. Legal departments are 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 providers, creating a new balance between external providers and the legal department.

Factors like these may compel legal departments 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.

By 2030, a legal professional’s ability to use technology to improve service delivery will become a key differentiator. Technology and genAI will not replace all lawyers. They will replace lawyers who do not use them to augment their work, drive value and deliver a new experience for the business — one of partnering, insight, judgment and experience that helps the business to navigate its challenges and accelerates the generation of revenue.

As genAI takes on rising portions of core legal work, a lawyer’s technical knowledge will be rebalanced with the quality of interaction between a lawyer and the business, or between a lawyer and a client. Along with skills in the digital realm, the most successful lawyers of the future will seek to improve their client dealings by enhancing the overall experience of dealing with the legal departments, becoming partners that business will seek out rather than avoid.

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 or variable-cost legal service providers. 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 or third-party sourcing options for the business are easy to use and provide a good quality experience for internal clients. 

Contract negotiation is already migrating to technology platforms that enable faster communication, better collaboration and access to market data in real time. Looking ahead, online platforms will increasingly enable legal teams to standardize the process across the organization, with uniform practices for contract design, internal approvals, and the signing and archiving of agreements.

Standardizing contract creation processes 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.

By 2030, embedded AI will make the process even faster and more efficient. In addition to alerting legal teams when a contract is coming due and monitoring returns on contractual transactions, AI will be able to predict when new agreements are needed and draft the terms based on previous experience, performance and tolerance for risk.

Words are the essence of the legal profession, and the rise of generative AI and large language models will rewrite legal’s traditional value proposition — moving the focus from crafting words and clauses on a bespoke basis to leveraging AI and other advances to deliver strategic insights and solutions, and greater efficiency and accuracy.

To drive successful legal operating models for the future, legal departments will need to lead a huge shift in mindset across the organization, and they’ll need to devote significant resources, budget and time to ensure the change takes hold. Their leaders will need to demonstrate their commitment to realizing the transformation’s benefits, and they will need to overcome resistance by framing the benefits of change in ways that wary legal professionals will accept. Putting implementation in the hands of a dedicated change management team, supported by management, will be critical.

The scale of transformation predicted above will put legal department leadership to the test. The traditional General Counsel role has passed. Current and future demands are changing the time, focus and skill sets needed to lead a legal department and ensure its operating model meets current goals and can be adapted for the future.

Leadership of legal departments 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, deliver more value, and help accelerate the generation of revenue for the business. As getting things done well takes priority, the role of the legal chief operating officer will continue to increase and expand, and increasingly include technology and transformation. As these speed of change accelerates, legal chief operating officers (COO) are likely to be joined by chief legal technology leaders (CTO) and chief legal data officers (CDO).

Overall, the future could see legal departments transformed into genuine partners with the business, offering advice that’s more proactive, evidence-based and strategic. Legal leaders 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 the business’ ongoing needs for practical legal advice and support the business with more efficiency, more user-friendly approaches and more focus on adding value.