AI Software Market in Legal Industry Size, Share & Trends Analysis Report By Components (Solution, Services), By Deployment (On-Premise, Cloud), By Applications (Legal Research, Contract Review and Management, E-Billing, E-Discovery, Compliance, Case Prediction), By End User (Law Firms, Corporate Legal Departments) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global AI software market in legal industry size was valued at USD 719.5 million in 2022. It is expected to reach USD 7,252.8 million by 2031, growing at a CAGR of 29.27% during the forecast period (2023–2031).

The next big thing in productivity and efficiency tools for law firms is quickly emerging as AI. The algorithm has improved its potential and resulted in increased utility in its application in the legal sector due to improvements in computing power and advancements in NLP, neural networks, and chips. Machine learning, information science, computer vision, evolutionary computation, data mining, and multi-agent systems contribute to artificial intelligence (AI). The skills and professionalism needed from lawyers are changing due to AI's impact on legal practice. Contract review and management, legal research, e-billing, and e-discovery are a few examples of AI applications in the legal sector. 

The market is expanding favorably due to rising demand for automation in processes like contract review and management, eDiscovery, case prediction, and compliance. In addition, Real estate company CBRE surveyed more than 100 law firms, finding that 48% now use AI software in their operations, and 41% plan to do the same. According to the poll, 61% of businesses use artificial intelligence (AI) to create and analyze legal papers, 47% for due diligence, and 42% for research.

Market Dynamics

Global ai software market in legal industry drivers

Various services and solutions offered by ai software

ROSS Intelligence's natural language search features allow attorneys to get the most out of it by posing queries and receiving recommendations for further reading, as well as links to applicable case law and supplementary materials. One hundred years after the law firm was established, BakerHostetler decided to use ROSS in its bankruptcy department to process 27 terabytes of data. ROSS sifted through trillions of documents and was able to answer questions in a short time. 

In addition, Casetext's CARA asserts that locating prior legal opinions enables attorneys to anticipate the arguments of an opposing counsel. Users can also identify cases mishandled or marked as potentially unreliable by lawyers. With the help of its predictive coding feature, every law builds prediction models from at least 300 documents that the user had previously categorized as relevant or irrelevant. The AI examines the metadata and content and uses that data to organize other documents. According to the company, the prediction model results can easily guide users in determining which documents are most pertinent.

Global ai software market in legal industry restraints

Concerns about data privacy of confidential and legal data

In contrast to other types of software, artificial intelligence (AI) comprises several different algorithms and produces results based on the input or captured data. It is important to keep remembering that since AI does not possess a brain of its own, it cannot be applied to sensitive or cases with sentimental value. Unlike attorneys and people, AI is without morality and emotion. They are incapable of making moral judgments; they can only carry out what is programmed in them. This is exceptionally accurate when it comes to equity judgments. In addition, AI cannot develop independently without human input, including new codes and training algorithms. The software is unable to apply its intelligence to any issue quickly. They have limited mental ability and cannot carry out jobs for which they were not designed. These factors are expected to restrict the market growth.

Global ai software market in legal industry opportunities:

Technology development for ai software solutions

The way that legal professionals operate has undoubtedly changed due to the development of technology in the field. Legal professionals, such as lawyers and paralegals, have been forced to become more proficient in tasks like word processing, telecommunications, data presentation, and other tasks as legal operations become more automated. Introducing such technological innovation will help lawyers conduct legal research quickly and effectively. Additionally, by implementing AI solutions, businesses and legal departments will be able to concentrate more on providing clients with advice and taking on challenging cases. 

Further, AI software can reduce paperwork, store vast amounts of data, and manage it effectively. Every aspect of the legal industry has been impacted by law technology, from corporate practices and law firms to courtroom operations and document handling. Modern software can now sort through legal records, streamline conversations, and determine which instances require the assistance of legal specialists.

Regional Analysis

By region, the global AI software market in legal industry is segmented into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North america dominates the global market

North America is the most significant contributor to the global AI software market in legal industry and is expected to grow at a CAGR of 27.24% during the forecast period. North America is anticipated to hold the greatest market share due to the rising use of cutting-edge technologies like AI. The region has a significant presence among vendors offering platforms and software for artificial intelligence to the legal sector. OpenText Corporation, IBM Corporation, Ross Intelligence Inc., Veritone Inc., and Neota Logic Inc. are just a few of them. AI is assisting lawyers in becoming more productive, positively influencing the market's expansion in the area. 

In addition, a rising number of partnerships and acquisitions were seen in the area. The availability of business incubators and innovation labs in the region supports the development of AI-based legal software. To support the development of legal technology, established law firms, ALSPs (like Thomson Reuters), the Big Four, and financial institutions (like Barclays) collaborated or set up their incubators. These incubators offer space to support legal tech startups and scale-up development and have access to the advice, know-how, and frequent investment that innovative companies need to succeed in the market.

Europe is expected to grow at a CAGR of 29.57% during the forecast period. The Artificial Intelligence Act, the first-ever legal framework for artificial intelligence, was introduced by the European Commission on April 21, 2021. The risks associated with the various applications of AI systems are addressed by extensive AI methods, which also seek to foster innovation in the field. The AI Act will be applicable to companies offering legal technology outside of the EU that serve EU users. It is anticipated that developments like these will accelerate the adoption of AI-based legal software in the area. The region also saw significant investments and seed funding for various small businesses and startups.

Asia-Pacific is expected to grow significantly over the forecast period. A 2020 survey by Daisy Chain, ACC, and Australian legal technology company Yarris found that 45% of participants had purchased legal technology in the previous 12 months. The percentage of respondents who said they had purchased legal technology in the last 12 months was 44%, followed by 37% by contract management systems, 26% by document management systems, 22% by knowledge management systems, and 22% by project management systems. These factors are expected to rise over the forecast period. Furthermore, Asia's legal industry adopted AI more slowly than North America and Europe. Large firms with plenty of resources, many law firms have established a foothold to set up a legal technology unit and an operational capability to make such investments profitable. This is different for smaller law firms because they have less money to spend on training, research, and development and buy or subscribe to such services.

The Latin American region is seeing an increase in interest in using AI in the law. It is anticipated that this interest will gradually shift to professions and how paralegals, legal researchers, and litigants conduct their work. AI in the legal industry has discovered a way to help attorneys and clients. The legal industry has changed significantly over the past few years, and Latin American law firms are following suit. Artificial intelligence tools are crucial for processes like due diligence, contract analysis, real estate analysis, intellectual property, and dispute resolution to be improved. 

The legal industry is undergoing a revolution thanks to technologies like cloud computing, smart contracts, and artificial intelligence. Law firms risk falling behind the more innovative and efficient competition if they do not use new tools to communicate with clients and manage and analyze massive amounts of case-related documents. The United Arab Emirates is the most advanced nation in this area, and its government is committed to utilizing various cutting-edge technological solutions to improve its overall legal system. In addition to the market for AI-powered legal software expanding, some new players are making investments. The global players were compelled to establish a presence in the region by the rising demand for AI-powered legal software.

Segmental Analysis

The global AI software market in the legal industry is segmented by component, deployment, application, and end-user.

Based on the component, the global market is bifurcated into solutions and services.

The solution segment is the highest contributor to the market and is expected to grow at a CAGR of 28.05% during the forecast period. The segment for software solutions typically holds the largest market share because the necessary task/process requires deploying AI software platforms and solutions in end-user systems. In contrast, market-available AI software gives users the tools they need to create applications. There will be more opportunities to deploy legal AI software solutions across end users as there is an increasing need to automate various legal-related tasks. In order to safeguard the sensitive information used in the processes, governing bodies still need to fully regulate legal software that uses artificial intelligence (AI). For instance, the development and application of AI will be under control by the Indian government.

The training, consulting, the legal AI software sector provides system integration, testing, support, and maintenance services. The services are essential to the operation of legal AI software. To manage the market rollout of AI-based solutions, the vendors of legal AI software need technical support and consulting services. The demand for the services segment is anticipated to increase faster in the anticipated period due to the growing need to perform various legal tasks efficiently.

Based on the deployment, the global market is bifurcated into on-premise and cloud.

The cloud segment owns the highest market share and is expected to grow at a CAGR of 30.31% during the forecast period. AI solutions must synchronize with the secure user logins and permissions specified by the law firm's Microsoft Active Directory or possibly set for something like their Box cloud storage to protect sensitive data. In order to maintain confidentiality, these AI solutions are typically implemented on-site, behind a law firm's firewall, or in a private cloud. On-premise solutions cannot compete with cloud solutions regarding flexibility and quick adaptation. Small law firms that require a practice management solution that will scale with them find that cloud solutions are the best option. In addition, the most crucial modules or features for a law firm can be selected and integrated with the current tool. Cloud solutions also support safe file sharing and collaboration between coworkers, clients, and outside parties by utilizing a centralized information system.

While it is simpler for new businesses to adopt cloud solutions, older businesses choose on-premise ones because of their existing infrastructure and preference for on-premise AI software. Artificial intelligence (AI) adoption in business processes while installed on-premises is part of the intelligent business process in today's world. Market strategies for legal software incorporate AI, creating a system capable of completing tasks requiring human intelligence. In developed nations like the USA, on-premise software solutions are widely used to achieve benefits like contract management and effective legal data analysis.

Based on the application, the global market is bifurcated into legal research, contract review and management, e-billing, e-discovery, compliance, and case prediction.

The e-billing segment is the highest contributor to the market and is expected to grow at a CAGR of 28.49% during the forecast period. Correct client billing is essential to the success of law firms. Law firms can now easily use e-billing software to save time for attorneys, ensure invoice accuracy, and resolve post-billing disputes with clients thanks to advancements in the LegalTech sector. In both private practice and law firms, legal e-billing software with AI is now frequently used by attorneys to bill clients. E-billing options unquestionably boost revenue, which raises their demand in the legal sector. There is no justification to avoid it because it is simple to deploy, use, and securely sync with the cloud.

The legal profession is changing in many ways due to technology and innovation. The value of legal research is still significant, but how it is done is constantly evolving. Online legal research services like Thomson Reuters' Westlaw welcomed attorneys who used hard copies for their research. The current stakeholders accept services that use artificial intelligence and analytics. In addition, the game and the cost of legal research are changing due to artificial intelligence (AI). In terms of computer software and systems, artificial intelligence (AI) refers to those that use pre-programmed tasks and learn as they go. Similarly, online legal investigation services predominate over specialized terminals and are accessible via the internet. Lawyers and law students now do most legal research online, eliminating the need for protracted library visits.

Based on the end-user, the global market is bifurcated into law firms and corporate legal departments.

The law firm segment owns the highest market share and is expected to grow at a CAGR of 28.66% during the forecast period. Every industry of professionals, including the legal profession, has been transformed by artificial intelligence. Software solutions are replacing paperwork and data management. Globally, technological advancements and rapid growth are observed in the legal sector, particularly in law firms. In addition, everything is susceptible to technological replacement except for a few services that rely on expertise and judgment. Due to the availability of numerous pieces of software that can perform the repetitive and laborious work that lawyers do, artificial intelligence is making its way into the legal industry. Artificial intelligence can assist lawyers in time-consuming, repetitive tasks, allowing them to concentrate on more important issues.

Businesses need artificial intelligence (AI) to be successful. Corporate legal departments are starting to use AI applications. Numerous tasks in corporate legal departments can be made simpler by AI applications' ability to analyze vast amounts of data, including the analysis of prior cases. In addition, using AI increases legal departments' productivity by streamlining numerous processes. JPMorgan uses COIN, an internal legal tool powered by AI that quickly extracts 150 attributes from more than 12,000 commercial credit agreements and contracts. According to the business, this represents 36,000 hours of legal work completed by its loan officers and attorneys. The other corporate legal departments can create similar software to streamline and perfect the due diligence process.

Recent Developments

• January 2023- The San Francisco-based law firm modCounsel and Luminance, the world leader in legal process automation, partnered to offer the full range of Luminance's AI-powered products to the firm's numerous high-growth clients.