by The UK legal services industry has historically been one of the largest in the world, with revenues expected to grow to almost £40bn by 2028. But the sector is in a state of flux as US law firms seek market share increase in the market. The UK and Europe, although a report from Thomson Reuters suggests that standing out is becoming increasingly difficult as legal work is commoditized. In addition, an increasing number of UK clients are looking to keep more activity in-house to improve efficiency and cost savings.
Newly incorporated multinational law firm A&O Shearman is one company that is innovating to stay ahead – part of its mission to be the most advanced sector in the world. A central part of this is the provision of legal services in new, flexible ways and the optimization of technology. This campaign encouraged the organization to become an early adopter of AI, allowing it to gain a competitive advantage in a traditional industry.
As David Wakeling, partner and head of A&O Shearman’s Market Innovation Group (MIG), explains, the company began its AI generation journey in November 2022, when it began testing an AI generation tool designed for law firms, called Harvey. “As lawyers, we are very focused on risk management. My team and I looked at generational AI, and we quickly realized that it would be very disruptive to the global legal industry, as well as carrying a lot of risks with it.”
In deploying Harvey, Wakeling and his team focused on the governance needed to enable a safe deployment. They introduced a feedback loop to understand how lawyers were using the AI tool, as well as capture any concerns or challenges they had. “We rolled out incrementally, piece by piece, and developed governance around deployment, to ensure it was done responsibly and reliably. Our objective was to roll it out to 2,000 lawyers across 43 jurisdictions by Christmas Eve 2022.”
The feedback from lawyers painted a very clear picture: “We could quickly see that this technology was going to complement the lawyer, rather than displace him,” says Wakeling. “AI can ‘guess’ – giving wrong or misleading results – which means that human decision-making and judgement, tailored to the particular industry sector in which the lawyer works, is essential.”
Following the successful trial, the technology was integrated into the firm’s global practice, making A&O Shearman the first firm in the world to deploy generative AI at the enterprise level.
This led A&O Shearman to partner with Microsoft and Harvey to develop its own AI-generated contract negotiation tool that leveraged its unique company knowledge. “We wanted to create an AI tool for lawyers that facilitated contract review and negotiation, and also managed the risk of hallucinations. We did this by basing the AI output on high quality ‘benches’ of legal knowledge – in other words, a bank of gold standard precedents. We wanted to make sure that the lawyer had a very good work product, with proven quality,” says Wakeling. The result was ContractMatrix.
Wakeling says that lawyers have long worked in Microsoft Word, which means they are familiar with the Microsoft environment. “We made ContractMatrix as a Word add-in because we wanted it to work from the lawyer’s natural workspace. The idea is that you hit the app, ContractMatrix opens, and your previous benches and deals are immediately accessible to you. It was so logical to build it in that environment.”
The tool speeds up many manual tasks, related to drafting contracts, that a lawyer usually performs during his working day. “No one went to law school for manual process exercises – this is about enabling lawyers to focus on tasks that require strategic thinking and decision-making,” says Wakeling. “From a business perspective, it’s more productive and efficient.”
The firm currently has more than 1,000 of its lawyers using ContractMatrix, and Wakeling estimates that the tool saves an average of seven hours for each contract review, which equates to a productivity gain of about 30 %. “That’s pretty significant,” he says.
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Wakeling says ContractMatrix, which runs on Microsoft Azure, was ‘made by our lawyers’.
One of the biggest benefits that ContractMatrix brings is the ability to access gold standard precedents in seconds. “We can find precedent contracts and bring those up to the screen with a few pointers to an AI engine,” says Wakeling. “That’s a big deal for lawyers because the whole legal system is based on precedent, so if you can get the best precedents quickly, that has a huge impact.”
ContractMatrix runs on Microsoft’s cloud computing platform, Azure, which was an additional draw for partnering with Microsoft. As John O’Donovan, chief technology officer at A&O Shearman explains, the law firm has a large IT infrastructure with a large amount of information based in existing data centres. “It’s a daunting job for a law firm to manage and organize such a large infrastructure; you need to be in the data center business.”
The opportunity to move its infrastructure into the Microsoft Azure cloud computing platform allowed A&O Shearman to centralize its technology. “When you build things in an on-premises environment, you have to buy a lot of infrastructure, like new servers, and that limits you. By moving from an on-premises environment to a cloud environment, you can quickly and easily scale according to your needs.”
This enabled A&O Shearman to also scale ContractMatrix as a software-as-a-service for wider client and market use. As Wakeling says, this gave the law firm a unique opportunity to differentiate itself from new business, effectively. “We are a law firm focused on deploying legal AI for clients, with Microsoft as the joint delivery infrastructure. Clients know how to use Microsoft Azure and we can deploy it for clients’ in-house legal functions through that environment, so it’s very enabling.”
O’Donovan also says that lawyers rely on a suite of Microsoft tools – such as SharePoint and OneDrive – in their daily work, and this creates further opportunities for A&O Shearman to build on that within the wider Azure environment. “Microsoft has invested heavily in legal technology over the last few years, and we see that in the use of other tools like Power BI. [a data visualisation tool augmented by AI]. So we can use those platforms to build custom tools and workflows for our business and our clients – we don’t have to develop them from scratch. We’re also able to help Microsoft make products more relevant to the legal market, so it’s a mutually beneficial partnership.”
A&O Shearman has invested heavily in improving the firm’s technological capabilities over the years. The company raised this when generational AI came up. “We hired a lot of developers and added some data scientists, but we also realized that certain functions needed to be up-skilled,” says Wakeling. “Our risk committee needed to be improved, as did some of our board members. Every member of our risk committee considers AI in their day-to-day work.”
The firm’s investment in generative AI affects everyone in the company, from marketing and finance to project managers, and the technology is changing the business. “AI provides some very generic capabilities, such as using Copilot for Microsoft 365 [a Microsoft AI assistant designed to enhance business productivity] taking and distributing meeting notes,” says O’Donovan. “People had to do these things by hand, so there were some simple, huge efficiencies to be gained.
“But our use of AI goes all the way to enhancing the very specific skills and knowledge of our lawyers. A great example of this is ContractMatrix, made by our lawyers, for lawyers.
A&O Shearman’s AI integration also prompted him to revamp his graduate recruitment process, primarily by asking graduates questions about AI, such as how they would write the prompts if given a certain research task. “We’re looking at his logic and his quick engineering,” says Wakeling. “And then we’re saying: ‘How do you validate the output and check for errors?’ So we’re asking them for a different skill set from the start of their careers. We are thinking about what will make graduates good lawyers in the years to come – it is no longer about rote learning; it’s more strategic.”
The innovation doesn’t stop there. Allen & Overy has also recently been empowered with Shearman & Sterling by working with Microsoft, helping with systems and data integration. As an example, O’Donovan cites Microsoft’s cross-tenant synchronization capability, which enabled A&O Shearman to redirect the email addresses of both legacy companies to the new email domain, as well as manage communications between the two organizations via Teams.
“These technologies were invaluable in building and bringing two large law firms together,” he says. “Merging requires a lot of work, which usually takes years, but we were able to do some things fairly quickly by taking advantage of these technologies.”
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Wakeling and his team are looking at opportunities to apply generative AI beyond contract negotiations, such as due diligence, litigation discovery and mergers and acquisitions. “That’s where we’re starting to focus our attention,” he says.
A&O Shearman’s unique experience in developing and deploying AI systems also means that a large number of clients have sought advice on how to safely deploy AI within their businesses. “Since last summer, there has been incredible client demand for our global expertise on the key issues surrounding AI deployment, as well as advice on AI-related disputes, AI collaboration agreements and AI-focused transactions. Our technical expertise in building and deploying AI systems is at the heart of our AI legal advisory group. This is so valuable because clients want to know what responsible AI looks like in practice.”
Wakeling says that future apps that his team will develop together with Microsoft will likely be invented. “It certainly sets a very good precedent for how one of the best technology companies can work successfully with one of the best law firms.”
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