Basically, although I see this as a tool that will sharply decrease entry-level and document review work in the near-term future, in the long-run I see this type of technology as a major threat to the current legal order, specifically to the "BigLaw" business model.
Let me start with a wider lens. I'm no Marxist in the political sense, but sometimes it's difficult to discard Karl Marx's material way of viewing the world, at least its basic sociological principles. For example, it's hard to completely discredit his focus on materialism as a historical determinant, e.g.:
In acquiring new productive forces men change their mode of production; and in changing their mode of production, in changing the way of earning their living, they change all their social relations. The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist.The same men who establish their social relations in conformity with the material productivity, produce also principles, ideas, and categories, in conformity with their social relations.
Thus the ideas, these categories, are as little eternal as the relations they express. They are historical and transitory products. There is a continual movement of growth in productive forces, of destruction in social relations, of formation in ideas; the only immutable thing is the abstraction of movement – mors immortalis.
It's a gross over-simplification of complex society, but at the core there's some truth to it. Look no further than a basic and hackneyed evaluation of how people gained wealth and power over time. In the feudal ages in Europe, land ownership determined virtually everything. It was the one singular avenue to wealth. You either had land or, in one way or another, you leached off someone who did. But over time, technology brought other avenues of wealth. Security and improved transportation allowed a genuine merchant class to develop. With it came the roots of modern banking, whose centers sprang up along the most common routes of commerce. Then came the industrial revolution and suddenly there were at least four major ways to get to the top of the economic pyramid: land, commerce, production, and banking. And of course, the lawyer class developed along side all of this in order to sort out the quagmires that developed in post-feudal society.
Fast-forward to the 20th century and the possible routes to wealth increased exponentially. Advances in financial markets allowed people to earn entirely derivative wealth. The basic recording of audiovisual performances made what was once a temporal experience into intellectual property that made entire industries. Suddenly, knowledge, too, in the form biochemical reactions or software processes, became a billion-dollar, wealth-creating business.
I say all this only to suggest the following: technology, historically, has increased possible avenues to wealth, not taken them away, which is why it should not necessarily be feared here. Land still makes one money; it just doesn't give one the proportionate power it did 800 years ago; heck, ask the farmers who still somehow own their own land, it doesn't even give the power it did 100 years ago.
So, moving back to the topic at the outset, let's look at why BigLaw is the way it is today. A cursory view of the last fifty years or so suggests to me that BigLaw largely developed in response to ever-increasingly multinational corporations who preferred working with law firms who had offices in multiple major metropolitan areas. Large, multinational corporations more or less needed large, multinational law firms. The prestigious ones that got the choice corporate accounts merged when feasible to reduce economies of scale and - voila! - you had firms with hundreds of attorneys who raked in the top business and could charge prime rates precisely because there weren't many places that could offer the manpower of elite graduates, places like Jones Day or Skadden Arps or Winstron & Strawn.
There are, of course, other reasons the major corporations consistently go to the larger firms, prestige and experience being at the top of the list. But to Fortune 500 companies, cutting expenses to free up cash and improve profitability is a religion. I've heard from multiple sources that BigLaw has been under increased pressure the last few years to cut billing hours. I have no reason to doubt that.
And these corporations - with knowledgeable in-house counsel, many of whom sit on their boards and in their executive committee - will certainly have knowledge of this technology's existence. And since more than one company is currently developing this technology, there's no reason to think it won't be priced competitively, which will allow a broader range of firms access to the technology. Will Joe Schuck operating a sole proprietorship out of his basement be able to get it? Probably not, but firms with 25+ attorneys would find it advantageous to streamline their discovery process.
If the software can reduce what used to be done by 100 attorneys into manageable work for 2-3, the manpower advantages of the BigLaw model are dead on arrival. Because of the software, smaller firms can take on cases that resource restrictions would have prevented them from taking previously. Things like class actions can be handled by smaller and smaller firms.
Because the range of activities firms can take on will increase, real competition for legal business will increase with new entrants into the market. The result should be more robust price competition.
Of course, BigLaw will still have two key advantages, as noted above: its history of experience with large corporate matters and its prestige of being armored with "cream of the crop" lawyers. And of course, they can continue to charge more as a result of both of these competitive advantages, but the status quo cannot continue. Fortune 500 companies will simply not pay exorbitant rates if another lawyer down the street has the exact same technology and is charging a fraction of the hourly rate. Much of the prestige difference comes from the illusion of paying elite associates and staff attorneys to do the grunt work; if a computer is doing that grunt work, why would anyone pay the extra?
And with a reduction in resource costs, many BigLaw attorneys will be less likely to stick around. If a BigLaw partner has a great relationship with two or three key clients, that partner is far more likely to splinter off and set up a new firm and take his clients with him if there is software that can reduce the manpower advantage of bigger firms.
I'll admit I'm no expert, but it just seems to me that with technology like this, an extra key to wealth has been created by allowing a whole new class of firm into the market for bigger and bigger clients. If they can offer similar services at half the cost, most companies will go with the discount provider. At the very least, the price pressures should end escalating relative salaries and bonuses because the pseudo-oligopoly over high-end legal services will be broken. If I were a BigLaw partner, I'd be concerned that more firms and attorneys could do what I do, that an army of elite attorneys may become as worthless and unnecessary as an army of elite barber college graduates, and that America's successful corporations will start shopping around if I don't slice rates, and my take-home profit.
Of course, thousands of young attorneys will suffer from a collapsing marketplace for their services. That's a major problem. But transformative technology doesn't just hit the lowly; it also opens up new avenues for others to achieve wealth. It shakes the top of the pyramid, too, and if more firms can take on complex litigation, it'll help them jump into higher levels of law and in the end it's better for all of us by increasing competition and cutting litigation costs for large American companies.