Britain’s legal services sector has traditionally been one of the largest in the world, with turnover expected to grow to almost £40 billion by 2028. But the sector is in flux as US law firms look to increase their share of the UK market . Britain and Europe, while a Thomson Reuters report shows that it is becoming increasingly difficult to stand out as legal work becomes increasingly a commodity. In addition, a growing number of UK customers are looking to keep more operations in-house to improve efficiency and cost savings.
Multinational, recently merged law firm A&O Shearman is one company innovating to stay ahead. Part of the mission is to be the world’s most advanced in its sector. An integral part of this is delivering legal services in new and flexible ways and optimizing technology. This drive has pushed the organization to become an early adopter of AI, successfully enabling it to gain a competitive advantage in a traditional industry.
As David Wakeling, partner and head of A&O Shearman’s Markets Innovation Group (MIG), explains, the firm began its generative AI journey in November 2022, when it began testing a generative AI tool called Harvey, designed for law firms. “As lawyers, we are extremely focused on risk management. My team and I looked at generative AI, and we quickly realized that this would be truly disruptive to the global legal industry, and that it would pose significant risks.”
When implementing 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, and to capture any concerns or challenges they encountered. “We carried out a gradual rollout, piece by piece, and developed governance around the implementation to ensure this was done in a responsible and reliable manner. We have set a target of rolling it out to 2,000 lawyers in 43 legal areas by Christmas Eve 2022.”
The feedback from lawyers painted a very clear picture: “We could quickly see that this technology would augment the lawyer, rather than displace it,” says Wakeling. “AI can ‘hallucinate’ – revealing incorrect or misleading results – meaning that human decision-making and judgment, tailored to the specific sector in which the lawyer operates, is paramount.”
Following the successful trial, the technology was integrated into the company’s global practice, making A&O Shearman the first company in the world to deploy generative AI at the enterprise level.
This led A&O Shearman to collaborate with Microsoft and Harvey to develop its own generative AI contract negotiation tool that leveraged its unique business knowledge. “We wanted to create an AI tool for lawyers that streamlined contract review and negotiations while managing the risk of hallucinations. We did this by basing the AI output on high-quality ‘banks’ of legal knowledge – in other words, a bank of gold standard precedents. We wanted to ensure that the lawyer had a really good work product, the quality of which was assured,” says Wakeling. The result was ContractMatrix.
Wakeling says lawyers have been working in Microsoft Word for a long time, which means they are familiar with the Microsoft environment. “We made ContractMatrix a Word add-in because we wanted it to be controllable from the lawyer’s natural workspace. The idea is that you click on the app, ContractMatrix opens and your banks and past deals are immediately accessible to you. It made so much sense to build it in that environment.”
The tool speeds up many manual tasks associated with contract drafting, which a lawyer typically performs during their workday. “Nobody went to law school for manual process exercises – it’s about enabling lawyers to focus on tasks that require strategic thinking and decision-making,” says Wakeling. “From a business perspective, it is more productive and efficient.”
The firm currently has more than 1,000 lawyers using ContractMatrix, and Wakeling estimates that the tool saves an average of seven hours for each contract review, which is a productivity gain of approximately 30%. “That’s pretty important,” he adds.
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Wakeling says ContractMatrix, which runs on Microsoft Azure, is ‘made by our lawyers, for lawyers’
One of the biggest benefits of ContractMatrix is the ability to access gold standard precedents in seconds. “We can find precedent contracts and bring them to the screen with a few prompts from an AI engine,” says Wakeling. “That’s huge for lawyers because the entire legal system is based on precedents, so if you can get the best precedents quickly it has a huge impact.”
ContractMatrix runs on Microsoft’s cloud computing platform, Azure, which was an added attraction to the partnership with Microsoft. As John O’Donovan, Chief Technology Officer at A&O Shearman, explains, the law firm has a large IT infrastructure and a huge amount of information in existing data centers. “It is quite an intimidating task for a law firm to manage and organize such a huge infrastructure; you really have to be in the data center business.”
The ability to move infrastructure to Microsoft Azure’s cloud computing platform allowed A&O Shearman to centralize its technology. “When you build things in an on-premise environment, you have to buy a lot of infrastructure, like new servers, and that limits you. By switching from an on-premise to a cloud environment, you can quickly and easily scale up to your needs.”
This also allowed A&O Shearman ContractMatrix to scale as a software-as-a-service for customer and broader market use. As Wakeling says, this has presented a unique opportunity for the law firm to differentiate itself with what is essentially a new business. “We are a law firm focused on deploying legal AI to clients, with Microsoft as the common infrastructure for delivery. Customers know how to use Microsoft Azure and we can use it through that environment for customers’ internal legal functions, so it’s very enabling.”
O’Donovan adds that lawyers rely on Microsoft’s suite of tools such as SharePoint and OneDrive in their day-to-day work, and this creates further opportunities for A&O Shearman to build on this within the wider Azure environment. “Microsoft has really invested in legal technology in recent years, and we see that in the use of other tools such as Power BI [a data visualisation tool augmented by AI]. So we can use these platforms to build custom tools and workflows for our business and our customers – we don’t have to develop them from scratch. We can also 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 company’s technological capabilities over the years. The company ramped this up when generative AI emerged. “We hired a lot of developers and added a number of data scientists, but we also realized that we needed to retrain certain functions,” says Wakeling. “Our risk committee needed further training, as did some of our board members. All members of our risk committee now consider AI in their daily work.”
The company’s investment in generative AI affects everyone in the company, from marketing and finance to project managers, and the technology is transforming the business. “AI offers some very general capabilities, such as using Copilot for Microsoft 365 [a Microsoft AI assistant designed to enhance business productivity] to take and distribute minutes,” says O’Donovan. “People used to have to do these things manually, so there are some simple, huge efficiency gains being made.
“But our use of AI now extends all the way to augmenting the very specific skills and knowledge of our lawyers. ContractMatrix, created by our lawyers, for lawyers, is a good example of this.”
A&O Shearman’s integration of AI has also prompted the company to overhaul its graduate recruitment process, particularly by asking graduates questions about AI, such as how they would write the prompts if given a particular research task. “We look at their logic and rapid engineering,” says Wakeling. “And then we say: ‘How do you validate the output and look for errors?’ That’s why we ask them for different skills from the start of their career. We’re thinking about what will make graduates good lawyers in the decades to come – it’s no longer about rote learning; it is more strategic.”
The innovation doesn’t stop there. The very recent merger of Allen & Overy with Shearman & Sterling was also made possible through the collaboration with Microsoft, which helped with the integration of systems and data. For example, O’Donovan cites Microsoft’s cross-tenant sync capability, which allowed A&O Shearman to redirect the two old companies’ email addresses to the new email domain and manage communications between the two organizations through Teams.
“These technologies have been invaluable in bringing two major law firms together,” he says. “A merger requires a lot of work, which usually takes years, but by using these technologies we have been able to do some things quite quickly.”
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Wakeling and his team are looking at opportunities to apply generative AI beyond contract negotiations, such as due diligence, litigation detection and mergers and acquisitions. “That’s where we’re starting to turn our attention,” he says.
A&O Shearman’s unique experience in developing and deploying AI systems also means that a large number of customers have approached the company for advice on how to safely deploy AI within their businesses. “Since last summer, we have seen incredible customer demand for our global expertise on 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 unusually central to our AI legal advisory group. This is so valuable because clients want to know what responsible AI looks like in practice.”
Wakeling adds that it is likely that future apps his team develops will be developed jointly with Microsoft. “It certainly set a very good precedent for how one of the best technology companies can very successfully partner with one of the best law firms.”
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