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Gray Rule
March 2018 | VOLUME 19, NUMBER 2
Gray Rule
The Opportunity for 'Back Office AI' in Law Firms
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IN THIS ISSUE:
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»Skill Fade: The Ethics of Lawyer Dependence on Algorithms and Technology
»Using Expected Value Calculations and Big Data to Guide Decision-Making
»Fending Off Incursions by the Big Four into the Legal Industry
»The Opportunity for "Back Office AI" in Law Firms
»Suffolk Law School: Leading Transformation of Legal Education
»The Future of Change is Client/Law Firm Collaboration
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The Opportunity for By Sally Gonzalez, Senior Consultant, Fireman & Company, Scottsdale, AZ
Most of the recent hype around Artificial Intelligence in law firms has been focused on the front office—the potential for Artificial Intelligence to supplant some of the work now performed by lawyers. But there is also an opportunity for AI to transform the back office of law firms, reducing costs while improving quality and speed. This article explores the potential role of Robotic Process Automation (RPA) in achieving that transformation.

Artificial Intelligence (AI) continues to be a hot topic for law firms, generating much hype and angst about just how far it can go toward replacing lawyers with an army of "robot lawyers." Fortunately, the current wisdom is that while AI can perform many repetitive tasks currently performed by lawyers, there is no immediate threat of AI replacing the more complex services that lawyers deliver today.

With this front office concern now in perspective, it is time to think about "back office AI," the role that AI could play in transforming the business services side of law firms. One of the most interesting aspects of AI to explore is Robotic Process Automation (RPA). In 2013, McKinsey and Company identified knowledge work automation, including AI and RPA, as the second of twelve technologies with the greatest potential for economic disruption.1 Five years later, RPA adoption continues to grow, but law firms seem to be largely unaware of its existence and potential impact on the bottom line so far.

What is RPA?

RPA is a specialized type of AI software used to create programs (i.e., "bots") that emulate the way human beings interact with multiple systems in order to perform repetitive, rule-based tasks. RPA is especially valuable where processes involve intermediate manual calculations or are subject to high error rates.

A bot appears to both applications and users as if it were performing tasks they expect a human to do. A common example is web site chat bots that offer you an "online chat" for customer service. You may see a person's photo displayed and the text messages may seem to come from a human. However, the messages may well be from a bot programmed to gather information from you and from back office systems, assess whether it can solve your problem using its programmed rules, and escalate you to a human representative if it is unable to do so.

What are the Benefits of RPA?

As with all software, industries adopt RPA to achieve benefits that justify the costs involved. The expected benefits vary widely.

Bots can reduce labor costs by performing tasks at a fraction of the cost of human labor. In "Automation versus labour arbitrage," Martin Conboy estimates that a bot can cost about a tenth of a full-time worker in the US and about a third of a full-time worker in India.2 In addition, costs are trivial to add or retire bots as workload changes. Thus, bots could transform traditional approaches to BPO offshoring by replacing labor arbitrage cost savings with more lucrative labor automation cost savings.

  • Bots can improve speed by performing tasks faster and longer than their human counterparts.
  • Bots can quickly and reliably extract, cleanse, standardize, and analyze data across the enterprise.
  • Where compliance matters, RPA reduces risk by ensuring tasks are performed accurately and consistently, and are fully traceable.
  • For businesses that rely on a complex array of interconnected software applications, as law firms do, RPA can forestall legacy software reengineering and/or infrastructure replacements.

Who is Doing RPA?

RPA, like AI, is still in the early adoption phase. A 2017 survey by PWC of RPA in financial services showed that "11% of respondents consider themselves 'leading,' meaning they have adopted RPA widely across the enterprise, and another 19% are heading in that direction" with most expecting positive ROI within 14 months.3

Among the first adopters are organizations that have already completed business process optimization initiatives. They have done the tough work of standardizing their business processes, defining their business rules, and consolidating high volumes of transactions in specialist staff roles. They are ideally positioned to use RPA to further reduce labor costs while improving service levels.

Other examples of early adoption include the following.

  • Highly-regulated industries that are implementing RPA to improve compliance.
  • Companies that receive high volumes of customer inquiries through their websites.
  • IT organizations that are embracing RPA to perform system and application testing, routine system administration tasks, and monitoring and alerting activities.

How Might Law Firms Use RPA?

Few law firms are using RPA today. Firms interested in RPA need to look at what other industries such as finance, accounting, and IT are doing for common back office functions. In addition, firms should pay special attention to what other professional service industries are doing.

For example, in its white paper "Rise of the Robots," KPMG describes its RPA application supporting client onboarding, a process that it clearly shares with law firms. KPMG reports that it built an RPA-enabled service in the UK to onboard clients in compliance with international regulations such as Anti-Money Laundering and Know The Client.4 The RPA software gathers information submitted by clients, mines electronic news and information sources, and extracts the information from all sources. The software then consolidates and assigns a risk rating to each client. Finally, the software keeps the information and ratings current by continuously searching for changes. It issues alerts if a client becomes non-compliant.

Thinking about law firms specifically, it is easy to imagine opportunities for RPA in back office functions that currently rely on people to perform repetitive, computer dependent tasks such as:

  • onboarding new hires and managing departures
  • managing conference room and event scheduling
  • answering policy inquiries and delivering documents and forms that users find hard to locate
  • performing simple research requests
  • reviewing expense reports and processing AP and AR in Finance

What Impact Might RPA Have on Business Services Staff?

Like AI, RPA invokes the human fear of being replaced by a robot. For many workers, this fear is not unfounded. McKinsey and Company has forecast that by 2025, smart robots could replace more than 100 million knowledge workers, about one-third of the world's jobs.5

Law firm business services staff likely have less to worry about than employees of offshore BPO companies. Why? Already many law firms are finding it increasingly difficult to recruit and retain business services staff. This pressure will likely increase as Boomers retire and both the Millennials and Gen X resist doing the repetitive, routine work that bots could do. As a result, the more realistic outcome for law firms would be a smaller human business services staff augmented by bots that allow humans to focus on the higher value tasks that require more complex problem solving and real time human interactions.

Conclusion

RPA is an important and currently under-recognized opportunity for law firms to apply specialized AI technology to back office functions to reduce operating costs, improve quality, and reduce risk. Early adopters will be among the first to reap the ROI benefits. To achieve success, they should look to other industries for lessons learned as they consider their early forays into this important, emerging AI toolset.

Sources

  1. Manyika, James et al. "Disruptive technologies: Advances that will transform life, business, and the global economy." McKinsey Global Institute. May 2013.
    http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/disruptive-technologies
  2. Conboy, Martin N. "Automation versus labour arbitrage." LinkedIn. 10 June, 2015.
    https://www.linkedin.com/pulse/automation-versus-labour-arbitrage-martin-n-conboy
  3. "What PwC's 2017 survey tells us about RPA in financial services today." PWC. Oct 2017.
    https://www.pwc.de/de/finanzdienstleistungen/digital/pwc-fsi-whitepaper-2017-rpa-survey.pdf
  4. "Rise of the robots." KPMG. April 2016.
    https://assets.kpmg.com/content/dam/kpmg/pdf/2016/04/rise-of-the-robots.pdf
  5. Manyika, James et al. "Disruptive technologies: Advances that will transform life, business, and the global economy." McKinsey Global Institute. May 2013.
    http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/disruptive-technologies

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