Legal Tech’s Real Transformation Is Happening Now

Written by Caroline Elliott and Marina Perez-Llorca

Legal tech is at an inflection point. After years of slow, incremental change, the legal industry is finally undergoing a real shift driven by new technology, changing client expectations, and regulatory movement. Legal services have long been some of the hardest sectors to automate, but that resistance is starting to fade. For the first time, adoption is being pulled forward by the market instead of pushed by vendors, creating the right conditions for meaningful transformation.

To understand why this moment feels different, it helps to look at why earlier waves of legal  tech never fully took off. Pre-GenAI tools were mostly simple admin products like billing systems, time trackers, and document storage, with a few notable successes like Clio but limited influence on the actual practice of law. Adoption varied but generally stalled because the technology wasn’t capable of handling the important and nuanced components of legal work. Structural issues also challenged adoption: the billable-hour model discouraged efficiency, accuracy standards were too high for the tools available at the time, and law firms were conservative buyers with limited IT budgets. In short, the market was not ready, and the technology was not strong enough to fundamentally disrupt how legal work is conducted.

Market Tailwinds 

GenAI and the underlying technological breakthroughs have set the stage for the structural changes the industry is now experiencing, and these advances are being amplified by strong market tailwinds. Corporate clients are increasingly unwilling to pay for low-value, time-consuming work, and procurement teams are evaluating output much more rigorously. Early movers like Winston and Strawn’s fixed-fee programs show a real shift away from the billable hour toward predictable, outcome-based pricing. This model is especially well suited for AI because it rewards productivity and speed rather than hours worked. At the same time, in-house teams are being asked to take on more work without larger budgets, which pushes them to internalize tasks and adopt tools that help them keep up. According to the 2025 Thomson Reuters Legal Operations Department Index report, many in-house groups now expect to expand their scope without adding new headcount, which only reinforces the need for efficiency.

Pressure  for industry reform is strengthened further by regulatory and cultural changes that have reshaped what legal service models can look like. ABA 5.4 reforms and MSO structures now permit non-lawyer ownership, opening the door for a wave of tech-enabled legal companies across the US. Outside capital is also playing a growing role with private equity groups like Burford Capital starting to look into acquiring equity stakes in law firms. This will undoubtedly challenge long-standing norms and push practices toward technology adoption and consolidation. 

Cultural expectations inside firms are shifting as well. More young attorneys entering the profession are comfortable using AI tools in their daily workflows and want to work in tech-forward environments. The consequences of not adopting technology are also starting to become apparent: as AI starts to outperform humans on certain repeatable tasks, not using these tools could result in malpractice. The American Bar Association has already issued ethics guidance underscoring that lawyers must understand both the benefits and the risks of AI tools to meet their professional obligations, reinforcing the expectation that attorneys stay current with relevant technologies.

Together, these forces create a powerful set of tailwinds driving legal tech adoption. We’re seeing especially strong momentum in three areas where there is significant potential for transformation: tech-enabled legal service companies, litigation technology, and IP and R&D innovation.

Tech-Enabled Legal Services

Tech-enabled legal service companies are a clear example of the fundamental change the legal sector is undergoing. These hybrid law firms typically employ a small staff of lawyers while heavily leveraging artificial intelligence and agent-based workflows to supplement human work.  Not all legal work is equally susceptible to this model though; big law is bespoke and already consolidated. AmLaw 100 firms focus on strategic, judgment-heavy matters like litigation and M&A. Clients pay a premium for risk transfer and deep expertise, so leveraging automation too heavily is not acceptable. 

Tech-enabled legal service companies instead thrive in repetitive, rule-based, and outcome-driven verticals such as immigration, personal injury, or compliance, where outcome based pricing aligns incentives toward efficiency. Their advantage comes from combining human expertise with AI in a model that creates a powerful flywheel: every completed case generates data that improves future performance and pricing accuracy, which in turn attracts more volume. 

Startups building tech-enabled services are in a position to extract more value from their customers compared to startups selling software to law firms. Legal service budgets are much higher than software budgets with a significantly larger addressable market. Companies like Crosby and Alma, an Interplay portfolio company, are leading the way in this space and showing how this model can produce meaningful leverage and scale far beyond what traditional software models have achieved.

Litigation Technology

Litigation is experiencing a similar shift, driven by rising costs and structural inefficiencies. Costs are growing far faster than inflation while firms continue to under-invest in technology, and 97% of cases settle before trial, meaning the pre-trial workflow is both massive and largely automatable. Crucial tasks such as evidence review, narrative building, and deposition preparation remain manually intensive and are deeply underserved by traditional software. New entrants are targeting these gaps with tools built specifically for litigators. Finch, for example, focuses on helping lawyers structure evidence and build and narrate arguments more effectively, while Eve automates early case evaluation for personal injury and mass tort practices. Together, these tools signal a move toward digital-first litigation practices where AI supports the heaviest and most repetitive parts of the process.

IP Law

IP law is also undergoing major changes, with global patent activity exploding and intangible assets now accounting for more than 90% of the S&P 500. Despite more than $17 billion spent each year on IP legal services, software penetration remains low, creating a large but underserved market for AI driven automation in drafting, prosecution, and portfolio management. A particularly important area is R&D, where teams often struggle to convert scientific progress into protectable inventions. Companies such as Ankar and Solve Intelligence are addressing this gap. Ankar provides a full lifecycle platform that helps enterprises discover new inventions, assess novelty, and prepare filings, while Solve Intelligence offers domain aware drafting support tailored to deep tech research. These tools show how AI can move closer to the innovation process itself, not just the legal work that follows.

Taken together, these shifts point to a legal industry that is finally ready and embracing real change. The opportunity ahead is not simply better software, but a full re-architecture of how legal services are delivered, structured, and scaled in a world where technology and services increasingly merge.

If you are building a startup that is transforming a legacy services sector, we’d love to chat! Please reach out to our team at ce@interplay.vc.