Generative AI in Legal Market Report Based on Deployment Model (On-premises, Cloud-based), Based on Application (Document Review, Legal Research, Contract Analysis, Prediction of Legal Outcomes, Other Applications), Based on End-User (Law Firms, In-House Legal Department Corporation, Government Legal Departments, Other End-Users), By Region and Companies - Industry Segment Outlook, Market Assessment, Competition Scenario, Trends and Forecast 2024-2033

Report Overview

The Global Generative AI in Legal Market size is expected to be worth around USD 667.6 Million by 2033, from USD 49.8 Million in 2023, growing at a CAGR of 30.70% during the forecast period from 2024 to 2033.

The surge in demand for huge volume of legal dataset and new advanced technologies are some of the main key driving factors for the generative artificial intelligence in legal market.

The legal industry is an important sector that offers legal services, suggestions and recommendations to individuals, firms and businesses. This comprises of different areas of law, like criminal, corporate, civil and intellectual property legal. The legal sector has begun combining GenAI that brings new solutions that improves legal research, simplify document review and augment client services.

According to a survey report published by LexisNexis in 2023, highlights that over 1,000 legal experts in UK to develop awareness towards GenAI. While there are 87% of the legal professionals, who already knew about GenAI and its advantages in legal firms. 38% of the legal experts found GenAI to be substantial whereas, 11% found it as transformative. The implementation of GenAI in legal services have lot of capable advantages and also consumes time that increase the productivity.

The adoption of GenAI in legal services has serval benefits within the construction sector. It fastens the research and development process by analysing legal precedents that helps attorneys to easily access relevant data. This technology helps in summarizing of legal documents, emphasizing important arguments and forecasting capable results by using past information.

Moreover, it simplifies document review that helps layers to grasp difficult materials easily. By automating the development of legal document like contracts and briefs. GenAI decreases manual drafting of any kind of document that overloads the work of attorneys. It also makes sure to take responsibility of various type of research practices by structuring data effectively, permeating domain expertise and depending up on trusted information sources.

The use of GenAI technology will help legal experts to get involved in more tactical and new endeavors, changing the field of legal research in construction sector. The demand for the GenAI in legal market will increase due to its potentiality that increases the quality of productivity in workplace that will help in market expansion in the coming years.

Key Takeaways

• Market Value: The Global Generative AI in Legal Market is projected to reach USD 667.6 Million by 2033, exhibiting a substantial growth from USD 49.8 Million in 2023, with a CAGR of 30.70% during the forecast period from 2024 to 2033.
• Deployment Model: On-premises solutions dominate with 57% market share due to their robust data security and control features.
• Application: Document Review leads with 32% market share, driven by high volume data processing requirements.
• End-User: Law Firms hold the majority share with 37%, directly impacting efficiency and profitability.
• North America: Holds a dominant 55% market share, attributed to robust technological infrastructure and early AI adoption.
• Europe: Holds approximately 25% market share with strong regulations on data protection and AI ethics driving growth.
• Key Players: IBM Corporation, Open Text Corporation, and Thomson Reuters Corporation lead the market with their comprehensive AI solutions tailored for legal applications.
• Recent Developments: Thomson Reuters Corporation announced the acquisition of Casetext, while the adoption of generative AI tools is expected to significantly transform legal practice.
• Analyst Viewpoint: Automation of Document Drafting and Review, Legal Research and Analysis Acceleration, Improved Client Communication, and Legal Knowledge Management are key drivers.

Driving Factors

Automation of Document Drafting and Review Drives Market Growth

Generative AI significantly enhances the efficiency of drafting and reviewing legal documents, marking a transformative shift in the legal sector. By incorporating natural language processing and machine learning, these technologies automate the creation of tailored legal documents with remarkable accuracy.

This automation reduces the time spent on manual drafting by up to 70%, as reported by some law firms, while also decreasing the incidence of human error and enhancing document consistency. As generative AI continues to evolve, it's estimated that the adoption of these technologies in law firms will increase productivity by 30% by 2025, underscoring a robust growth trajectory for the market.

Legal Research and Analysis Acceleration Drives Market Growth

The deployment of generative AI in legal research streamlines the processing and analysis of vast databases of legal documents, case law, and precedents. This capability enables attorneys to extract key legal principles and relevant facts rapidly, reducing the time required for legal research by approximately 50%.

The adoption of AI in this field not only enhances the efficiency of legal practices but also allows lawyers to allocate more time to strategic thinking and client interactions, thus driving growth in the legal services market. Predictive analytics suggest that the increasing reliance on AI for legal research could potentially expand the market size by 40% over the next decade.

Improved Client Communication and Engagement Drives Market Growth

Generative AI's ability to simplify complex legal language plays a critical role in improving communication between lawyers and their clients. This technology fosters enhanced client relationships through personalized, clear, and concise communications.

Law firms employing AI report an increase in client satisfaction rates by up to 20%, which in turn boosts client retention and attracts new clients. The overall improvement in client engagement contributes significantly to the market's growth, with projections indicating a 25% increase in client retention metrics across the industry as AI tools become more widespread.

Legal Knowledge Management and Knowledge Transfer Drives Market Growth

In knowledge management and transfer, generative AI acts as a pivotal tool within law firms and legal departments. By digitizing and codifying the expertise of seasoned attorneys, AI creates accessible knowledge bases and training modules for less experienced legal professionals. This technology not only accelerates the onboarding process but also ensures the preservation of critical institutional knowledge.

Law firms utilizing AI for knowledge management report a 30% reduction in training time for new hires, coupled with a notable improvement in the quality of legal practice. The strategic integration of AI in knowledge management is forecasted to enhance market growth by fostering a more dynamic and informed workforce.

Restraining Factors

Concerns Over Bias and Fairness Restrain Market Growth

Generative AI in the legal sector faces significant challenges due to concerns over bias and fairness. Since these AI models learn from existing data, they can unintentionally perpetuate existing biases if the data include any discriminatory patterns. This is particularly problematic in law, where fairness is critical.

Such biases can undermine the credibility of AI applications in legal settings, where decisions impact lives and businesses profoundly. Studies indicate that up to 40% of potential users hesitate to adopt generative AI due to these ethical concerns. Overcoming this barrier requires implementing rigorous testing and debiasing methods, which can be costly and time-consuming, thus slowing down the technology's adoption rate and market growth.

Regulatory and Compliance Challenges Restrain Market Growth

The integration of generative AI within legal processes is significantly hindered by regulatory and compliance challenges. The legal industry's stringent regulations on data privacy, client confidentiality, and ethical conduct pose substantial hurdles. AI applications must navigate these rules without compromising the integrity of sensitive data.

The accountability for AI-generated outputs remains a contentious issue, leading regulatory bodies to possibly enact stringent guidelines that limit AI's use in certain legal contexts. Compliance costs and the risk of non-conformance may deter law firms from adopting these technologies. As a result, these regulatory challenges are estimated to reduce the adoption rate of generative AI by about 30%, directly impacting the market's expansion potential.

Deployment Model Analysis

On-premises dominates with 57% due to robust data security and control needs.

The deployment model segment of the Generative AI in the legal market is distinctly led by on-premises solutions, holding a majority of 57%. This dominance is attributed to the high priority placed on data security and control, which are critical in the legal sector where sensitive information is frequently handled.

Law firms and legal departments prefer on-premises systems as they provide greater control over the infrastructure and data, which aligns with stringent regulatory and compliance requirements. These entities prioritize the ability to maintain full control over their data environments due to risks associated with data breaches and data sovereignty issues.

The cloud-based sub-segment, though smaller in proportion, is witnessing growing adoption due to its scalability, cost-efficiency, and ease of access. Cloud solutions offer legal professionals the flexibility to access advanced AI tools and vast storage for large volumes of legal documents without significant upfront investments in IT infrastructure. This segment's growth is bolstered by the increasing reliability of cloud services and improvements in cloud security measures, making it an increasingly attractive option for smaller law firms and in-house legal departments that may lack the resources for on-premises installations.

Application Analysis

Document Review dominates with 32% due to the high volume of data processing requirements.

Within the applications of Generative AI in the legal market, Document Review emerges as the dominant sub-segment, accounting for 32% of the market. This segment benefits significantly from AI capabilities, particularly because legal professionals face enormous volumes of documents needing timely review. Generative AI enhances efficiency and accuracy in this area, reducing the time and labor traditionally required for manual reviews. The ability of AI to quickly sift through and identify relevant information in documents is a key driver for its adoption in this segment.

Other application areas such as Legal Research, Contract Analysis, Prediction of Legal Outcomes, and Other Applications also contribute to the market, each facilitating different aspects of legal work. Legal Research utilizes AI to parse through extensive legal databases for relevant case laws and precedents, while Contract Analysis benefits from AI's ability to interpret and analyze contract clauses and stipulations efficiently.

Prediction of Legal Outcomes leverages AI's predictive models to forecast case results, providing valuable insights for strategic planning. Each of these sub-segments, while not as dominant as Document Review, plays a critical role in the broader adoption of AI in legal practices, supporting a more integrated and intelligent approach to legal operations.

End-User Analysis

Law Firms dominate with 37% due to the direct impact on efficiency and profitability.

The end-user segment is predominantly led by law firms, which constitute 37% of the market. Law firms extensively adopt Generative AI technologies to enhance their service offerings, optimize operational efficiency, and boost profitability. The pressure to deliver faster, more accurate legal services at a competitive price drives law firms towards AI adoption. Generative AI tools streamline various legal processes such as document handling, case analysis, and client management, enabling lawyers to focus on more complex, strategic legal work.

In contrast, other end-users like In-House Legal Departments of corporations and Government Legal Departments also integrate Generative AI to various extents. In-house legal departments leverage AI to manage corporate compliance and contractual obligations efficiently, while government legal departments utilize AI to handle public legal services and regulatory compliance. These segments recognize the value of AI in reducing workload and improving service delivery. The diverse application of Generative AI across different end-users underscores its growing penetration and acceptance in the legal field, reflecting its integral role in transforming legal practices worldwide.

Key Market Segments

By Deployment Model

• On-premises
• Cloud-based

By Application

• Document Review
• Legal Research
• Contract Analysis
• Prediction of Legal Outcomes
• Other Applications

By End-User

• Law Firms
• In-House Legal Department Corporation
• Government Legal Departments
• Other End-Users

Growth Opportunities

Generative AI for LegalTech Startups Offers Growth Opportunity

The rise of generative AI technology presents a transformative growth opportunity for LegalTech startups. These emerging companies are at the forefront of leveraging AI to innovate traditional legal practices, making legal services more efficient and financially accessible. LegalTech startups that integrate generative AI can drastically reduce the time and cost associated with creating and processing legal documents, offering a competitive edge in a market that values speed and efficiency.

The potential market for AI-driven legal services is expanding, with forecasts suggesting a compound annual growth rate (CAGR) of approximately 35% over the next five years. By harnessing generative AI, startups can not only streamline vast arrays of legal procedures but also democratize access to legal services, making it possible for smaller businesses and individuals to afford formerly out-of-reach legal advice and documentation.

Generative AI for Legal Aid and Access to Justice Offers Growth Opportunity

Generative AI significantly boosts the capacity of legal aid organizations to provide justice and legal assistance to underserved populations. By implementing AI-driven tools that offer straightforward, easy-to-understand legal information and guidance, these organizations can reach more people who lack traditional access to legal resources.

The technology enables the creation of virtual legal assistants and self-help tools, which can guide individuals through legal procedures or offer preliminary legal advice without the cost of a human lawyer. This accessibility is crucial in bridging the justice gap faced by individuals in remote or economically disadvantaged areas. The market for AI in legal aid shows potential for significant expansion, with an expected increase in adoption rates by up to 50% in the next decade, as more legal aid entities recognize the efficiency and reach provided by generative AI solutions.

Trending Factors

Integration of Generative AI with Legal Practice Management Software Are Trending Factors

The integration of generative AI with legal practice management software is a significant trend reshaping the legal industry. Law firms and legal departments are increasingly merging AI capabilities with their existing management tools to enhance productivity and operational efficiency. This trend is fueled by the need to optimize document management, case scheduling, billing processes, and client communications.

By automating routine tasks and streamlining workflows, law firms can focus more on high-value activities, significantly reducing overhead costs and improving service delivery. Statistics indicate that firms adopting AI-integrated management systems see an average efficiency increase of 40%, demonstrating the high impact and trending nature of this integration in the legal sector.

Adoption of Generative AI for Legal Due Diligence and Contract Analysis Are Trending Factors

The adoption of generative AI for legal due diligence and contract analysis is becoming a critical trend within the legal market. Legal professionals use AI to automatically review and analyze large volumes of documents and contracts. This application of AI drastically reduces the time and effort required for due diligence, especially in complex transactions like mergers and acquisitions.

Generative AI identifies essential clauses and potential risks, summarizing these in comprehensive reports. This capability not only speeds up the due diligence process but also enhances accuracy, leading to better-informed decision-making. As per recent trends, law firms utilizing AI for these purposes report a reduction in due diligence time by up to 50%, underscoring why this application is a trending factor in the industry.

Regional Analysis

North America Dominates with 55% Market Share

North America holds a dominant 55% market share in the Generative AI in Legal Market, primarily due to the region's robust technological infrastructure and the early adoption of AI technologies. The presence of major technology and LegalTech companies that continuously innovate and invest in new AI applications significantly contributes to this leadership. Additionally, the legal framework in the U.S. and Canada is progressively adapting to incorporate AI-driven solutions, supporting widespread adoption within legal practices.

The market dynamics in North America are characterized by a high degree of tech integration in legal services, a well-established legal market, and significant investments in AI research and development. The region’s focus on enhancing legal services through technology for greater efficiency and accuracy fosters a conducive environment for the growth of Generative AI applications. This is further supported by a strong culture of innovation and a competitive market that drives legal firms to adopt AI to maintain an edge.

Regional Market Shares:

• Europe: Europe holds approximately 25% of the market share. The region shows robust growth due to its strong regulations on data protection and AI ethics, which are pivotal in legal applications.
• Asia Pacific: This region accounts for about 15% market share, with rapid growth expected due to increasing technology adoption and expanding legal services sector in countries like China and India.
• Middle East & Africa: Holding around 3%, the market in these regions is developing slowly due to initial stages of AI adoption and infrastructure development.
• Latin America: With a 2% market share, Latin America is gradually progressing in the legal tech field, with increasing awareness and investment in technology solutions for legal services.

Key Regions and Countries

• North America
  • The US
  • Canada
  • Mexico
• Western Europe
  • Germany
  • France
  • The UK
  • Spain
  • Italy
  • Portugal
  • Ireland
  • Austria
  • Switzerland
  • Benelux
  • Nordic
  • Rest of Western Europe
• Eastern Europe
  • Russia
  • Poland
  • The Czech Republic
  • Greece
  • Rest of Eastern Europe
• APAC
  • China
  • Japan
  • South Korea
  • India
  • Australia & New Zealand
  • Indonesia
  • Malaysia
  • Philippines
  • Singapore
  • Thailand
  • Vietnam
  • Rest of APAC
• Latin America
  • Brazil
  • Colombia
  • Chile
  • Argentina
  • Costa Rica
  • Rest of Latin America
• Middle East & Africa
  • Algeria
  • Egypt
  • Israel
  • Kuwait
  • Nigeria
  • Saudi Arabia
  • South Africa
  • Turkey
  • United Arab Emirates
  • Rest of MEA

Key Players Analysis

In the Generative AI in Legal Market, key players exert significant influence through their impact and strategic positioning:

IBM Corporation, Open Text Corporation, and Thomson Reuters Corporation lead with their robust AI solutions tailored for legal applications. Their established market presence and comprehensive offerings position them strategically.

Veritone Inc. and ROSS Intelligence Inc. specialize in AI-driven legal research and analysis, providing innovative solutions that streamline legal processes. Their niche expertise enhances their market influence.

Luminance Technology Ltd., LexisNexis Group Inc., and Neota Logic Inc. focus on leveraging AI to enhance document review, contract analysis, and decision automation in the legal sector. Their specialized tools cater to specific legal needs, enhancing their strategic positioning.

Kira Inc. and Casetext Inc. offer AI-powered platforms for contract analysis and legal research, respectively. Their user-friendly interfaces and advanced functionalities bolster their impact in the legal AI market.

Other market players contribute to the ecosystem with niche offerings, collaborative ventures, and innovative solutions, collectively shaping the landscape of Generative AI in Legal Market.

Market Key Players

• IBM Corporation
• Open Text Corporation
• Thomson Reuters Corporation
• Veritone Inc.
• ROSS Intelligence Inc.
• Luminance Technology Ltd.
• LexisNexis Group Inc.
• Neota Logic Inc.
• Kira Inc.
• Casetext Inc.
• Other Market Players

Recent Developments

• In June of 2023 when Thomson Reuters Corporation announced the signature of a legally binding contract to purchase Casetext for the sum of $650 million, Thomson Reuters Corporation, a multinational technology and content company and a potential acquisition, will improve Thomson Reuters' current AI guidance and extend the recent initiatives that include a commitment to invest greater than 100 million per year to improve its AI features, development of new experiences throughout its portfolio of products, and the launch of a new plugin that works with Microsoft as well as Microsoft 365 Copilot for lawyers.
• In August 2023, about half of all lawyers believe generative AI tools will significantly transform the practice of law, and nearly all believe it will have at least some impact (92 percent). 77 percent believe generative AI tools will increase the efficiency of lawyers, paralegals, or law clerks and 63 percent also believe generative AI will change the way law is taught and studied.
• 83% of law firm attorneys surveyed in 2023 believe that generative AI could be applied to legal work. And the in-house counsel they serve want to see law firms using technology in legal service delivery. A Thompson Hine survey found that 96% of law department leaders and legal operations staff wish their law firms would use innovation (like trusted generative AI) to save them money.

Report Scope