AI for services: the landscape
Earlier this year Sibyl was featured by Innovate UK and KTN in their AI for Services report. In a series of blogs we’ll expand on the report’s findings with our own experience, starting with an overview of the sector. We see the current picture as consistent with an historical trend where professional services do adopt new tech, but lag behind other industries by around 10 years.
This year’s AI for Services Report by Innovate UK and KTN outlines the current landscape for AI and data technologies in the UK service sector. A landscape that is of increasing importance because effective adoption of data technologies has been seen to translate into reduced costs, improved efficiency and an increase in customer satisfaction.
The report focuses primarily on InsurTech, LegalTech and AccountTech. Out of the 553 companies identified, the report found InsurTech accounted for 49% of the AI and data start-up ecosystem, whilst LegalTech accounted for 27%, and AccountTech accounted for 14%. The remaining 10% lacked a focus on solely one of these sectors.
From these figures, it is evident the InsurTech segment is the largest, with LegalTech still being somewhat nascent and less mature. Innovation in the latter has largely not been disruptive, meaning focus is placed towards the efficiency and automation of already established processes instead of the delivery of ‘new types of law’ (The Law Society, 2019). This is particularly true for the large proportion of LegalTech start-ups that focus on document and contract AI services.
In contrast, investment in InsurTech has amounted to over £750 million through 2018 and start-ups in this sector can be identified from as far as twenty years ago, making it a more established field (InsurTech Channel, 2019). In the case of LegalTech, investment amounted to about £430 million. In addition, company formation only saw a sharp increase around 2010, suggesting the sector is still largely in development. How long it will take for funding in the LegalTech sector to catch up is uncertain, but estimates say about 10 years (The Law Society, 2019).
The report further underlined that many major and mid-sized firms do appear to be using, or at least experimenting with some form of AI. Not only is this a significant step in ensuring the growth of the LegalTech segment, but is reflective of the fact that 80% of senior lawyers view AI and machine learning as a critical element for the future of their respective firms (Luminance, 2020). In fact, over the last ten years there has been an exceptional increase of 639% in the amount of research conducted on LegalTech. This translates into there being 1,389 publications relating to legal technology in 2019, compared to a much lower 188 in 2009 (Factiva, 2020).
Despite this R&D activity, the report underlined that the rise in the number of LegalTech companies seen in the last few years has not yet translated into an acceleration in the rate of adoption among legal practitioners (The Law Society, 2019). Similarly, uptake of data technologies in other areas of law such as barristers’ chambers and courts is slow, with the impact of LegalTech not felt widely yet.
When taking into account our own findings at Sibyl, this does not come as a surprise. Indeed, they are part of a longer historical trend showing a delayed uptake of new technology by around 10 years. Take the introduction of PC’s in 1981. Here, law firms resisted the change from in-person case management until the 1990’s, when the demands of clients to communicate through email became pressing.
On the other hand, some technology has caught fire in the sector. Take the introduction of word processing software in 1973, which created a central database for all document versions available (Appinventiv, 2020). The new software was so compelling that practitioners at law firms were lining up at their respective IT departments to apply for use (Friedmann, 2004). Even though lawyers were slower to adopt technology beyond word processing in comparison to other professionals, they were inclined to accept change when a compelling product came around (Friedmann, 2004).
Overall, the current landscape for AI and data technologies looks promising with the global LegalTech and InsurTech sector expected to generate approximately £40 billion by 2025 (ITProPortal, BusinessWire, 2020). Notably, the widespread adoption of AI tools across service segments means there is only room for growth. Our findings suggest that change will happen when it is incited by the introduction of useful and comprehensive technology, such as the word processing case study. It’s just that professional services lag behind other sectors. As such, it is important that the synergy between technology start-ups and the service sector is maintained, so as to keep being able to promote effective innovation in the UK landscape.