The Legora ROI Report and How Law Firms Quantify the ROI of Their Legal AI Investments

I spoke with Kyle Poe, the Vice President of Legal Innovation & Strategy at Legora, a legal AI platform for law firms and legal departments. We discussed how law firms quantify and qualify the ROI of their legal AI investments, which metrics law firm leaders should focus on, and how the Legora ROI Report will help them.

Episode Transcript

(00:01):
Welcome to Reinventing Professionals,a podcast hosted by industry analyst
Ari Kaplan, which shares ideas,guidance, and perspectives from market
leaders shaping the next generationof legal and professional services.
This is Ari Kaplan, and I'm speakingtoday with Kyle Poe, the Vice President

(00:21):
of Legal Innovation and Strategyat Lara, a legal AI platform for
law firms and legal departments.
I had the privilege of collaboratingwith Lara on a new report about ROI.
Kyle, great to see you.
I see you again too.
Are you?
How do you drive strategy at Lara?
At a, a fast growing startup likeLara, I feel it changes every day

(00:42):
and every week, but I broadly thinkabout it in terms of what we are as
a company and we like to describeourselves as the application layer.
We are not a foundational LLM company.
We're not the ones building theengines that are powering various AI
processes and platforms out there.
And we're not the legal servicesprovider, but we are the
platform that connects the two.

(01:03):
Given that we're the applicationlayer, you have to approach strategy.
that we are connecting thesetwo sides of the equation.
So on the engineering and product side,it comes from understanding the technology
at a really deep level and understandingwhere the technology is going.
For example, the underlying models,what Anthropic has done with cowork,
what they've done with coding has been.
Phenomenal.

(01:23):
And we are seeing massive increases incapabilities which are going to power,
more fully featured end-to-end workflows.
I really believe this is goingto be the year of agentic ai, not
just for legal, but more broadly.
And so it really comes downto understanding what the
technology can do, but.
Even more important is understanding thelegal practice itself and ultimately,

(01:44):
the business of law, which is of coursewhat the ROI, report is getting at.
It's understanding the pain points.
Not asking what the technology can do,but what are the pain points of lawyers?
What are the competitivepressures that they're under?
Under understanding more andmore the tasks of lawyers.
On a day-to-day basis across avariety of different practice areas,
but also understanding the differentbusiness models and also having a

(02:05):
better grasp on the evolving landscapeas the business models are changing
in response to the technology.
It's a moving target, but ultimatelywe see the technology as it gets
more powerful, and as lawyers andlegal profession adapts to these
change, coming together more and more.
As the way law firms quantifyand qualify, ROI changed.

(02:25):
It certainly has,particularly the ROI of ai.
It absolutely has changed.
A year ago, we were in theera of innovation theater.
you could be in the top five percentileof, advanced firms in terms of
legal ai just by adopting a tool.
But obviously just buying a licensethat doesn't really do anything.
At the end of the day, it'snot gonna change anything.
Especially if you buy somethingthat people don't use there's not

(02:48):
really gonna be any benefit of that.
People have had a year of experimentation,a year of pilots, but firms are now in
a position where they're prepared to go.
All in, on AI and reallymake, firm wide deployments.
And I like to think about ROIreally as two types of conversations
that are very interrelated.
The first is the internalconversation about are we getting
our money's worth outta these tools?

(03:09):
Are they paying for themselves?
And the second conversationis the client conversation.
And that more and more is becomingprobably the most important conversation
that's happening today, which is why?
So excited about this reportcoming out now because it's as
relevant as it's going to be.
What we're seeing now is.
The first wave of ROI conversations bothinternally and externally, was around just

(03:29):
like pure time savings and cost savings.
Obviously that's complicated bythe different billable models.
And so the way that plays out ina, a billable hour arrangement is
very different than if it's undersay, a fixed fee arrangement.
But I think what firms are now seeing isa couple of different dimensions of this.
So cost savings and the deficiency gains.
Are underlying everything, but at the sametime, it's using those cost savings to,

(03:51):
for example, pitch clients for new work.
So to increase revenues by winning newwork using ai, either from the fact that
you're able to undercut a competitorand so maybe you're able to move work
that they're currently sourcing on anhourly fee basis from another firm.
But now you're able to offer it on afixed fee basis, which of course gives.
The corporations cost certainty, whichthey really enjoy and really appreciate.

(04:13):
But you're able to then increasethe revenues for the firm.
The other aspect is, margin optimization,so as firms are looking at this
in terms of measuring the marginson their matters and seeing how.
Particularly around fixed feearrangements, how, when you
have these cost savings, youdirectly increase your margins.
And then also they're evolvingto thinking about the more
qualitative aspects of it as well.

(04:34):
Ultimately why you hire one law firmover another is because of their
experience and the fact that theyhave done more transactions or done
more litigation of a given type.
That's why they commandpremiums in the market.
And if you go to the best.
Particularly in a be the companylitigation or certain most high stakes
m and a. You want to have lawyerswho are going to reduce the risk
of mistakes, the risks of errors,business risk as much as possible.

(04:57):
And AI is, a force multiplier, butit's also something that increases the
consistency and quality of work product.
So that's also something that I thinkwe're seeing firms focus on more and more.
ultimately also, we should neverlose sight of the fact that law
is a client service business.
When they've done surveys in thepast about, why do in-house counsels
use one law firm over another?
It's usually not because of thequality of the work product.

(05:20):
It's usually in terms of actuallymore of the human factors.
Like, did they pick up the phone?
Did they remember my kids' birthdays?
So not just reducing the numberof hours a given task takes,
but increasing your throughput.
Being able to have a clienthave a question, and be able
to give that client an answer.
Going from days to hours or in realtime , at various points where you're on
a call with a client and using ai, theclient can ask you a question and you

(05:43):
can just type into Lara that question.
And it has access to, all of thecase files or the matter files that
you're dealing with, and being ableto get an answer back to the client
in real time is something that youwouldn't have been able to do before.
And again, that just creates a much betterclient experience and the clients are
much more likely to stick with you and goback to you for repeat work in the future.
Anything about the LaraROI report surprise you.

(06:07):
Yeah, the consistency of the reportprobably did we are in the early innings
in terms of clients communicating this.
Obviously we're past innovation theater.
We're now at a point where partners arestarting to have these conversations
with their clients, that alone to me isquite impressive, just given my history
as a former partner at an AM law firm.
Partners typically don't wannahave these kinds of conversations.
If you're gonna have a conversationabout, the use of technologies, you

(06:29):
don't necessarily want to open up thehood and let the client see is made.
And so I was quite impressed with the factthat people are being more prospective
about having these conversations withclients, which is really encouraging to
me because I do think that for those firmsthat continue to be entirely reactive I
don't think it's gonna end well for them.
If the first time you're talkingabout AI with a client is because

(06:51):
they've decided to go with acompetitor because they were able to
undercut you on price it's too late.
And so it's much better to have theseconversations now, and sometimes
they're tougher internally at thefirm potentially where you're calling
up clients and saying, look, I'mgonna prospectively self disrupt.
Instead of calling up my clientssaying, I'm sorry to let you
know we're raising your rates.
Calling up a client saying, Hey,look, we're using ai, we're being

(07:13):
more efficient, we're being moresuccessful, thanks to ai, and we're
able to offer you a discount now.
So we'd like to lock in a fixed feearrangement, say on a multi-year basis.
That's going to allow the firms then,once they do lock in, that fixed
fee arrangement, of course, benefitfrom the continued gains of ai.
But allow the clients and their firmsto share the gains that AI creates.

(07:34):
What was your key takeawayfrom the research?
It's that the ROI of legal AI ismultiplicative and not just additive.
If you look at only the costsavings, you're going to materially
undervalue the impact that AIis having in real time today.
The real ROI of AI comes from theeffects that interaction between
a couple of different components.
One is the higher quality of workproduct that can reduce rework, can

(07:58):
reduce excessive time on a giventask or a given matter, the reduction
in risk both to the firm, but alsothe enterprise risk to the client.
It's things like faster delivery timesand the increased client satisfaction.
Obviously the increase in win rights ondeals, but also on winning more work.
Clearly the lower cost of delivery onfixed fee matters, and I think there

(08:18):
will be continued expansion of fixedfee matters, as your research showed
firms are considering more and morelooking into fixed fees as a way to
share the gains of AI with their clients.
It comes back to this feedbackloop that firms have, so it's what
we call the AI flywheel and it'sthat firms are leveraging their
knowledge and experience to createreusable workflows through labra.
Those reusable workflows are then beingdeployed to meet clients' expectations,

(08:42):
which are of course rising all the time.
'cause clients are aware of ai, theyknow that there are cost savings.
They know there are qualityuplifts thanks to ai.
And so though the bar is continually beingraised and firms are able to use ai, use
their knowledge, experience to deliverthose expectations for their clients.
And then once you deliver for clientsand you win those cases, or you have
those massive deals and you put outthose amazing press releases, that of

(09:03):
course builds the firm's brand, buildsthe firm's reputation for the firm as
well as for the partners and associatesin those firms, which of course leads
to more work, which leads to, moreexperience, which you can then feed back
into more workflows, which allows you tocontinue to deliver on these expectations.
It's this virtuous cycle that firmsare starting to really realize.
I was fortunate to speak with law firmleaders in 14 countries for this report.

(09:27):
What do you hope the researchwill do to help your customers?
The first is that internal conversation.
people are investing in thesetools, but they're not just
investing, the licensing costs.
There's also the opportunity costsof the time that's being spent.
firms are investing in hiring legalengineers for innovation departments,
knowledge management field.
These are costs the firms are bearing thatare, in addition to the licensing fees.

(09:48):
Firms are making substantial investments.
substantial bets on ai.
And so being able to understandthe impact for themselves is really
important internally to the firm.
So the firm can have the confidence thatthey're spending their partner's money
effectively, and in a way that willfurther the long-term success of the firm.
But the most important piecereally is the client conversation.

(10:08):
What your report.
Does so well is because it pullsfrom the insights of, industry
leaders across the world.
And there's different threads thatwere articulated by different people.
There was a lot ofcommonality to those threads.
And I think the statistics that youhighlight in the report really do show
the continuity, but it gives a breadth ofdifferent ways that firms are realizing.

(10:28):
ROI.
so I like to think of it asgiving a vocabulary to firms.
these conversations are notconversations that they've really
even had with their clients before.
For a lot of partners, they've just hadconversations about their experience
and the work that they're doing.
They've not really hadconversations about.
Innovations in pricing arrangements or,.
not conversations about howthey're leveraging technology.

(10:50):
Maybe the firm does in its response toproposals, but the partners themselves
historically haven't really been engagingin conversations about what technology
they're using and the benefits of those.
By giving, firm partners, law firmleaders, a vocabulary a cornucopia
of ideas that others in theindustry are finding that resonates.
It's giving them a chance to structuretheir thoughts and structure their

(11:11):
communications as to clients in a waythat's going to resonate a lot more.
So, it's really not just about firms.
Using ai, but it's allowingthem to also ideate.
One of the benefits of ai, isideation and brainstorming.
And I think your report really sparse alot of interesting ideas in terms of how
firms can start to rethink pricing, howthey're gonna start to rethink staffing.
And of course, with staffing,rethink associate training.

(11:33):
And ultimately how they package anddeliver work as they're creating
entirely new business lines,entirely new delivery, services that.
You couldn't even havedelivered before generative ai.
This is Ari Kaplan speaking with Kyle Poe,the Vice President of Legal Innovation
and Strategy at Lara, a legal AI platformfor law firms and legal departments, which

(11:54):
has just released the Lara ROI report.
Kyle, thanks so very much.
It's been a privilege.
Thank you, Ari.
Thank you for listening to theReinventing Professionals podcast.
Visit reinventingprofessionals.com orarikaplanadvisors.com to learn more.