When the UK’s Serious Fraud Office embarked on a four-year corruption probe into Rolls-Royce, it faced a big challenge. Some 30m documents had been turned over to the agency in what was then its largest investigation to date, but many would prove unusable — they were protected by legal professional privilege. The SFO had to figure out which and how to keep its cost down while doing it.

The SFO’s solution was to use artificial intelligence software from the London-based start-up Ravn, since acquired by iManage, to sift through the documents.“We’re investigating some of the most complex and data-heavy cases in any jurisdiction,” says Ben Denison, SFO chief technology officer. “At the time, the Rolls case was our largest, with just over 30m documents. We’re now working on a case more than twice that size, with 65m, and there’s one on the way with over 100m. It’s impossible to investigate cases like ours without technology.”

The legal technology, or “lawtech”, sector is not new — even if it has taken a while to catch up with higher-profile peers, such as fintech. iManage, a Chicago-based document management and artificial intelligence provider to law firms, in-house legal teams and other professional services groups, was founded in 1998, before being acquired by Autonomy and spun out of HP in a management buyout in 2015.

HighQ, another professional services technology business, was set up in London 17 years ago. While a decade ago companies may have been most worried about how to share files securely, legal technology now encompasses machine learning algorithms and natural language processing to help with due diligence and disclosure exercises, smart contracts that can be populated with information scraped from large data sets, and a plethora of practice management tools.“We’ve definitely seen an explosion in legal tech,” says Stuart Barr, chief product and strategy officer for HighQ.

Established law firms, large organisations and start-ups have all entered the fray. Some firms have developed their own tech incubators, such as Allen & Overy’s Fuse, while Slaughter and May has taken a stake in Luminance, set up in 2015 by Cambridge university mathematicians, which has developed document analytics software. In the US, Dentons has set up Nextlaw Labs, which has a portfolio of interests in companies trying to disrupt legal services provision.

There’s one case on the way with over 100m documents. It’s impossible to investigate cases like ours without technology  Ben Denison, UK’s Serious Fraud OfficeSome of the technology players have graduated from start-ups to significant forces in the industry. HighQ took a $50m private equity investment from One Peak, Morgan Stanley and Goldman Sachs in 2016, while in September this year one of the other leading lawtech businesses, Kira Systems, secured $50m in venture capital funding. In the US, Everlaw has raised almost $35m from investors including Andreessen Horowitz and Menlo Ventures, according to data from Crunchbase.

The legal industry is ripe for greater innovation and use of technology, says Michel Sahyoun, co-founder of QuisLex, a specialist outsourcing firm that uses tech from a range of other providers to solve clients’ problems. According to Mr Sahyoun, this is “in part because the legal field has been rather neglected by the technology industry, and because legal costs are elevated and under pressure from businesses”.

After the financial crisis costs came under pressure. Companies moved legal work in-house as they sought to reduce their reliance on external advisers. That, in turn, created a renewed focus on how to do more for less — and how to use technology and more efficient management of internal processes to do it.“One need look only as far as the Corporate Legal Operations Consortium, and its exploding membership numbers, to see that the movement of work in-house after last decade’s economic downturn continues to have ripple effects in this market,” says Jon Kerry-Tyerman of Everlaw. “Corporates have realised that the latest technology lets them do much more themselves, reducing reliance on both outside counsel and outside vendors, and that the cloud lets them take this on without a massive investment in on-premises infrastructure.”

AB InBev has developed its own global compliance app, called BrewRight Bloomberg that has driven projects such as Anheuser-Busch InBev’s BrewRight global compliance app, developed in-house, but has also put pressure on external advisers to take a more tech-centric approach.

At Deloitte, technology-focused partner Marc Verdonk says the firm recognised it needed to develop its own tech to augment its services or risk losing clients — even if, in the short term, that meant lower fees for some work.“

The client is happy because using the tech means ultimately they often pay less, and we can be more efficient, which allows us to continue investing in innovation, and everybody benefits,” says Mr Verdonk, part of Deloitte’s risk advisory practice in Amsterdam.

Rapid development in legal and regulatory technologies have led to problems, however. Many developers provide niche products, which can leave in-house teams — and law firms — wrestling with different platforms and tools.The technical capabilities and claims of several products proved to have been significantly exaggerated

Michel Sahyoun, co-founder of QuisLexOthers have overstated the ability of their technology, which has deterred investors and clients from considering others in the sector. “The technical capabilities and claims of several products proved to have been significantly exaggerated,” Mr Sahyoun of QuisLex says.In other cases, the technology is up to scratch, but the expertise about legal and professional services needed to apply the tech is missing.“In regtech, you can either start with tech, or with people and a network,” says Mr Verdonk. “A lot of start-ups are starting with tech but at some point you realise you’re missing the expertise and the people.”