Legal Tech Will Radically Change the Way SMEs Handle Legal: How SMEs Can Run Legal as Effectively and Professionally as Large Corporations

Abstract

Legal departments of all sizes are facing challenges around technology and liberalization, triggered by what is described as the “more-for-less” or “better, faster, cheaper” challenge. Surprisingly, the focus in literature and practice is almost exclusively on large legal departments. However, there are fundamental differences between legal departments in large corporations and the legal function in small and mid-sized enterprises (SMEs). SMEs generally more often use the help of external counsel. Small legal departments usually have a lesser degree of specialization and are much closer aligned with other departments, like Sales and Finance. In some cases, SMEs also have a higher tolerance of risk-taking. Often, there is a lack of clear processes and policies, resulting in more communication and ad-hoc coordination. These challenges affect SMEs without a legal department even more. Such SMEs have the additional challenge of information asymmetry when hiring an external lawyer, they usually have no dedicated legal budget and are lacking structured documentation of legal data. So how can SMEs effectively run Legal as a Business? This is only possible with the effective use of technology, something which is still often rejected by lawyers (also in small legal departments). Technology in the legal services market, or Legal Tech, will enable SMEs to run Legal as a Business, just as large corporations. Legal Tech thus offers opportunities for new and innovative legal services providers to successfully enter into the legal services market.