2023 Predictions

Seal Harbor, Maine; photo by the author

It’s been said that it’s tough to make predictions, especially about the future. That didn’t stop me from doing so last year, and I’m back for more. Without further ado, here are my 2022 predictions revisited and (self) scored, and my 2023 predictions.

Scoring my 2022 predictions

1. Hybrid work dominates, and frustrates: Hit. According to an April 2022 survey of 800 workplace leaders commissioned by Envoy, 77% of companies have adopted hybrid work, and 43% have a hybrid at-will policy. At the same time, work flexibility tensions clearly are rising: Apple is locked in a monthslong back-and-forth with its employees over its return-to-office mandate, and Snap announced a new policy requiring employees to return to the office four days a week.
2. The Great Stagnation: Unclear. After almost two years in which companies couldn’t hire quickly enough, giving job-seekers significant leverage, economic conditions have shifted the balance of power back to employers. Particularly in technology companies, many employees are now staying where they are to avoid becoming a last-in-first-out victim. So while there’s a growing number of people remaining in roles they’d prefer to leave, it may not be for the reason I predicted.
3. The political climate cools (a little): Miss. I didn’t see a Russian invasion of Ukraine coming (in fairness, neither did David Petraeus), and I was caught off guard by the Supreme Court overturning Roe v. Wade rather than chipping away at it. And let’s not forget about Europe: Liz Truss’s disastrous 45 days in office and a foiled coup to overthrow the German government, among many lowlights. At least there’s a silver lining: election deniers overwhelmingly lost their US midterm races.
4. Legal ops crosses the chasm: Hit. CLOC membership increased 11% in the first quarter of 2022, implying a 52% annual growth rate. Attendance at the CLOC Global Institute exceeded 2,500, including a record number of first-time attendees and attending organizations—proof that legal operations is becoming the norm, rather than the exception. Recognizing the importance of this trend, Brightflag hosted a webinar about hiring and being hired in legal ops.
5. Rise of the legal engineer: Unclear. There are more (and more prominent) people taking on legal engineering roles, although not at the rate I expected. At least part of this is because the second half of the year hasn’t been kind to the creation of new positions. More than this, though, I think what’s happening is the need for technical resources is being met by vendors and specialist consulting firms, BRYTER and SYKE being two examples.
6. Paralegals are empowered: Hit. I commented on the trend of paralegals transitioning into legal ops roles in a LinkedIn post that generated a fair share of engagement (and controversy), and followed it up with a second post and a webinar in partnership with Legal Operators. Clearly, there’s overlap between the work done by some paralegals and by legal ops. Also clear is the frequency with which paralegals are entering legal ops roles: by my estimation, paralegals are now the largest source of first-time legal ops professionals.
7. Investment in legal tech doubles: Miss. Legal tech companies raised so much funding in 2021 that there wasn’t much of a need for them to raise more in the first half of the year. Then the public markets collapsed, taking the venture and growth investment markets down with them, effectively freezing investment in the second half of the year. I know of two well-known legal tech companies that tried to raise funding over the summer and weren’t able to do so at an acceptable valuation (neither of these companies is Brightflag).
8. Top 10 legal tech players merge: Miss. In hindsight, the total addressable market for legal tech is growing so quickly that there isn’t much of an incentive for large players to merge. This was doubly true in the first half of the year, when growth capital was cheap. With valuations down and the cost of customer acquisition increasing, we could still see a mega-merger in 2023, but I’m now cooler on the probability of this happening.
9. Big Tech makes a legal acquisition: Miss. I’m surprised this didn’t happen—so much so that I’m doubling down for 2023.
10. Brightflag has a great year: Hit. Brightflag crossed 200 customers and was recognized by G2 as a leader in enterprise legal management. Among many product innovations, we launched an all-new reporting infrastructure, significantly expanded matter budgeting capabilities, and released two new dashboards, further improving usability. Finally, we created multiple resources to help legal operations professionals succeed in their careers, including a compensation report and Legal Ops 101, our online learning program.

Four hits, four misses, and two unclear. If I were a baseball player, I’d be headed to the Hall of Fame! Still, I think I’ll keep my day job.

Okay, let’s move on to my 2023 predictions.

2023 predictions

1. Reductions in force continue

We’re entering the new year with the economy in poor shape. Bellwether stocks are trading at stubbornly low multiples. For the first time ever, Salesforce is not providing earnings guidance, citing the “very unpredictable macro environment.” Hiring freezes and reductions in force are hitting even the largest and most stable businesses. Although we’re not quite in 2023, the prediction is already coming true with Relativity laying off 10% of its global workforce just last week.

2. Growth investment remains frozen

According to Crunchbase, global venture funding in November 2022 was down 69% year-over-year, with late-stage (growth) funding down even more: 80% year-over-year. With public company multiples continuing to be down (especially those of software companies) and inflation remaining high, it’s reasonable to expect the growth investment climate will remain cool if not downright frigid. Growth companies will need to manage their burn rate very carefully.

3. (Some) CLM vendors feel the pain

Gartner’s 2021 Hype Cycle for Legal and Compliance Technologies put contract lifecycle management (CLM) on the slope of enlightenment, but I think it’s entering the trough of disillusionment. As Lucy Bassli has written, CLM is as much about templates, policies, and processes as it is about software. This complex, time-consuming work is underestimated by many first-time buyers. Combine this with market forces—there’s a lot of competition and many CLM vendors raised money at now-unsupportable valuations—and you have the ingredients for a rough year. Leaders like Ironclad will be fine, and will grow market share.

4. Legal ops becomes the GC’s right hand

The logical evolution of the legal ops function is that it becomes the General Counsel’s right hand. Earlier this year, I wrote on LinkedIn: “Legal operations is more than a job title and more than a job function… Every leader needs a right hand: someone to help operate the team. This is legal ops.” I later came across a post on Penn Law’s blog that said, “The idea of elevating legal ops to the status of legal advice may sound controversial, but it is simply common sense in today’s world.”

5. The US enacts a national privacy law

Conventional wisdom says Republicans are anti-regulation, and that with them taking control of the House there’s no chance of a national privacy law being passed. But even free-market, low-regulation advocates recognize businesses are suffering from a patchwork of state regulations and a national framework would be better and less expensive. With Democrats retaining control of the Senate, it’s easier to see a path to the American Data Privacy and Protection Act (ADPPA) becoming law in 2023, upending privacy practice in the US.

6. Am Law 200 revenue growth halves

In 2021, Am Law 200 revenue grew 13.9% year-over-year. It takes a while for ALM to compile the data, so we won’t know the 2022 growth rate until May 2023 (and the 2023 growth rate until May 2024), but I predict it will halve to 7%. The main driver will be blowback against the hourly rate increases Big Law has already started to seek for 2023. Legal tech like Brightflag makes it easier for corporate legal teams to spread their business across a wider set of legal providers, including a diverse set of alternative providers, better aligning spend with risk and value.

7. AFAs slow, but ALSPs grow

In the world of software and technology, many vendors are adopting usage-based pricing models. In theory, these models align price to value because value is correlated with use, although it’s a little murkier in practice. This trend isn’t limited to technology; use cases for micropayments are popping up across verticals. It’s somewhat curious, then, that the legal industry has moved — haltingly — in the opposite direction. I think 2023 will be a year in which the growth of alternative fee arrangements slows while alternative legal service providers continue to grow by offering disruptive price points and service delivery models.

8. Contract standards break out

Eliminating the redlining of contracts altogether is the Holy Grail of contract management. That’s exactly what oneNDA does for non-disclosure agreements, and it’s been adopted by more than 800 organizations. Together with oneDPA and Claustack, 2023 will be the year of contract standardization, further driving the growth of legal operations as commercial contract volume shifts from attorney to automation. The leading CLM vendors will recognize this shift and incorporate these standards in their software as out-of-the-box options.

9. Big Tech makes a legal acquisition

With big enterprise software sitting on mountains of cash and valuations down 50% or more, conditions are right for a major acquisition. Conga will be in its fifth year of ownership by Thoma Bravo, which is a common hold period. DocuSign’s stock is down 65% in the last year and is at a significant distribution disadvantage relative to Adobe Sign. Icertis struck a strategic partnership with SAP early this year, often a precursor to an acquisition. Onit is a wildcard acquisition target: having bulked up through acquisition, they’ve exhausted the $200 million raised and will need to provide liquidity to K1 and management. As with last year, this prediction is made without any inside information.

10. Brightflag has a great year

Among legal tech companies, I think Brightflag is uniquely positioned to achieve great success in a year in which many are likely to struggle. There are three reasons I believe this. First, we’ve built a fantastic product that keeps getting better with automatic monthly updates. Second, Brightflag’s outstanding customer service is just what resource-constrained teams need to achieve success as they discover software alone isn’t enough. Third and finally, outside counsel management is a strategic imperative when organizations are looking to directly impact the balance sheet.

If you work in a corporate legal department, we’d love to speak with you. And if you’re considering a career in legal tech, we’re hiring.

I hope you have a safe and happy holiday season.