Despite significant global adoption of generative AI by major law firms, corporate clients have not yet experienced cost savings, and legal service bills continue to rise. Clients anticipate that over the next year, they will increasingly seek agreements with law firms to mandate AI use in various billing areas, expecting a reduction in costs. Veta Richardson, CEO of the Association of Corporate Counsel, emphasizes that clients will only realize savings if law firms and in-house departments openly share information about AI's benefits, efficiency, accuracy, and value, including its impact on billing, data privacy, security, and ethical considerations like biases and 'hallucinations'.
Generative AI has the potential to significantly change the criticized, yet resilient, billable-hours model, according to Perlman. This could manifest through increased use of alternative fee arrangements as law firms develop customized generative AI models based on their proprietary data. Additionally, law firms might lease their proprietary AI models to corporate clients or offer more tools and services on a subscription basis, potentially shifting away from traditional billable hours in specific areas of work.
Law firms must invest in generative AI services and other legal technology. This investment has led some firms to consider incorporating these costs into client billing. However, clients are finding it difficult to concretely measure the cost savings achieved through generative AI, as the technology is often applied to specific parts of projects rather than the entire scope. This makes it challenging to identify precisely where savings occur and to compare current costs with what previous methods would have entailed for newly enabled tasks. Ashurst, for example, is rethinking its business model to charge clients for both technology and human expertise.
