In order to have an understanding of how major law firms are approaching AI adoption, this study has reliance on several important interviews with chief operating officers and partners responsible for AI deployment from some prestigious firms. These interviews supply insights into their strategies for AI implementation, operational readiness and client collaboration. The findings reflect a range of perspectives on the effects of AI on productivity, revenue models, and firm profitability. Having recognition of confidentiality and controversial issues, firms were offered anonymity in their responses.

Who does this great productivity gain benefit? There was clear agreement that the benefits would fall to both the firm and the client in spite of the fact that the exact mechanisms were not yet clear. Nowadays,  some experts hold the viewpoint that the total number of hours worked would be similar or even have expansion while attorneys will have the opportunity to spend more time analyzing and making plans.  There is an expectation that the additional time now available will be likely to enhance outside counsel’s “quality of service,” not just a less expensive result. This opinion was expressed by a vast majority of the firms interviewed. Conveniently, their clients agreed with this expectation and are satisfied with the current fee arrangement systems and approach. 

While the revenue model appears to be firmly in place for the long run, firms are continuing to develop their capabilities around alternative pricing agreements, primarily fixed-fee work. None of the firms believe that their ability to scope the work and price accordingly has enough maturity, but they have been progressing on this front for many years and continue to grow their pricing and profitability analysis teams. They hold the expectation that they will have the ability to enlarge this function quickly if necessary.

With the model enjoying increasing dominance, it also offers a mechanism recovering investment costs of AI deployment. No firms interviewed plan on recouping AI investments directly from clients. As said by one person, the increased value will be acknowledged and will be likely to be built into higher rates.

With the lawyers helped by all of this smart software, none of the firms interviewed are predicting any reduction in the need for the number of practicing attorneys. Associate hiring and lateral movements have not been influenced by the expected inclusion of AI capabilities available to practice groups. Some of this behavior may also result from momentum. Conversely, headcount may increase as such new positions as data scientists and AI engineers are being added to the teams. Lawyers with a multifaceted set of skills or versatility with AI may also show their own extra value.

All the firms interviewed are working together with their clients on the development and testing of use cases for the infusion of AI into their work. Additionally, many are containing AI software vendors as a third partner in projects to prove their value asking vendors to modify software during the course of the pilot project to better deploy AI in common situations. With the number of iterations increasing during each pilot phase, lawyers are seeing improved accuracy and general quality of output. These collaborations have led to shared investment approaches for many projects. At the same time, firms have the discovery that many potential cases have not produced the anticipated results after pilot testing, abandoning projects altogether.                                                                      

With a strong belief that AI infused practices will have improvements of the quality of legal work delivered to clients, interviewees also discussed practice specific “case methodologies.” About one third of the firms have in place at least some form of practice methodologies which AI tools will enhance. The natural home for governance of new AI tools is within case methods enabling lawyers to review, test, and approve specific AI software to make contributions to the quality of legal services.  Law firms have been experimenting with case methodologies for many years. AI will assist in defining new, more efficient and consistent processes and ultimately push firms to develop methods in concert with AI software as complementary capabilities and even supply competitive advantage. Every firm will not have the same processes, AI tools, or databases of knowledge which will allow significant differentiation between law firms.                                                                                                                                                                                                                

Making strategic plans, law firms often debate growth objectives, and for a long time the advantages of scale were not obvious in the legal industry. Often law firm strategy would avoid a path of “growth for growth’s sake.” Even so, recent aggressive hirings in the lateral partner markets from firms with very deep financial pockets have shown how significant an advantage scale is. Similarly, the transition to AI capable law firms also advantages those firms with the financial strength to make these investments without risking partner profits.