Law firms’ billing model faces disruption as clients turn to AI DIY advice

Law firms are grappling with a disruption to their traditional billing model as corporate clients turn to in-house legal teams and AI tools to handle legal matters themselves. According to HSBC's yearly UK Law Firm Strategy and Investment Survey, 75% of surveyed law firms reported that the growing use of technology in legal delivery is contributing to disruption, while 60% cited clients bringing more work in-house.

Clients are increasingly using AI tools to manage legal work and arrive at meetings with AI-generated strategies, leaving lawyers unsure about how to bill for their specialized services, which have been billed hourly in the past. "Clients increasingly try to do more for themselves, and their accessing plenty of their own AI tools in order to do it," said Helen Drayton, CEO of Pennington Manches Cooper.

Some clients even use AI solutions recommended or developed by their law firm partners. Knights law firm CEO David Beech noted that GCs are using AI tools suggested by their firms to fulfill their needs. The HSBC survey also found that effective AI integration is the most frequently cited organizational challenge, with 73% of firms reporting it as a major hurdle.

Law firms have largely adopted generative AI strategies, but senior leaders are now focused on securely and effectively integrating the technology across their businesses. However, they face challenges such as time and opportunity to explore the AI market, legacy systems and data, cost, and uncertainty over return on investment.

Finance director at Roythornes, Sam Elkin, commented that law firms are now facing a dilemma of how to adapt their business model to the potential transformative impact of generative AI.