“The customer’s perception is your reality.” — Kate Zabriskie
To paraphrase what’s often been said about getting outside lawyers to change what they are doing: It’s hard to tell a room full of millionaires the way they’re doing things is all wrong. Be that as it may, a new study by the Association of Corporate Counsel and Everlaw could spell trouble and be harbinger of change for outside lawyers.
Indeed, I have often said that real change in how outside lawyers deliver legal services and charge for them won’t change unless and until in-house lawyers demand it.
ACC did a survey of some 657 in-house legal professionals across 30 countries. What the ACC wanted to find out was what the current rate of GenAI adoption by in-house legal departments. And boy, did they find out.
The Key Findings
Here are some key findings:
- 67% of those surveyed said they are currently using GenAI or at least using beta AI projects as compared to 38% last year.
- 91% of those using GenAI report efficiency as the top benefit.
- 64% expect to rely less on outside counsel as a result of AI use.
- 24% of legal professionals are very likely to push for change in billable hour model.
So lots of GCs are using AI for lots of things. But what about their outside counsel? There are some startling statistics.
What About Outside Counsel
Fifty-nine percent of in-house professionals remain unaware of whether their law firms are using the technology on their legal matters. And even more startling: as of now, 80% — yes, 80%! — of those surveyed are not requiring or even encouraging outside counsel to use GenAI. Even more telling: Of those firms who are using GenAI, 59% of in-house counsel say they have seen no noticeable changes in what is being billed.
No wonder law firms are slow to change. Why change what you are doing when what you are doing has made you millions, particularly if no one is telling you to. And the 59% statistic tells me that firms who claim to be using, are doing just that. Claiming, not using.
The Paradox
It’s a paradox. In-house counsel are using GenAI and seeing significant benefits but aren’t making demands on outside lawyers. Why? Several reasons. First, I think, in part, in-house counsel don’t want to mess with how their lawyers do their work. They hired the lawyers for a reason — to do something in-house can’t. Therefore, you need to give them the freedom to do it.
Second, you can never underestimate the ability of outside lawyers to paint a sky-is-falling picture. As in, I would use GenAI, but you know if it makes a mistake, the case could be doomed (unsaid: and it will show up on your review, Mr. In-House).
Or there is the argument: Yeah, we could use AI, but we have to check everything and, in the end, it will just cost you more. (Forty-three percent of the respondents cited this “fact.”)
Finally, there may also be some mistrust involved. In-house counsel can control and monitor in-house use of AI. They can’t control outside use.
Other reasons given by those surveyed range from it’s too early and law firms haven’t adjusted pricing models to reflect AI efficiencies. (Wait, you haven’t asked them to. Do you really think they will do it on their own and wound, if not kill the cash cow?)
I have to say, based on these statistics, law firms might be justified in thinking let’s just stay fat dumb and happy. But I think despite the stats, that would be misguided and shortsighted. Why?
Let’s Not Kid Ourselves
As the study indicates and I have written before, in-house counsel are using AI tools to do more and do in-house work that outside lawyers used to do. That will inevitably mean fewer matters for outside lawyers to bill for. Okay, but there’s also more work for outside lawyers to do as I have mentioned before so that should not be a concern, right? Also wrong.
Here’s what’s happening. In-house lawyers are seeing the power of these tools in their everyday work. They are seeing how much more they can accomplish using the tools. They are seeing the efficiencies that can be achieved. As they come to trust the tools more and more, they can’t help but see that outside legal spend could be reduced if only outside lawyers used the tools like inside counsel are.
And because outside lawyers are lagging so far behind in-house and apparently making little effort to catch up, it’s not hard to envision a day of reckoning. When inside counsel say enough is enough. Or vote with their feet and flock to what Zach Abramowitz has described as AI first firms, firms that embrace AI and use the tools to practice their cases at a fraction of the time it takes others.
Think I am wrong? Compare again these two sets of numbers: 67% of in-house use the tools and almost all see greater efficiency. Yet 80% aren’t demanding outside counsel use the tools. Yet.
That’s like saying most of us would continue to use Amazon if it delivered goods by horse and buggy when we know there is a better way. At some point, we would demand a better delivery mechanism or go to someone who provided something better. Your clients’ perceptions are indeed your reality.
So, law firms, don’t kid yourself. Your clients are about to wake up. You better do likewise, or your competition may eat you alive.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
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