There is growing agreement across the legal industry that artificial intelligence may mark the end of the billable hour. When intelligent systems can complete discrete legal tasks faster, more consistently, and at lower cost, time stops working as a credible proxy for value.
For in-house legal teams, this shift should feel overdue. The billable hour has long ignored outcomes, rewarded inefficiency, and complicated efforts to align legal spend with deliverables and results. Many corporate legal departments have long pushed for alternative fee arrangements, though not all such arrangements represent true value-based pricing. Capped fees, blended rates, and tiered discounts remain hourly-based and carry the same fundamental problems. True value-based (VBP) pricing requires fixed fees and other non-hourly fee structures for defined scopes of work.
As AI accelerates this transition, the more complex question is not whether time-based pricing will survive. The better question is what replaces it, and who is actually ready for that change.
Over the past year, this question has surfaced repeatedly in conversations with general counsel and Legal Operations leaders. Many agree that the billable hour is losing its prominence. Far fewer feel confident that their organizations are operationally prepared for what comes next.
As Rita McGrath, a Columbia Business School professor and leading authority on strategic inflection points has written in some of her publications, that disruption rarely arrives as a sudden break. In her book Seeing Around Corners, McGrath explains that major shifts typically emerge first as subtle signals, early indications that long-held assumptions are starting to fail, well before the change becomes impossible to ignore.
In the January 2026 episode of the UpLevel View podcast, McGrath described disruption this way: “It occurs when something that used to be really hard and complicated becomes easy, and when something that used to be really expensive and inaccessible becomes less expensive and accessible.” In a recent Wall Street Journal essay, she applied that same lens to artificial intelligence, arguing that AI accelerates the decline of the billable hour by making time an increasingly meaningless measure of value.
The billable hour persisted not because it reflected value, but because it absorbed uncertainty. When scope was unclear, workflows varied, and outcomes were difficult to define, time functioned as a hedge. It shifted risk away from firms and onto clients, masking inefficiency and variability rather than resolving it. The outcome was that clients absorbed all the risk of the matter, not only for the hours billed, but also for a bad result.
AI removes that hedge.
As intelligent systems potentially reduce costs in individual tasks, they expose weaknesses elsewhere. Intake processes that were never standardized. Workflows that differ from matter to matter. Metrics that track activity but fail to explain impact. Governance structures that rely on informal judgment rather than clear accountability. These gaps were manageable when time absorbed the risk. They are not in an AI-driven model.
When time is no longer the buffer, operations have to be explicit. This includes clarity about scope (what is and is not included), assumptions (the conditions under which pricing holds), and deliverables (what the client receives at each stage). It benefits both parties: clients gain budget predictability, while firms can price work with confidence and without building in excessive contingencies.
The erosion of the billable hour is one of those early disruption signals as described by Professor McGrath, and one that legal leaders can no longer afford to ignore.
It is showing up gradually, through persistent questions about predictability, increased scrutiny of spend, and growing discomfort with operating models built for a different era. AI accelerates this erosion, but the signal itself is structural, not technological.
Value-based pricing does not fail because legal leaders lack imagination or conviction. It fails when fee arrangements lack proper structure, when scopes are too broad, assumptions are undefined, and pricing is negotiated rather than competitively bid. The good news is that a well-designed RFP process with granular task-level pricing can succeed even without perfect internal operation processes. In fact, the discipline of scoping work for VBP often creates the internal focus and clarity that organizations believe must come first.
This is especially true for in-house teams. Moving beyond the billable hour requires more than negotiating new fee structures with outside counsel; it requires a focus on operations metrics besides dollars per hour worked. These might be units of value such as dollars per contract or dollars per bond offering.
One immediate and often overlooked benefit of properly structured fixed-fee arrangements is the elimination of invoice review altogether. Across value-based pricing engagements, in-house teams consistently report spending 10–20% of their time reviewing line-item bills. That administrative burden disappears when fees are fixed to defined scopes and paid on predetermined schedules.
For legal leaders, the pricing debate is revealing something deeper than the fate of the billable hour: how much of Legal’s value still depends on legacy operating structures. The teams that navigate this transition successfully will be the ones that recognize this signal early.
It is worth noting that well-structured VBP arrangements can also benefit law firms. Firms that invest in efficiency and matter management can earn margins that exceed what hourly billing would provide. The goal is not to squeeze firms but to create alignment where both parties benefit from efficiency and successful outcomes.
AI may be the death knell for time-based pricing. Readiness (operational, financial, and organizational) will determine what comes next, and which legal teams are positioned to lead when it arrives.
Stephanie Corey is the co-founder and CEO of UpLevel Ops. She also serves as the Global Chair of LINK x L Suite — a premier community of General Counsel and Legal Operations leaders united to transform the legal industry through collaboration, innovation, and strategic insight. Stephanie co-founded LINK (Legal Innovators Network), a legal ops organization exclusively for experienced in-house professionals, and previously founded the Corporate Legal Operations Consortium (CLOC), where she served as an executive board member. She is a recognized leader in legal operations and a frequent advisor to corporate legal departments on scaling operational excellence. Please feel free to connect with her on LinkedIn.
Ken Callander is the founder of Value Strategies by UpLevel Ops and specializes in helping corporate legal departments optimize their outside counsel relationships, ensuring greater value, efficiency, and budget predictability. As part of the Advisory Team at UpLevel Ops, he partners with legal teams to implement strategic outside counsel management programs, including transitioning from hourly billing to value-based fee arrangements. His clients span industries such as technology, healthcare, construction, the sharing economy, private equity, and multinational conglomerates.
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