Corporate law departments have embraced their inner-DIY urge. Thankfully, instead of attempting to gut their kitchens after binging HGTV, these lawyers have channeled this into doing more and more of their own legal work and using their newfound independence to overhaul their outside counsel relationships. And, as one might suspect for a story in 2025, AI is involved.
The 2025 Harbor Law Department Survey, conducted in collaboration with CLOC, dropped this morning. Pulling insights from 135 corporate law departments representing companies with a median revenue of $13 billion, the survey indicates a power shift underway with GCs capturing the upper hand. Biglaw isn’t going out of business any time soon, but 58 percent of surveyed legal departments expected to increase their outside counsel spend last year. This year, only 37 percent project sending more money to the firms. Economic uncertainty probably accounts for some of the depressed spending, but the dropoff is too significant to fully blame on tariffs and federal mismanagement.
GCs keep bringing work in-house. In itself, this isn’t unprecedented. Much like those HGTV viewers, every few years a bunch of in-house lawyers get convinced that they can save some money handling the work of outside professionals. Whether it’s the Property Brothers replacing a load-bearing wall or Cravath drafting a cease and desist, there will be someone out there to confidently declare, “I’m pretty sure I could do that.” In legal, that trend will last a year or so and then clients start ticking up outside spend again.
The difference this time is scale. Almost two-thirds of legal departments reported intentionally bringing more work inside over the past two years. Which just so happens to coincide with the two years where the conversation around AI leapt from nerdy diversion to magic productivity box. According to the survey, law departments embraced the change, with 85 percent indicating that they have dedicated resources to managing AI initiatives, with live or piloting solutions for general productivity (74%), summarization (56%), legal research (54%), content creation (54%), and contract intelligence (49%).
Beyond reducing outside workload, this DIY spirit enables a reboot of the whole outside counsel relationship. The billable hour continues to cling to life like a Boomer clings to a multimillion dollar property they bought for $15K in the 70s, but time is starting to chip away at its tenacity. As AI transfers more leverage to clients, law departments are negotiating more budget projection-friendly alternative fee arrangements. Over three-quarters of respondents now use AFAs. Some 69 percent have convergence or preferred provider panels, a jump from 50 percent, reflecting a shift toward deeper and more easily managed client relationships.
“Departments are shifting from reactive cost-containment to structured operational strategies — optimizing outside counsel, implementing workflow technologies, and building robust AI governance,” said Lauren Chung, survey editor and Practice Group Lead, Strategy + Transformation at Harbor. “The emphasis on legal operations and technology strategy underscores that transformation is now a defining capability of leading corporate law departments.”
Which is consultant-speak for “clients now have the tools to actually enforce accountability.” Partner wants to push back on fixed fees? Fine, we’ll keep it in-house. Firm balking at joining the preferred panel on your terms? Plenty of other firms will jump at becoming one of our go-to firms. That 5% rate increase you want? Let me check what our AI budget could do with that money instead.
Now, these legal departments need to maintain a clear-eyed assessment of their AI-fueled capabilities. The appointed prophets of AI swear that there’s no task that their miracle devices can’t tackle while we sit back and count the sanctions. Playing hardball with the professionals is a lot easier before you’ve accidentally flooded the basement. “Legal leaders are no longer simply exploring AI, they’re deploying it to unlock productivity, accelerate legal research, and enhance content and contract workflows,” said Jaime Woltjen, Senior Director of Strategy + Transformation at Harbor. “At the same time, departments are thoughtfully building governance frameworks to ensure responsible and secure use.”
Much of that task is falling on the Legal Ops professionals, who reported their three top priorities over the next year as technology strategy (80%), financial management (72%), and outside counsel management (62%).
Notice how neatly those priorities align. A technology strategy to improve financials and build leverage over outside counsel. Quite the battle plan for the Legal Ops warriors. While Biglaw continues charting its own AI adoption, it needs to keep an eye on the clients, because rate increases are going to get a lot harder to sell when the client has the same power tools.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
The post Biglaw’s Worst Enemy Isn’t AI, It’s Clients Using AI to Stop Paying Them appeared first on Above the Law.