As artificial intelligence (AI) continues to evolve, its impact on various industries becomes increasingly profound. In the legal sector, a new study highlights a significant shift towards questioning and eventually moving away from the traditional billable hour pricing model, driven by the adoption of Generative AI (GenAI).

A survey conducted by Everlaw in collaboration with the Association of Corporate Counsel, titled “Generative AI’s Growing Strategic Value for Corporate Law Departments,” provides insight into current attitudes and adoption rates of AI technologies within corporate law departments. The findings indicate that a majority of these departments—61%—are either somewhat or very likely to challenge existing law firm pricing structures.

Despite this growing inclination to rethink how legal services are billed, there remains a notable gap in awareness and implementation of GenAI among law firms. According to the survey, 59% of respondents are unaware if their law firms utilize GenAI for legal matters. Furthermore, a substantial 80% have not taken steps to encourage or mandate the use of this technology by their external legal providers.

On the other hand, the use of GenAI within law departments themselves has more than doubled over the past year. This surge in adoption allows in-house legal teams to handle more tasks independently, thereby reducing reliance on outsourced legal services and potentially influencing cost structures.

Petra Pasternak, summarizing the report for Everlaw, notes, "Momentum is building against the billable hour. Firms that link GenAI-enabled efficiency to fair, transparent pricing will stand out as modern, client-first partners." This sentiment underscores a growing trend where efficiency and transparency are becoming key differentiators in the legal services market.

The survey's data, drawn from 657 in-house professionals across 30 countries, suggests a readiness within corporate law departments to leverage GenAI for increased efficiency, setting new expectations for how law firms should operate and bill for their services.

As the legal industry continues to grapple with these changes, the role of GenAI is becoming central in shaping future practices. Law firms that adapt to these expectations and integrate GenAI into their operations may not only gain a competitive edge but also align more closely with the evolving needs of their clients.

For more detailed insights, the full reports by Everlaw can be accessed through their publications on the strategic value of GenAI in corporate law departments and its implications for law firm billing practices.