“The customer’s perception is your reality.” — Kate Zabriskie once wisely noted, a sentiment that resonates deeply within the legal industry today. A groundbreaking study by the Association of Corporate Counsel and Everlaw underscores a seismic shift occurring in legal departments worldwide, which could spell trouble for traditional law firms.

The extensive survey, which took into account the opinions of 657 in-house legal professionals from 30 countries, reveals an explosive growth in the use of Generative AI (GenAI). The findings show a significant jump, with 67% of in-house teams now using or experimenting with AI, up from 38% just last year. The primary benefit cited? Efficiency, with 91% of GenAI users acknowledging it.

More telling is the impact this shift is having on the traditional reliance on outside counsel. According to the survey, 64% of legal departments expect to decrease their dependence on external lawyers due to the efficiencies gained from AI. Furthermore, a notable 24% of respondents are very likely to advocate for a shift away from the traditional billable hour model.

Yet, while in-house teams rapidly adopt and benefit from AI, many law firms seem stuck in the past. A startling 59% of in-house professionals are unaware if their external legal teams even use AI. And of those who do, the use hasn't significantly altered billing practices, with 80% of in-house teams not requiring or encouraging their outside lawyers to adopt GenAI.

This paradox highlights a significant reluctance among in-house counsel to demand changes from their outside law firms, possibly due to a mix of professional courtesy, fear of untested tech impacting critical cases, and a general mistrust in controlling external AI applications.

However, as in-house departments continue to see tangible benefits from AI, the pressure on external firms to adapt will inevitably increase. The statistics speak volumes: while 67% of in-house teams use AI tools to enhance efficiency, a staggering 80% have not yet demanded similar practices from their external counsel.

In a world where efficiency and innovation are increasingly valued, law firms that continue to resist the AI wave risk obsolescence. As client expectations evolve, those sticking to traditional methods may find themselves sidelined in favor of 'AI first' firms that offer faster, more cost-effective legal solutions.

The message is clear: the legal landscape is transforming, and for law firms, adapting to this change isn’t just an option—it’s an imperative. As technology reshapes what clients expect, only those who evolve will survive.