In a significant shift within the legal landscape, corporate law departments are increasingly turning to artificial intelligence to manage their legal affairs, reducing their reliance on external counsel and reshaping the traditional attorney-client relationship. This evolution is highlighted in the 2025 Harbor Law Department Survey, conducted in partnership with CLOC, which draws insights from 135 corporate law departments with a median company revenue of $13 billion.

The findings of the survey reveal a power shift, with general counsels (GCs) gaining the upper hand. While Biglaw firms are not going out of business, the trend towards internal management of legal tasks is unmistakable. Last year, 58% of legal departments expected to increase their spending on outside counsel. This year, that number has dropped to 37%, a decline too significant to attribute solely to economic uncertainty.

Notably, almost two-thirds of the departments reported intentionally bringing more work in-house over the past two years, coinciding with a period where AI technology transitioned from a theoretical tool to a practical solution enhancing productivity across various legal functions. According to the survey, 85% of departments now have dedicated resources for AI initiatives, with significant adoption in areas such as general productivity, summarization, legal research, content creation, and contract intelligence.

This surge in AI utilization has also prompted a reevaluation of the billable hour model, with over three-quarters of legal departments now employing alternative fee arrangements, and a significant increase in the use of convergence or preferred provider panels. These changes indicate a move towards more predictable and manageable legal expenditures, leveraging AI to hold law firms accountable and negotiate more favorable terms.

Lauren Chung, survey editor and Practice Group Lead, Strategy + Transformation at Harbor, commented on the strategic shift, stating, "Departments are shifting from reactive cost-containment to structured operational strategies — optimizing outside counsel, implementing workflow technologies, and building robust AI governance."

The survey also underscores the growing importance of legal operations professionals, whose top priorities include technology strategy, financial management, and outside counsel management. These priorities reflect a comprehensive approach to leveraging technology to enhance financial performance and strengthen control over external legal services.

As corporate law departments continue to harness AI's potential, Biglaw firms must adapt to a changing environment where clients are equipped with the same advanced tools, making traditional rate increases and billing practices increasingly difficult to justify. This movement is not just about cost savings but a fundamental transformation in how legal services are managed and delivered, signaling a new era in the legal industry.