In a transformative shift within the legal industry, in-house legal teams are leveraging artificial intelligence (AI) to redefine their relationships with large law firms, traditionally known as Biglaw. This change centers not merely on enhancing efficiency but on fostering greater accountability and transparency, posing significant challenges to the conventional billable hour model that many large firms rely on.

Mathew Kerbis, known as "The Subscription Attorney," recently shed light on how sophisticated in-house teams are increasingly equipped with purpose-built legal AI tools. These advancements enable them to scrutinize and benchmark the work and billing practices of external law firms. Unlike individual clients, in-house counsels have the expertise to detect overcharging practices and demand justifications for the billed amounts, thereby demanding higher standards and accountability from their Biglaw counterparts.

A poignant analogy presented in the discussion differentiates between general AI tools, like ChatGPT, and purpose-built legal AI technologies. While general AI can be likened to a bonfire—broad and unspecialized—purpose-built AI is akin to a blowtorch that delivers precision and tailored utility, crucial for legal applications.

The dialogue also touched upon the emerging trend of flat fees as an alternative to the billable hour. However, this model isn't necessarily the solution Biglaw hopes for. Even with a flat fee arrangement, in-house teams can utilize AI to calculate the actual time spent on their cases. If AI reveals that tasks are completed in significantly less time than billed, the perceived value diminishes, leaving clients feeling overcharged. This underscores a fundamental issue: AI's role in making the actual costs of legal services transparent, effectively rendering traditional pricing models obsolete.

This ongoing shift is not just about cost but about the broader implications for how legal services are valued and delivered. As AI continues to penetrate the legal sector, it compels both in-house teams and Biglaw firms to reconsider and potentially revolutionize their operational and billing strategies.

As the legal landscape continues to evolve under the influence of technology, the relationship between law firms and their corporate clients may be poised for a significant transformation. The question remains whether Biglaw can adapt swiftly and effectively to these changes or if they will be outpaced by more agile, technologically adept in-house teams. The full extent of AI's impact on the legal industry is still unfolding, but one thing is clear: the traditional ways of working are being challenged like never before.