At a recent legal executive forum, panelists considered exactly where the impact of artificial intelligence may be most felt among law firms and their corporate clients
NEW YORK — While it’s hardly a ground-breaking scoop to contend that artificial intelligence (AI), and its more hyper (and hyped) companion generative AI (GenAI) will have an impact on many professional service industries, especially the legal industry, deciphering exactly when and where that impact will hit most definitively is the real issue.
At the recent Thomson Reuters Institute’s 23rd Annual Law Firm COO & CFO Forum, one panel took up this and other related queries, eventually painting a picture of a legal market and a law firm business model that may look very different in a few years from what it’s like now.
“I think AI will have an impact beyond what we even can imagine yet,” said one panelist, adding that even considering these questions raises others that legal professionals will have to deal with in the years to come. For example, the panelist said, it’s obvious that GenAI potentially can save lawyers lots of time in work hours, but exactly which work will be impacted? Indeed, once you get past the low-hanging fruit of tedious, clearly automatable tasks, then what?
Further, the panelist explained, it’s common sense that freed-up work time then can be used to allow lawyers to perform more value-added tasks, but exactly what are those tasks and — more importantly — how do law firms convey that value to their clients, especially in a way that will allow firms to continue increasing their billing rates?
“If we say that AI is not replacing anyone, but it’s just making them more efficient, again, we have to be able to explain that clients who may be looking at firms’ new-found efficiency as a way to pay them less for their fewer hours of work time,” the panelist added.
Beyond this hefty conundrum, the panel looked at other areas where they see AI having the largest impact on law firms and their clients.
Practical uses of AI — Law firms and other industries currently are looking for the practical uses of AI and asking how they can best protect their clients from the mistakes that AI use could bring. As one panelist explained, AI’s best uses are in three areas — finding things, creating things, and analyzing things — and none of these strictly require the use of client data.
“If we say that AI is not replacing anyone, but it’s just making them more efficient, again, we have to be able to explain that clients who may be looking at firms’ new-found efficiency as a way to pay them less for their fewer hours of work time.”
For example, some members of the panel and the attending audience cited current uses of AI within their firms, such as conflict tracking, tracking patent applications, time capture via a time entry generator, and even drafting terms from a raft of contracts to create a state of the industry template.
Talent management — Many on the panel suggested that law firms will have to bring in non-lawyer tech specialists and find possible ways to compensate them that do not run afoul of Rule 5.4 of the Model Rules of Professional Conduct, which effectively disallows non-lawyers from sharing in the profits of a law firm.
Indeed, one panelist suggested that might be impossible, leading to a re-thinking of that rule. “I predict that some firm is going to finally just break this rule, saying we’re bringing in a tech professional and paying them in a way that is comparable to industry standards, so go ahead and sue us,” the panelist said.
Others agreed. “If you bring in tech people, you have to give them a seat at the table,” said another panelist. “Someone has to be in charge of all this in order for the firm to make progress and handle client-facing issues. You may in fact, have to staff a law firm unconventionally.”
Tech adoption — Many on the panel said that law firms should be making better use of their own internal data and working with vendors and third parties to leverage the tech software they need. “You have to realize that all the smartest people in the world are not all at your firm,” one panelist explained. “That’s why it makes sense to go to the outside for tech expertise.”
Indeed, argued another, there is no law firm that is going to outspend tech companies in their investment in AI or GenAI. “Vendors will always out-invest law firms,” the panelist said. “So let them, and we can just use the solutions they come up with — at least for now — or work with them to create something proprietary for us to use.”
The panel’s consensus was that law firms should try everything — using third parties, leveraging their own internal data and tech, and a mix of the two. Ideally, panelists suggested that law firms will want to use their own internal data while getting their tech stack from vendors. In fact, it may be a bit easier than it sounds, one panelist noted, adding that firms can use off-the-shelf tech solutions for the simplest “business of law” operations, but for other tasks, such as pre-bill reviews, it may be harder to find products that can work for each firm.
“New lawyers can spend their time doing more than just simple rites-of-passage work. If training is used effectively, firms can get their new lawyers to see more of what clients need and understand what the clients’ main challenges are.”
Training lawyers — As to the questions of what work will be impacted and which value-added tasks will fill that available space, one panelist stated: “AI is not replacing anyone, it’s just making them more efficient — but we have to explain that to the client.”
And while some law firm partners may worry about the dearth of dues-paying work being done by new associates and how these new lawyers will be trained, some on the panel said that points to a lack of imagination as to what lawyer training can entail. “New lawyers can spend their time doing more than just simple rites-of-passage work,” one panelist said. “If training is used effectively, firms can get their new lawyers to see more of what clients need and understand what the clients’ main challenges are.”
Changes to the business model — Perhaps most importantly, the impact of AI may shake the previously unshakable grip that the billable hour business model has on the legal industry, the panel predicted. While several panelists agreed that the billable hour won’t die, they noted that its market share may have peaked.
One panelist predicted that a couple years down the road, there will be a reconning: Law firms are going to have to demonstrate how and why their work quality is better, given their freed-up time — and they will have to justify this to clients in order to be able to raise (or even maintain) their billing rates.
Indeed, others agreed, saying there will be an evolving view of the billing cycle, and it may take years for everyone in the legal industry to figure this out — from outside law firms to their corporate clients, and from GCs to the rest of the business units within the overall organization.
“In the future, the billable hour will be among a mix of billing and pricing options,” one panelist forecasted, adding that law firms will still face stiff questions once these options are impacted by AI’s ability to shave off time from lawyers’ tasks. “Will less hours mean cheaper? How will firms explain their value-added to clients? For many firms, this is an unknown, even now.”
You can find out more of what you missed at the recent Thomson Reuters Institute’s annual Law Firm COO & CFO Forums, here.
