Why In-House Legal Teams Are Demanding Proof of AI-Driven Cost Savings from Law Firms

In-House Legal Teams Demand Clear AI-Driven Cost Savings from Outside Counsel

Big law firms across the globe are increasingly adopting generative artificial intelligence (AI) in their workflows. Yet, corporate clients report they have yet to see the expected reductions in legal fees. In fact, costs for outside counsel continue to climb. For example, in the US, Brightflag's recent report shows a 10% year-on-year increase in rates for the top 100 law firms in 2024.

“There has not been a fundamental change in how law firms are delivering the work,” says Alex Kelly, co-founder of Brightflag, a company that uses AI to help in-house teams manage external legal services. Despite wider AI use in tasks like document review, research, and due diligence across sectors from private equity to patent law, price reductions remain elusive.

Clients Push for Mandated AI Use to Control Costs

Kelly anticipates that in the next year, more clients will demand contracts that require law firms to utilize generative AI in billing areas, expecting this to translate into cost savings. Jeff Langlands, general counsel for BT’s corporate, digital, and networks divisions, confirms this pressure.

BT is actively asking potential law firms to disclose where and how they use generative AI, and how it benefits the company. So far, firms have struggled to demonstrate tangible cost savings on specific tasks such as due diligence.

“We’ve not seen that ‘compare and contrast’, and that’s, for me, really quite an important next step,” Langlands explains. He emphasizes the need to clearly show CFOs and boards the financial advantages of technology adoption within legal services.

Corporate Clients as Catalysts for Legal Tech Progress

Andrew Perlman, dean of Suffolk University Law School, stresses that client demand strongly influences law firms' technology adoption. However, client views on AI use vary widely—some fully embrace it, while others prohibit it. This patchwork creates challenges for firms trying to balance compliance with client preferences.

Despite this, generative AI could be the most significant factor yet to challenge the traditional billable hour model, which remains dominant despite criticism.

Perlman notes that many clients have not pressed for alternatives to billable hours due to concerns over service quality. But with AI adoption growing, clients are better positioned to guide how firms deploy technology and adjust billing practices.

Potential shifts include:

• Increased alternative fee arrangements linked to customized AI models trained on proprietary firm data.
• Law firms leasing proprietary AI tools to corporate clients.
• Subscription-based legal tech services replacing billable hours in some work areas.

Transparency and Collaboration Are Key

Veta Richardson, president and CEO of the Association of Corporate Counsel, highlights that cost savings will only materialize if law firms and in-house teams communicate openly. Firms need to clearly articulate how AI improves efficiency, accuracy, and value—including its impact on billing.

She also points out the importance of addressing data privacy, security, and ethical concerns like algorithmic bias and the environmental footprint of AI technologies. In-house teams should specify where they expect efficiency gains, helping firms focus AI efforts effectively.

Challenges in Demonstrating AI-Driven Savings

Kerry Westland, head of Addleshaw Goddard’s innovation group, explains that law firms face hurdles in showcasing AI-enabled cost savings. Investments in generative AI and legal tech add to firms’ expenses, sometimes offsetting efficiency gains.

AI tools have mostly been applied to parts of projects, not entire matters, making it difficult to isolate savings. Plus, AI capabilities enable new types of work that would have been unfeasible before, complicating comparisons.

Clients inevitably ask, “If you’re using technology, what does that mean for fees?” Westland says this question has followed legal tech pioneers for over a decade and remains central today.

Conclusion

Law firms are adopting generative AI at scale, but the legal industry has yet to see clear, widespread cost reductions passed on to clients. Corporate legal teams are increasingly demanding transparency and measurable savings tied to AI use.

For legal professionals looking to deepen their AI expertise and better understand how to leverage these technologies in practice, exploring dedicated AI training can be a practical step. Resources like Complete AI Training's latest courses offer focused learning paths tailored to legal professionals seeking to integrate AI into their workflows efficiently.