The Disconnect Between Law Firms and Clients on Use of Gen AI

By Geoffrey D. Ivnik, Esq. | Director Large Markets, LexisNexis 

Senior leaders at large law firms and executives in corporate legal departments are largely in agreement that Generative Artificial Intelligence (Gen AI) tools are likely to have a dramatic impact on the practice of law in the years ahead. But there are some notable and intriguing gaps between how firm leaders and their clients are thinking about a future in which Gen AI is a routine part of their workflows.

In January of 2024, LexisNexis surveyed 216 managing partners and other senior leaders at large law firms, as well as 50 executives in corporate legal departments at Fortune 1000 companies, to better understand the business impact of Gen AI technology on the legal industry.

Our survey found that a similar share of law firm leaders (75%) and corporate legal executives (81%) have used Gen AI tools themselves, and roughly the same number of senior executives expect their investments in Gen AI technologies to increase either “significantly” or “modestly” over the next five years (90% in law firms, 86% in corporations).

But there was an interesting disconnect between law firm leaders and their in-house counterparts when we asked for their predictions and expectations surrounding how Gen AI will impact the law firm/client relationship:

• An overwhelming 80% of corporate legal executives expect their outside counsel bills to be reduced as a result of Gen AI technology, yet just 9% of law firm leaders said their corporate clients have expressed that they expect their firm bills to be reduced as a result of Gen AI;
• Nearly three in four (72%) corporate legal professionals predicted that more work will be done in-house as a result of Gen AI adoption, but meanwhile 70% of law firm leaders predicted that Gen AI will enable their firms to deliver new value-added work to their clients;
• More than two-thirds (68%) of in-house counsel said they approve of their outside counsel using Gen AI tools on their company’s legal work, yet just one-third (38%) of law firm leaders said their clients approve of law firms using Gen AI in their legal matters; and
• While 76% of corporate executives anticipate that Gen AI will decrease costs for their legal departments, fewer than half (47%) of law firm leaders expect that Gen AI will decrease costs for their firms.

The takeaway here is that Fortune 1000 in-house counsel have higher expectations regarding the potential for Gen AI to reduce corporate legal spending than their counterparts at large law firms, both in terms of cost savings opportunities and the ability for them to complete more work in-house.

The biggest disconnect, however, exists around expectations to changes in law firm billing. Most corporate legal executives expect to see a reduction in billing from their outside counsel due to efficiencies created by Gen AI, but just a small number of law firm leaders appear to be aware of this expectation. This is an important potential flash point to monitor as Gen AI adoption rises in the years ahead.

Download a free report of our 2024 Investing in Legal Innovation Survey: The Rise of Gen AI at Top Firms and Corporations.