Everyone agrees that generative AI is valuable. Everyone believes it’s going to be indispensable to the legal workflow. No one seems to know what it’s worth.
That tension sits at the heart of the 2025 Generative AI in Professional Services Report from Thomson Reuters. While it’s easy to blame the hype cycle for mucking up the distinction between “powerful tool for accelerating discrete legal tasks” and “MAGIC ROBOT BEANS!” the confusion over AI’s value proposition appears to run deeper. Firms are investing in GenAI tools. Clients want firms using GenAI tools. But barely anyone is bothering to keep track of what GenAI is actually doing.
As the immortal Lyle Lanley might observe, the legal industry armed with generative AI is a little like the mule with a spinning wheel. No one knows how he got it and danged if he knows how to use it.
Organizations reporting that they actively use generative AI tools nearly doubled since last year’s report. But the trend continues decidedly upward, with 79 percent of firms surveyed expect significant GenAI integration by 2027 and 95 percent of professionals anticipating that GenAI will be central to their workflow within five years.
Meanwhile, the profession seems to be preparing for this eventuality with all the strategic vigor of a chicken playing Tic-Tac-Toe:
Only 20 percent of respondents are tracking the ROI on the technology that they’re simultaneously clamoring for lawyers to adopt. On the other hand, part of the problem might be that clients seem a tad oblivious about what their firms are even doing, with 57 percent of clients replied that they want their firms using GenAI right now, but 71 percent replying that they “did not know whether their outside firms were doing so or not.”
Get it together, people! Vive le ROI!
Because the day will arrive sooner than later when law firms start changing their prices because of AI. At the moment, 46 percent of firm respondents still say GenAI will not have an impact on their rates. But the report notes that this amounts to a 7 percentage point drop from 2024 and that’s going to keep dropping like morale at Willkie Farr as firms recognize that they need to recover money for the billable time lost to AI. Or, perhaps more to the point, the leverage lost when firms hire fewer juniors because of AI. Ethical constraints prevent lawyers from penciling in fake hours saved by technology, leaving them three options when AI-enabled workflows start taking a bite out of cumulative hours.
One, accept that the same matter just makes them significantly less money now. Which… LOL.
Two, jack up hourly rates to seize more cash for the tasks that human lawyers will still perform to cover the lost revenue from automated tasks. This is the $10,000/hr option floated at Legalweek. It’s certainly an option, but clients already complain about $1000/hr associates on matters where they’re more than comfortable spending hundreds of thousands, reflecting a psychological resistance to the idea that one person is worth such a big number even when they don’t quarrel about the overall figure.
The days of billing time to “Further work” passed a long time ago and notching three hours to “AI-enhanced strategic insight” isn’t going to cut it.
Bringing us to option three… developing more fixed fee menu items to keep the firm’s revenue consistent while losing some of the leverage that forms the foundation of the law firm model:
As a result, while there is some recognition that new technologies may impact the mix of hourly work versus flat fees or other sorts of pricing arrangements — in fact, 40% of respondents said they expect the use of alternative fee arrangements to increase as a result of GenAI — many law firm practitioners expect the status quo to continue.
But whichever way the industry chooses — between two and three of course, option one is pure lunacy — it only works if everyone understands the actual ROI involved. More to the point, everyone needs to understand the client satisfaction component of ROI and even among the small percentage of respondents that measure ROI, only 38 percent are actively measuring client satisfaction.
Will generative AI really make exponential bounds in the future? Not likely. At least not without some sort of accompanying revolution in energy or computing — endless fusion power or quantum computing at scale can radically change the economics of AI development. But that doesn’t mean the technology that we have now won’t substantially alter workflows. Clients and firms both need to get on top of quantifying what those applications actually deliver.
Because if you haven’t figured out what AI means for pricing your side of the equation, don’t be surprised when the other side does.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
The post Nobody’s Bothering To Figure Out What AI Is Worth appeared first on Above the Law.
Everyone agrees that generative AI is valuable. Everyone believes it’s going to be indispensable to the legal workflow. No one seems to know what it’s worth.
That tension sits at the heart of the 2025 Generative AI in Professional Services Report from Thomson Reuters. While it’s easy to blame the hype cycle for mucking up the distinction between “powerful tool for accelerating discrete legal tasks” and “MAGIC ROBOT BEANS!” the confusion over AI’s value proposition appears to run deeper. Firms are investing in GenAI tools. Clients want firms using GenAI tools. But barely anyone is bothering to keep track of what GenAI is actually doing.
As the immortal Lyle Lanley might observe, the legal industry armed with generative AI is a little like the mule with a spinning wheel. No one knows how he got it and danged if he knows how to use it.
Organizations reporting that they actively use generative AI tools nearly doubled since last year’s report. But the trend continues decidedly upward, with 79 percent of firms surveyed expect significant GenAI integration by 2027 and 95 percent of professionals anticipating that GenAI will be central to their workflow within five years.
Meanwhile, the profession seems to be preparing for this eventuality with all the strategic vigor of a chicken playing Tic-Tac-Toe:
Only 20 percent of respondents are tracking the ROI on the technology that they’re simultaneously clamoring for lawyers to adopt. On the other hand, part of the problem might be that clients seem a tad oblivious about what their firms are even doing, with 57 percent of clients replied that they want their firms using GenAI right now, but 71 percent replying that they “did not know whether their outside firms were doing so or not.”
Get it together, people! Vive le ROI!
Because the day will arrive sooner than later when law firms start changing their prices because of AI. At the moment, 46 percent of firm respondents still say GenAI will not have an impact on their rates. But the report notes that this amounts to a 7 percentage point drop from 2024 and that’s going to keep dropping like morale at Willkie Farr as firms recognize that they need to recover money for the billable time lost to AI. Or, perhaps more to the point, the leverage lost when firms hire fewer juniors because of AI. Ethical constraints prevent lawyers from penciling in fake hours saved by technology, leaving them three options when AI-enabled workflows start taking a bite out of cumulative hours.
One, accept that the same matter just makes them significantly less money now. Which… LOL.
Two, jack up hourly rates to seize more cash for the tasks that human lawyers will still perform to cover the lost revenue from automated tasks. This is the $10,000/hr option floated at Legalweek. It’s certainly an option, but clients already complain about $1000/hr associates on matters where they’re more than comfortable spending hundreds of thousands, reflecting a psychological resistance to the idea that one person is worth such a big number even when they don’t quarrel about the overall figure.
The days of billing time to “Further work” passed a long time ago and notching three hours to “AI-enhanced strategic insight” isn’t going to cut it.
Bringing us to option three… developing more fixed fee menu items to keep the firm’s revenue consistent while losing some of the leverage that forms the foundation of the law firm model:
As a result, while there is some recognition that new technologies may impact the mix of hourly work versus flat fees or other sorts of pricing arrangements — in fact, 40% of respondents said they expect the use of alternative fee arrangements to increase as a result of GenAI — many law firm practitioners expect the status quo to continue.
But whichever way the industry chooses — between two and three of course, option one is pure lunacy — it only works if everyone understands the actual ROI involved. More to the point, everyone needs to understand the client satisfaction component of ROI and even among the small percentage of respondents that measure ROI, only 38 percent are actively measuring client satisfaction.
Will generative AI really make exponential bounds in the future? Not likely. At least not without some sort of accompanying revolution in energy or computing — endless fusion power or quantum computing at scale can radically change the economics of AI development. But that doesn’t mean the technology that we have now won’t substantially alter workflows. Clients and firms both need to get on top of quantifying what those applications actually deliver.
Because if you haven’t figured out what AI means for pricing your side of the equation, don’t be surprised when the other side does.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
The post Nobody’s Bothering To Figure Out What AI Is Worth appeared first on Above the Law.
