{"id":156976,"date":"2026-07-16T07:42:35","date_gmt":"2026-07-16T15:42:35","guid":{"rendered":"https:\/\/xira.com\/p\/2026\/07\/16\/the-deloitte-legal-report-trouble-for-ostriches\/"},"modified":"2026-07-16T07:42:35","modified_gmt":"2026-07-16T15:42:35","slug":"the-deloitte-legal-report-trouble-for-ostriches","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2026\/07\/16\/the-deloitte-legal-report-trouble-for-ostriches\/","title":{"rendered":"The Deloitte Legal Report: Trouble For Ostriches"},"content":{"rendered":"

The findings of a\u00a0recent survey<\/a>\u00a0from\u00a0Deloitte Legal<\/a>\u00a0could\u00a0spell trouble for law firms as in-house legal departments look to do more with AI and less with outside counsel. While many of the findings in the report are forward looking and\u00a0are\u00a0predictions\u00a0rather\u00a0than what has\u00a0yet\u00a0happened, the currents appear strong.\u00a0<\/p>\n

The fact that the survey and conclusions from it come from Deloitte Legal\u00a0says a lot.\u00a0Deloitte Legal is the legal services arm of the Big Four\u00a0accounting\u00a0firm\u00a0Deloitte<\/a>.\u00a0Deloitte\u00a0Legal itself does not provide legal services, at least currently, in the\u00a0U.S.\u00a0Instead, it\u00a0is in the business of\u00a0consulting\u00a0on practice management matters. It is\u00a0definitely\u00a0not\u00a0a law firm.\u00a0<\/p>\n

Deloitte Legal and Deloitte\u00a0have\u00a0the ear of corporate\u00a0America and know its overall business goals and\u00a0visions\u00a0much better than law firms.\u00a0They\u00a0can offer a less\u00a0biased\u00a0view than that of law firms and vendors.<\/p>\n

The survey itself was of some 100 legal department heads across nine industry sectors\u00a0according to Deloitte\u00a0Legal. It also\u00a0conducted\u00a0informal\u00a0interviews of an unspecified number of law firm leaders, although I got the impression that was more of an\u00a0afterthought\u00a0rather than a focus. The title of the report, \u201cThe AI Imperative:\u00a0Reshaping\u00a0of the Legal Industry<\/em>,\u201d perhaps says it all.<\/p>\n

First Things First<\/strong><\/p>\n

First things first. According to Deloitte\u00a0Legal, only 2% of those surveyed report no AI adoption at all. That means that almost every legal department has, and to some extent is using,\u00a0AI.\u00a0Indeed, 79% report their AI investment increased just since last year.\u00a0And with\u00a0all this, the\u00a0expectations\u00a0of what outside providers should be doing with AI\u00a0is or\u00a0will be\u00a0fundamentally\u00a0altered.<\/p>\n

Granted, so far legal\u00a0departments\u00a0have been\u00a0focused\u00a0more on the technology and little (7%) on\u00a0training. But that will no doubt change. As in-house becomes more proficient with AI and their knowledge\u00a0and a\u00a0sophistication\u00a0grows, they will undoubtedly demand more\u00a0AI sophistication and use of AI\u00a0from\u00a0outside counsel.<\/p>\n

The Legal Department\u00a0<\/strong>Experience<\/strong><\/p>\n

What in-house legal is seeing is\u00a0critical: a\u00a0substantial\u00a0increase in their own productivity and a\u00a0reduction\u00a0in legal\u00a0costs.\u00a0Seventy-eight percent believe AI will reduce\u00a0costs\u00a0further\u00a0in the future.\u00a0As might be expected, 66% of those surveyed expect insourcing of work from\u00a0outside\u00a0providers to grow.<\/p>\n

The\u00a0respondents\u00a0also believe that within two to three years,\u00a028% of legal work will be automated.\u00a0Not\u00a0surprisingly,\u00a0the respondents estimate that in the next three years, outside legal spend will be reduced 20 to 40%.\u00a0Simple math would tell you that this is not good for outside counsel. Less work to do due to automation and less work to do because legal departments will be doing more.<\/p>\n

Moreover, most in-house legal folks believe that legal teams in general will shrink in size with new roles cropping\u00a0up. Also spells\u00a0trouble\u00a0for law firms if it\u2019s true. Less need for lawyers,\u00a0fewer\u00a0people billing hours.\u00a0Expectations\u00a0of more for less from clients.\u00a0And while\u00a0legal workloads\u00a0may\u00a0grow,\u00a0more of that work will be automated, handled by AI, and done in-house.<\/p>\n

But What About Law Firms?<\/strong><\/p>\n

But what are law firms doing? It\u2019s\u00a0by and large\u00a0the same old, same old. The legal department people surveyed say 58% of their law firms rarely or never discuss AI benefits with them and only 4% say they have experienced any benefits whatsoever from outside counsel using AI. Talk about sticking your head in the\u00a0sand.<\/p>\n

And the billable hour and leverage models that have made law firms rich? Eighty-five percent of those surveyed say AI is going to change how law firms price work and the share of work billed by the hour is expected to fall from 72% now to 44% in two to three years.<\/p>\n

That\u2019s a big hit.\u00a0Deloitte describes the\u00a0challenge\u00a0facing law firms this way:<\/p>\n

\n

The impact of AI on law firms is potentially\u00a0seismic. The prospect of technology that can compress the time taken to complete legal work\u00a0creates an inherent tension: if the same output requires fewer\u00a0hours, how does a firm protect\u00a0its revenue whilst still passing the benefits of efficiency on to clients? \u00a0<\/p>\n<\/blockquote>\n

Duh.\u00a0I think the answer is\u00a0a lot of\u00a0law firms\u00a0will be\u00a0screwed if they\u00a0continue to\u00a0operate\u00a0as\u00a0they always have.<\/p>\n

As for the leverage model, Deloitte puts it this way:\u00a0\u201cThe longer-term\u00a0structural consequences is a move away from the traditional legal pyramid, with large number of junior lawyers at the base, towards a leaner diamond\u00a0model.\u201d\u00a0That also spells trouble since it is that\u00a0leverage\u00a0model that has enabled many law firms and lawyers to grow rich.<\/p>\n

But\u00a0<\/strong>Why<\/strong>?<\/strong><\/p>\n

So,\u00a0given\u00a0all this, why have\u00a0only 4% of those surveyed seen\u00a0any benefit\u00a0from outside counsels\u2019 use of AI?\u00a0To state the obvious, it\u2019s because\u00a0law firms aren\u2019t taking advantage of AI. That begs the bigger question, why not?<\/p>\n

First and foremost, it\u2019s the money.\u00a0To paraphrase an\u00a0oft quoted saying: it\u2019s hard to convince a room full of millionaires what they are doing is wrong.\u00a0<\/p>\n

But more than money, it\u2019s cultural. Most Biglaw firms\u2019 culture is\u00a0built\u00a0on the billable hours and the leverage model.\u00a0It\u00a0governs compensation and advancement. It governs\u00a0organization. It governs\u00a0who has power and clout.\u00a0And in my experience, those with power and clout aren\u2019t about to give it up. Combined\u00a0with a consensus model that slows down progress and you see\u00a0the ostrich taking shape.<\/p>\n

But the legal departments themselves share in the blame.\u00a0As the report notes,\u00a0businesspeople\u00a0(think\u00a0C-suite) in most organizations can tell in-house\u00a0legal what to do. It is\u00a0definitely not\u00a0a consensus\u00a0discussion\u00a0when the CEO says cut costs. The same should be true\u00a0with\u00a0respect\u00a0to the in-house and outside counsel relationship. When a\u00a0$5 million client says\u00a0use AI or else, it gets outside\u00a0lawyers\u2019\u00a0attention.\u00a0So\u00a0the fact that only 4% of the\u00a0respondents\u00a0have seen a benefit from their outside lawyers and only 58% say their law firms have raised the use of AI,\u00a0it\u2019s in large part due to in-house not demanding change.<\/p>\n

So\u00a0<\/strong>W<\/strong>here\u00a0<\/strong>Do<\/strong>es\u00a0<\/strong>T<\/strong>hat\u00a0<\/strong>L<\/strong>eave\u00a0<\/strong>L<\/strong>aw\u00a0<\/strong>F<\/strong>irms<\/strong>?\u00a0<\/strong><\/p>\n

Certainly,\u00a0there\u00a0will be some work that outside counsel\u00a0currently\u00a0do that\u00a0won\u2019t\u00a0change much. Bet-the-company litigation where the incentive of in-house legal is to leave no stone\u00a0unturned. But for everything else,\u00a0the seismic change\u00a0Deloitte\u00a0suggests\u00a0may become a reality.<\/p>\n

Smart firms will read the Deloitte report and the tea leaves and prepare for change.\u00a0But I\u2019m not sure large law firms can make the change until\u00a0it\u2019s\u00a0too late. These firms according to Deloitte\u00a0\u201cwill wait for the client to raise AI, and in doing so, will cede control of the conversation entirely.\u201d\u00a0In addition, some firms will try to trumpet their AI proficiency\u00a0that really isn\u2019t there under the mistaken impression that in-house counsel\u00a0won\u2019t\u00a0know the difference. While that may have\u00a0sometimes happened\u00a0in the past\u00a0with other technology, it would be\u00a0a mistake\u00a0with AI\u00a0where legal departments are so far ahead.<\/p>\n

But some firms, perhaps the true AI first firms or smaller boutique firms,\u00a0will grasp the opportunity and\u00a0play to in-house\u00a0counsel\u00a0desires and expectations. These firms will succeed.\u00a0Deloitte\u00a0says their success\u00a0will\u00a0lie\u00a0\u201cin their ability to harness their institutional intelligence to\u00a0search\u00a0and utilize knowledge assets,\u00a0redesigning of\u00a0workflows, business model innovation, and most importantly, achieving adoption at scale.\u201d<\/p>\n

And if\u00a0Deloitte\u00a0and many others are wrong,\u00a0they can still offer a new business model that\u2019s more efficient, less costly, and achieves better or just as good a result.\u00a0<\/p>\n

The other option: stay an ostrich\u00a0while others pass you by.<\/p>\n

\n

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes\u00a0TechLaw Crossroads<\/a>, a blog devoted to the examination of the tension between technology, the law, and the practice of law.<\/em><\/strong><\/p>\n

The post The Deloitte Legal Report: Trouble For Ostriches<\/a> appeared first on Above the Law<\/a>.<\/p>\n

The findings of a\u00a0recent survey<\/a>\u00a0from\u00a0Deloitte Legal<\/a>\u00a0could\u00a0spell trouble for law firms as in-house legal departments look to do more with AI and less with outside counsel. While many of the findings in the report are forward looking and\u00a0are\u00a0predictions\u00a0rather\u00a0than what has\u00a0yet\u00a0happened, the currents appear strong.\u00a0<\/p>\n

The fact that the survey and conclusions from it come from Deloitte Legal\u00a0says a lot.\u00a0Deloitte Legal is the legal services arm of the Big Four\u00a0accounting\u00a0firm\u00a0Deloitte<\/a>.\u00a0Deloitte\u00a0Legal itself does not provide legal services, at least currently, in the\u00a0U.S.\u00a0Instead, it\u00a0is in the business of\u00a0consulting\u00a0on practice management matters. It is\u00a0definitely\u00a0not\u00a0a law firm.\u00a0<\/p>\n

Deloitte Legal and Deloitte\u00a0have\u00a0the ear of corporate\u00a0America and know its overall business goals and\u00a0visions\u00a0much better than law firms.\u00a0They\u00a0can offer a less\u00a0biased\u00a0view than that of law firms and vendors.<\/p>\n

The survey itself was of some 100 legal department heads across nine industry sectors\u00a0according to Deloitte\u00a0Legal. It also\u00a0conducted\u00a0informal\u00a0interviews of an unspecified number of law firm leaders, although I got the impression that was more of an\u00a0afterthought\u00a0rather than a focus. The title of the report, \u201cThe AI Imperative:\u00a0Reshaping\u00a0of the Legal Industry<\/em>,\u201d perhaps says it all.<\/p>\n

First Things First<\/strong><\/p>\n

First things first. According to Deloitte\u00a0Legal, only 2% of those surveyed report no AI adoption at all. That means that almost every legal department has, and to some extent is using,\u00a0AI.\u00a0Indeed, 79% report their AI investment increased just since last year.\u00a0And with\u00a0all this, the\u00a0expectations\u00a0of what outside providers should be doing with AI\u00a0is or\u00a0will be\u00a0fundamentally\u00a0altered.<\/p>\n

Granted, so far legal\u00a0departments\u00a0have been\u00a0focused\u00a0more on the technology and little (7%) on\u00a0training. But that will no doubt change. As in-house becomes more proficient with AI and their knowledge\u00a0and a\u00a0sophistication\u00a0grows, they will undoubtedly demand more\u00a0AI sophistication and use of AI\u00a0from\u00a0outside counsel.<\/p>\n

The Legal Department\u00a0<\/strong>Experience<\/strong><\/p>\n

What in-house legal is seeing is\u00a0critical: a\u00a0substantial\u00a0increase in their own productivity and a\u00a0reduction\u00a0in legal\u00a0costs.\u00a0Seventy-eight percent believe AI will reduce\u00a0costs\u00a0further\u00a0in the future.\u00a0As might be expected, 66% of those surveyed expect insourcing of work from\u00a0outside\u00a0providers to grow.<\/p>\n

The\u00a0respondents\u00a0also believe that within two to three years,\u00a028% of legal work will be automated.\u00a0Not\u00a0surprisingly,\u00a0the respondents estimate that in the next three years, outside legal spend will be reduced 20 to 40%.\u00a0Simple math would tell you that this is not good for outside counsel. Less work to do due to automation and less work to do because legal departments will be doing more.<\/p>\n

Moreover, most in-house legal folks believe that legal teams in general will shrink in size with new roles cropping\u00a0up. Also spells\u00a0trouble\u00a0for law firms if it\u2019s true. Less need for lawyers,\u00a0fewer\u00a0people billing hours.\u00a0Expectations\u00a0of more for less from clients.\u00a0And while\u00a0legal workloads\u00a0may\u00a0grow,\u00a0more of that work will be automated, handled by AI, and done in-house.<\/p>\n

But What About Law Firms?<\/strong><\/p>\n

But what are law firms doing? It\u2019s\u00a0by and large\u00a0the same old, same old. The legal department people surveyed say 58% of their law firms rarely or never discuss AI benefits with them and only 4% say they have experienced any benefits whatsoever from outside counsel using AI. Talk about sticking your head in the\u00a0sand.<\/p>\n

And the billable hour and leverage models that have made law firms rich? Eighty-five percent of those surveyed say AI is going to change how law firms price work and the share of work billed by the hour is expected to fall from 72% now to 44% in two to three years.<\/p>\n

That\u2019s a big hit.\u00a0Deloitte describes the\u00a0challenge\u00a0facing law firms this way:<\/p>\n

\n

The impact of AI on law firms is potentially\u00a0seismic. The prospect of technology that can compress the time taken to complete legal work\u00a0creates an inherent tension: if the same output requires fewer\u00a0hours, how does a firm protect\u00a0its revenue whilst still passing the benefits of efficiency on to clients? \u00a0<\/p>\n<\/blockquote>\n

Duh.\u00a0I think the answer is\u00a0a lot of\u00a0law firms\u00a0will be\u00a0screwed if they\u00a0continue to\u00a0operate\u00a0as\u00a0they always have.<\/p>\n

As for the leverage model, Deloitte puts it this way:\u00a0\u201cThe longer-term\u00a0structural consequences is a move away from the traditional legal pyramid, with large number of junior lawyers at the base, towards a leaner diamond\u00a0model.\u201d\u00a0That also spells trouble since it is that\u00a0leverage\u00a0model that has enabled many law firms and lawyers to grow rich.<\/p>\n

But\u00a0<\/strong>Why<\/strong>?<\/strong><\/p>\n

So,\u00a0given\u00a0all this, why have\u00a0only 4% of those surveyed seen\u00a0any benefit\u00a0from outside counsels\u2019 use of AI?\u00a0To state the obvious, it\u2019s because\u00a0law firms aren\u2019t taking advantage of AI. That begs the bigger question, why not?<\/p>\n

First and foremost, it\u2019s the money.\u00a0To paraphrase an\u00a0oft quoted saying: it\u2019s hard to convince a room full of millionaires what they are doing is wrong.\u00a0<\/p>\n

But more than money, it\u2019s cultural. Most Biglaw firms\u2019 culture is\u00a0built\u00a0on the billable hours and the leverage model.\u00a0It\u00a0governs compensation and advancement. It governs\u00a0organization. It governs\u00a0who has power and clout.\u00a0And in my experience, those with power and clout aren\u2019t about to give it up. Combined\u00a0with a consensus model that slows down progress and you see\u00a0the ostrich taking shape.<\/p>\n

But the legal departments themselves share in the blame.\u00a0As the report notes,\u00a0businesspeople\u00a0(think\u00a0C-suite) in most organizations can tell in-house\u00a0legal what to do. It is\u00a0definitely not\u00a0a consensus\u00a0discussion\u00a0when the CEO says cut costs. The same should be true\u00a0with\u00a0respect\u00a0to the in-house and outside counsel relationship. When a\u00a0$5 million client says\u00a0use AI or else, it gets outside\u00a0lawyers\u2019\u00a0attention.\u00a0So\u00a0the fact that only 4% of the\u00a0respondents\u00a0have seen a benefit from their outside lawyers and only 58% say their law firms have raised the use of AI,\u00a0it\u2019s in large part due to in-house not demanding change.<\/p>\n

So\u00a0<\/strong>W<\/strong>here\u00a0<\/strong>Do<\/strong>es\u00a0<\/strong>T<\/strong>hat\u00a0<\/strong>L<\/strong>eave\u00a0<\/strong>L<\/strong>aw\u00a0<\/strong>F<\/strong>irms<\/strong>?\u00a0<\/strong><\/p>\n

Certainly,\u00a0there\u00a0will be some work that outside counsel\u00a0currently\u00a0do that\u00a0won\u2019t\u00a0change much. Bet-the-company litigation where the incentive of in-house legal is to leave no stone\u00a0unturned. But for everything else,\u00a0the seismic change\u00a0Deloitte\u00a0suggests\u00a0may become a reality.<\/p>\n

Smart firms will read the Deloitte report and the tea leaves and prepare for change.\u00a0But I\u2019m not sure large law firms can make the change until\u00a0it\u2019s\u00a0too late. These firms according to Deloitte\u00a0\u201cwill wait for the client to raise AI, and in doing so, will cede control of the conversation entirely.\u201d\u00a0In addition, some firms will try to trumpet their AI proficiency\u00a0that really isn\u2019t there under the mistaken impression that in-house counsel\u00a0won\u2019t\u00a0know the difference. While that may have\u00a0sometimes happened\u00a0in the past\u00a0with other technology, it would be\u00a0a mistake\u00a0with AI\u00a0where legal departments are so far ahead.<\/p>\n

But some firms, perhaps the true AI first firms or smaller boutique firms,\u00a0will grasp the opportunity and\u00a0play to in-house\u00a0counsel\u00a0desires and expectations. These firms will succeed.\u00a0Deloitte\u00a0says their success\u00a0will\u00a0lie\u00a0\u201cin their ability to harness their institutional intelligence to\u00a0search\u00a0and utilize knowledge assets,\u00a0redesigning of\u00a0workflows, business model innovation, and most importantly, achieving adoption at scale.\u201d<\/p>\n

And if\u00a0Deloitte\u00a0and many others are wrong,\u00a0they can still offer a new business model that\u2019s more efficient, less costly, and achieves better or just as good a result.\u00a0<\/p>\n

The other option: stay an ostrich\u00a0while others pass you by.<\/p>\n

\n

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes\u00a0TechLaw Crossroads<\/a>, a blog devoted to the examination of the tension between technology, the law, and the practice of law.<\/em><\/strong><\/p>\n

The post The Deloitte Legal Report: Trouble For Ostriches<\/a> appeared first on Above the Law<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

The findings of a\u00a0recent survey\u00a0from\u00a0Deloitte Legal\u00a0could\u00a0spell trouble for law firms as in-house legal departments look to do more with AI and less with outside counsel. While many of the findings in the report are forward looking and\u00a0are\u00a0predictions\u00a0rather\u00a0than what has\u00a0yet\u00a0happened, the currents appear strong.\u00a0 The fact that the survey and conclusions from it come from Deloitte […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-156976","post","type-post","status-publish","format-standard","hentry","category-above_the_law"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/156976","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=156976"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/156976\/revisions"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=156976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=156976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=156976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}

But lest outside firms get too comfortable,\u00a0businesspeople\u00a0may be on the\u00a0cusp of not\u00a0blindly\u00a0following<\/a>\u00a0their\u00a0in-house\u00a0counsel\u00a0recommendations\u00a0for\u00a0how\u00a0work gets done and\u00a0divvied\u00a0up with outside counsel. C-suite leaders will recognize the\u00a0efficiencies and cost reductions that AI may bring and\u00a0will\u00a0demand that their legal departments achieve it.\u00a0That will trickle down\u00a0hill\u00a0to increased demands on outside counsel.<\/p>\n

But lest outside firms get too comfortable,\u00a0businesspeople\u00a0may be on the\u00a0cusp of not\u00a0blindly\u00a0following<\/a>\u00a0their\u00a0in-house\u00a0counsel\u00a0recommendations\u00a0for\u00a0how\u00a0work gets done and\u00a0divvied\u00a0up with outside counsel. C-suite leaders will recognize the\u00a0efficiencies and cost reductions that AI may bring and\u00a0will\u00a0demand that their legal departments achieve it.\u00a0That will trickle down\u00a0hill\u00a0to increased demands on outside counsel.<\/p>\n