From automating everyday tasks to making fairer pricing models possible, the technology has changed both how legal work gets done and how it gets paid for.
70% of legal teams have already seen measurable cost savings thanks to AI, KPMG’s recent General Counsel Outlook survey reveals. Research, contract management, compliance monitoring, and board reporting are just some of the areas where firms have put AI to work to see those savings. But charging by the hour now makes less sense when AI can complete tasks that once took hours in mere minutes, and value-based pricing becomes the next logical step. This means clients will now pay for what they actually get and not how long it took. In fact, 87% of general counsel already prefer value-based pricing over hourly billing, and 82% expect firms to clearly explain how AI factors into their fees. For clients and firms alike, this change promises fairer costs and a better working relationship all around.
The growing role of AI in legal work
Admin takes up so much of lawyers’ time that they can only dedicate just 2.9 hours a day to billable work. But now time-consuming (yet necessary) administrative tasks like invoice generation and scheduling can be automated by AI, which means that lawyers can free up their time and get back to actually practicing the law. This is a shift 90% of lawyers think AI has helped to make happen, according to the KPMG survey.
On top of that, these tools can also do substantive legal work. In fact, 74% of legal professionals use them for legal research, while 77% say AI tools now make document review quicker and easier. But at the same time, only one in four legal teams in the KPMG survey actually feel their AI tools exactly match their specific needs. Some tools are designed solely for single tasks, which makes them well suited for teams who want them for certain things like document review or research. On the other hand, broader in-house legal AI tools can handle everything from document review to compliance monitoring all in one. Finding the right fit for each team is becoming increasingly important especially now as the range of tools continues to grow.
A new way to charge for legal work
AI tools can complete legal tasks far faster and hourly billing is therefore harder to justify now. Hourly billing was first introduced in the 1950s and it made sense before AI as lawyers put in every hour they billed for. But that’s no longer always the case as AI takes on more of that work. Value-based billing offers a better alternative and means that fees reflect the actual outcome and value delivered to clients. Flat fees are probably the most straightforward value-based alternative. The work is clearly defined and a fixed price set in the beginning, so clients know exactly how much they’ll be paying from the get-go. Capped fees may also be needed for more complex work. This means the client is billed by the hour, but there’s a limit agreed on, so costs don’t go over a certain amount. Subscription services are another potential option here, especially for businesses with ongoing legal needs. So a monthly or annual fee is charged to cover a set level of legal support and there’s no financial surprises for the client.
AI and new pricing models: better for clients and firms
As AI automates much of the work and drives costs down, firms can now offer clients more affordable and fairly priced services. Lawyers can also free up their time to put their full attention on their client work and provide even better results. And as clients also know exactly how they’ll be paying right from the beginning, there’s no ambiguity or confusion around costs. This kind of transparency builds trust and sets the stage for strong, more open relationships, which is of course good for clients and firms alike. This is a significant change for a sector that used the same billing model for about seventy years and one that’s already well underway.
AI is modernizing the legal sector in more ways than one. From automating everyday tasks to making fairer pricing models possible, the technology has changed both how legal work gets done and how it gets paid for.
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