“Future of Professionals Report” analysis: Why AI will flip law firm economics — from thomsonreuters.com by Ragunath Ramanathan
AI forces a reinvention of law firm billing models, the market will reward those firms that price by outcome, guarantee efficiency, and are transparent. The question then isn’t whether to change — it’s whether firms will stand on the sidelines or lead
Key insights:
- Efficiency and cost savings are expected — AI is significantly increasing efficiency and reducing costs in the legal industry, with each lawyer expecting to save 190 work-hours per year by leveraging AI, resulting in approximately $20 billion worth of work-savings in the US alone.
- Challenges to the billable hour model — The traditional billable hour model is being challenged by AI advancements, as lawyers are now able to complete tasks more efficiently and quickly, leading some law firms to explore alternative pricing models that reflect the value delivered rather than the time spent.
- Opportunities for smaller law firms — AI presents unique opportunities for smaller law firms to differentiate themselves and compete with larger firms, as AI solutions allow smaller firms to access advanced technology without significant investment and deliver innovative pricing models.
The legal industry is undergoing a significant transformation that’s being driven by the rapid adoption of AI — a shift that is poised to redefine traditional practices, particularly the billable hour model, a cornerstone of law firm operations.
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Not surprisingly, AI is anticipated to have the biggest impact on the legal industry over the next five years, with 80% of law firm survey respondents to Thomson Reuters recently published 2025 Future of Professionals report saying that they expect AI to fundamentally alter how they conduct business, especially around how law firms price, staff, and deliver legal work to their clients.