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‘Natural to expect’ firm costs will reflect AI-inspired efficiency
Not only should the increasing use of artificial intelligence by external providers have a flow-on effect on charge-out rates, but it should also result in greater transparency and communication between those in-house and their law firms.
Jerome Doraisamy
Not only is the age of AI changing how legal practitioners operate day-to-day, but it is also set to have consequences for both the rates they can charge to clients and the manner in which those client matters are billed.
The adoption and increasing use of AI in legal services, multiple award-winning general counsel Theo Kapodistrias said in conversation with Lawyers Weekly, is leading to greater efficiency and, therefore, cost-effectiveness.
“In-house counsel should expect to receive the cost benefits of AI-driven productivity due to the reduction of hours and work that may be conducted on matters,” he said.
“Looking at tasks such as contract drafting and review – these can be significantly expedited with AI and should lower the cost of delivery.”
The Fred Hollows Foundation general counsel Katrin O’Sullivan – who won the In-House Lawyer of the Year category at the Australian Law Awards last year – agreed, noting that as a GC managing a global panel, she views AI as a “game changer” that will fundamentally reshape the relationship between law departments and their external providers.
“With tools like generative AI streamlining research, drafting, and other repetitive tasks, it’s natural to expect external firms to reflect these efficiencies in their pricing models,” she said.
The comments follow Lawyers Weekly’s discussion with Denise Farmer, the Asia-Pacific general manager for tech provider Clio, reported earlier this month, about whether client demand is set to spawn an era of value pricing.
Last week, Lawyers Weekly explored the expectations and demands coming from individual clients regarding cost and efficiency in the age of AI and how boutique practitioners – such as those in the family and criminal law spaces – can respond.
O’Sullivan noted that she doesn’t expect “blanket rate cuts” from external providers in light of their increased use of AI and other emerging technologies.
However, given firms’ significant investments in technology and compliance, she does expect greater transparency in how AI is used and how it impacts the value delivered.
“For example, if AI reduces the time needed for routine tasks, those savings should be passed on rather than absorbed,” she said.
How those services are billed also needs to be examined, Kapodistrias added.
“Time-based modelling has already proven that it is outstated and may further not necessarily align with the advancement of technologies and the use of AI,” he said.
“Alternative fee arrangements (fixed-fee or value-based pricing) would be more appropriate.”
“External counsel and in-house counsel are ultimately partners, and to ensure a strong continuing relationship moving forward, the changes and cost-savings can only help to develop this further.”
This year, O’Sullivan advised, her focus will be on ensuring our external providers are leveraging AI responsibly to deliver both quality and cost-efficiency.
This necessarily includes, she outlined, revisiting billing arrangements and panel agreements to align with evolving capabilities.
“It’s also about finding providers who are willing to collaborate, innovate, and deliver measurable value rather than simply applying AI as a cost-saving tool for themselves,” she said.
“In this rapidly changing fiscal landscape, it’s critical to foster partnerships that share the benefits of technological advancements.”
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
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