Prior to the 1970s, law firms often turned in invoices to clients that simply said, “for professional services rendered.” In-house lawyers, facing questions about costs, began demanding greater transparency. The solution? The billable hour, an innovation that satisfied “client demand for tangible metrics of lawyer effort,” as one academic review has described it.
Thanks to artificial intelligence, however, the billable hour may be reaching the end of its half-century run as the primary billing model for law firms. Alternative fee arrangements are already common, and with the advent of AI tools, leading in-house lawyers are stepping up pressure on firms to find more cost-efficient ways of charging for their services.
"I don't think the billable hour is the solution, and we've known it for a long time," said Jeff Bleich, general counsel of AI giant Anthropic, at a recent panel discussion reported on by Business Insider.
The question remains: Will law firms move quickly enough to satisfy their clients? For most corporate firms, their entire business model is based upon maximizing billable hours. And in recent years, hourly rate increases have helped drive record revenues and profits for many firms.
“The dilemma for professional services firms is that the familiar pyramid model is so deeply baked into everything they do that this will require a major rethink on their part,” Columbia Business School’s Rita Gunther McGrath recently wrote in an article for the Wall Street Journal.
Eliminating ‘Tedious’ Work
At the March 12 panel discussion, Anthropic’s Bleich said artificial intelligence tools are allowing clients to handle more routine legal work and will reduce their reliance on outside counsel for those tasks.
“Now we've got a technology that's going to eliminate the sorts of things that allow people to become wealthy off of tedious work,” Bleich said, according to Business Insider. “That was not what lawyers are trained to do, and not what we ultimately look to lawyers for.”
Bleich said this technological shift presents a fundamental challenge to the billable hour model. Currently, firms earn more if they spend more time on a matter putting them “at odds with the interests of their clients," Bleich said. In general, a corporate client is looking for firms to do work as quickly and efficiently as possible, he said.
Bleich’s comments came at the American Bar Association's White Collar Crime Institute in San Diego. He was joined on the panel by leading in-house lawyers from Google, IBM, and Liberty Mutual.
Valuing Results
Those lawyers largely concurred with Bleich, Business Insider reported. And they emphasized that they were looking for law firm pricing that reflects the value of services rather than time spent. “The value is no longer you putting in time," said Damon Hart, Liberty Mutual’s chief legal officer. "The value is your strategy, your results.”
IBM General Counsel Anne Robinson said she was open to law firms initiating conversations about alternatives to the billable hour and suggesting better ways to align their priorities with those of their clients. She said she would welcome a firm asking to “sit down and talk about what you expect as far as outcomes and how we can both get there in a way that reflects your pressures and your priorities,” Business Insider reported.
As McGrath wrote, “value-based pricing represents the most obvious alternative” to the billable hour. Fees, in this case, would be “tied directly to outcomes achieved or value delivered rather than time spent.” Firms might base their charges on completing a successful deal or litigation matter, although McGrath acknowledged, “the difficulty is that both sides must agree on what value is fair.
“Subscription and retainer models offer another path forward,” she wrote, noting that these allow firms to offer “expertise and capabilities for a fixed periodic fee.” Artificial intelligence can enhance this process by enabling firms “to serve clients more continuously and proactively,” she said. For example, a firm might offer ongoing compliance monitoring and advisory services.
Premium Pricing
Bleich said law firms that figure out a billing model “that works” and do so “faster and better” will be “leapfrogging other firms, because they'll be more attractive to work with.” Early adopters may also have the inside track to more premium work. “We're not going to sort of cheap out and starve you,” Bleich said, according to Business Insider.
Premium pricing for services that only humans can provide is one of the primary arguments of AI evangelists—even as they predict doom for many of the current services that law firms provide.
Attendees at LegalWeek, ALM’s annual legal technology conference held in early March, brimmed with questions about whether AI would leave “clients unwilling to pay lawyers hundreds or thousands of dollars an hour” and enable firms to “charge even more but offer different services,” Reuters reported.
One AI consultant speaking at the conference said that, within the next three years, companies “would use AI to do half of the work they now pay law firms to do,” Reuters reported. The same consultant said that “clients would pay $10,000 an hour for human lawyers whose judgment AI can’t match.” Other speakers backed up that sentiment, saying law firms could use time saved on routine tasks to “offer more bespoke, complex advisory services.”
The Adoption Curve
While in-house counsel and AI companies and consultants are offering dire warnings about the risk to firms if they fail to adopt artificial intelligence, A Business Insider technology correspondent who attended LegalWeek noted that “the adoption curve” at firms may not be “matching the hype.”
When a roomful of attendees was asked whether they were automating contract review, for instance, “only a few hands went up,” Business Insider reported.
Meanwhile, billions of dollars are flowing into legal technology companies to produce AI tools that take on legal tasks tailor-made for large language models. In 2025 alone, venture capitalists poured $3.2 billion into legal tech companies.
In February, Forbes reported that Harvey, perhaps the best-known AI-driven legal tech company, was in talks to raise $200 million in additional funding from top VC firms Sequoia and GIC. The funding round valued the company at $11 billion—more than $2.1 billion more than the revenue at Kirkland & Ellis, the world’s highest-grossing law firm.
‘Cringeworthy’ Resistance
One of the in-house lawyers moderating a panel at LegalWeek called law firm resistance to AI tools “cringeworthy,” Business Insider reported, and said “AI maturity” will become a key determinant in how companies select law firms.
AI maturity may also be code for pricing changes. Half of clients in a 2025 survey by legal technology company Big Hand said they wanted greater pricing transparency by firms, but “outdated systems and slow adoption of structured legal pricing analytics put both client relationships and revenue at risk,” the survey said. Demand for alternative fee arrangements “continues to rise, but pricing models are only inching forward, with most [law] firms still cautious,” the Big Hand survey said.
Law firms in the Big Hand report were most comfortable with AFAs that “are the strongest in predictable, standardized work.” Firms are far less likely to have “scaled these models to more complex or bespoke matters.” Indeed, in a 2025 Best Law Firms survey of thousands of U.S. firms, the most popular AFAs were flat fees, which are typically used for routine or standardized matters.
While clients may be frustrated at their progress on AI, most law firm leaders are well aware that the traditional billable hour model faces increasing questions from clients. Thomson-Reuters, in its 2025 report on the state of the legal market, found that 44% of firm leaders it surveyed predicted that generative AI would “result in a decline in the use of billable hours pricing models over the next five years.”
The Fate of Associates
In another survey last year, e-discovery provider Disco reported client demand is driving 39% of the firms to adopt AI, and 36% said they see AI tools as an effective way to reduce costs.
Nearly half of respondents said AI will simplify routine tasks and “free up more time for complex legal analysis,” Disco said. And roughly one in five said AI will give them more time for strategic work, and a similar number said AI is becoming a requirement for success in the legal profession.
Reporting on the Disco survey, Above the Law said AI’s ability to handle routine tasks in a far shorter timespan threatens the bottom of the billable hour pyramid at most law firms—associates. The hundreds of hours an associate can bill for routine matters will need to be replaced if firms hope to maintain revenues and profits.
Above the Law suggested that “value pricing specific tasks” would help firms detach from hourly billing. And a certain number of associates will be needed to help cover AI’s flaws. As Above the Law put it, “AI simply isn’t capable of replacing the broad range of judgment even the lowliest of associates provides, but it can empower the lowliest of associates to cover the work previously handled by several associates.”
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David L. Brown is a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He consults on thought leadership strategy and creates in-depth content for legal industry clients and works closely with Best Law Firms as senior content consultant.