Corporate legal departments adopted artificial intelligence tools at a torrid pace last year and are increasingly using generative AI to bring work in-house and reduce spending. At the same time, they are less than impressed with the progress their outside counsel are making in using AI to improve efficiency and cut costs.
That’s according to an annual survey of hundreds of in-house professionals around the globe conducted by the Association of Corporate Counsel in conjunction with Everlaw, an e-discovery software company. The survey found that nearly two-thirds of in-house teams now expect to reduce their reliance on outside counsel, and half believe AI will drive down legal costs—numbers that have increased since last year’s survey.
As confidence in generative AI grows, more in-house counsel say they are ready to take aim at law firm billing practices. More than 60% said they are planning to push for change in how legal services are delivered and priced, and half believe that clients—not firms—will drive changes in billing services.
At present, however, most in-house departments see generative AI’s impact on outside counsel spending as a promise to be fulfilled. Just 7% reported that they have noticed a reduction in the total cost of matters, and even fewer—6%—said firms have offered alternative pricing models because of generative AI-driven improvements to their workflows.
“Among those who have seen a positive impact, the most common savings are related to efficiency gains rather than direct cost reductions,” the survey said.
Growing Faith in AI
The survey, which included responses from 657 in-house professionals from 30 countries, noted that corporate law departments are moving out of the research and planning phases related to AI. The result has been “a dramatic acceleration” of GenAI usage, the survey said.
In 2024, 23% of in-house professionals said they were actively using generative AI tools in their work. The number more than doubled this year, rising to 52%. “The past year has been a pivotal one for adoption,” the survey said. “Our findings reveal a decisive shift from passive planning to active implementation, with the in-house legal community moving swiftly to integrate this technology into their daily work.”
Faith in artificial intelligence’s ability to transform legal departments also doubled, the survey said, with 91% of U.S. in-house teams citing “the technology’s most immediate and tangible benefit: increased efficiency.”
Most gains in efficiency were driven in areas like document drafting and legal research, in house professionals said, although the survey notes that in-house teams are “now looking beyond these initial ‘quick wins,’ anticipating greater efficiencies in strategic and high-volume document-intensive areas of practice, such as litigation and M&A.”
While lack of trust in artificial intelligence’s reliability is a key obstacle to adoption, corporate resistance to GenAI is plummeting, nonetheless. Just 2% of respondents said their companies are “neither using nor planning to use” generative AI. Last year, 10% said the same. And the number of companies with policies prohibiting the use of AI dropped from 29% to 9% year over year.
No Savings
Even as their own resistance to GenAI tools crumbles, in-house professionals see their outside counsel as less willing or able to deploy new technology—especially to reduce costs. Only 24% of in-house professionals said they were pleased with how outside firms are adopting AI for cost effectiveness.
Six in 10 in-house professionals said they have seen no savings in time or money spent on matters because of generative AI use by outside lawyers. For the remaining four in 10, benefits have come in the form of gains in efficiency. Some 20% said turnaround times for legal work had improved, and 13% noted reduced billable hours “for specific tasks like document review or drafting,” the survey said.
Overall, the vast majority of in-house professionals—59%—said they are not sure whether their outside counsel have adopted AI tools. Law firms, the survey posits, are “not explicitly communicating” to their clients about GenAI adoption, which “presents a missed opportunity for both sides to collaborate and maximize the benefits of the technology.”
When generative AI is used in legal matters, corporate legal departments see themselves as the primary drivers. Fifty-eight percent of in house professionals said they are leading adoption of GenAI, with the number climbing to 70% among respondents based in Europe.
Collaboration between firms and in-house teams on AI adoption is rare. Just 3% of in-house professionals said they were working with their law firms on adoption. And only 1% said their outside law firms were leading the way—a data point that “underscores the fact that, at present, law firms are not the primary catalysts for their clients’ adoption of GenAI,” the survey said.
A Grace Period?
While the clock is ticking, most corporate departments are still giving their outside law firms the benefit of the doubt around GenAI cost-cutting. More than 60% said they believe “it is simply too early in the adoption cycle for cost reductions to have materialized,” the survey said. “This suggests a recognition that GenAI integration is a long-term process and that its financial benefits will emerge over time.”
And thus far, corporate clients have not demanded that their outside counsel adopt GenAI tools. Eighty percent of in-house professionals said they are not encouraging or requiring law firms to use artificial intelligence; roughly 20% are actively encouraging AI usage; and 1% prohibit AI’s use.
“This passive stance presents a significant opportunity for law firms,” the survey said. “While clients are not yet demanding the use of GenAI, they may be open to it. Law firms that take the initiative to discuss their GenAI capabilities and demonstrate its value would gain a competitive advantage.
In most cases, efforts by corporate law departments to encourage AI’s use among outside firms are taking place informally. But more formal structures may be on the way. While four out of five companies with revenues of less than $10 billion rely on informal communication around AI, 39% of those with revenues of more than $10 billion have developed official outside counsel guidelines.
“This indicates a move from a casual suggestion to an integrated part of their official legal strategy, suggesting a more mature approach to leveraging GenAI in legal matters,” the survey said.
Pushing for Change
More worrying for firms may be the fact that in-house teams are noticing that pricing models are not being adjusted to reflect efficiency gains made from deploying generative AI. Nearly 60% of in-house professionals said they have seen no pricing adjustments, a fact that “highlights a critical disconnect between the potential for increased productivity and how that value is being passed on to the client,” the survey said.
One problem may be flaws in the technology. Just under half of the survey’s respondents said the dearth of savings may owe to generative AI’s hallucinations and inaccuracies. The tools, the survey said, “are not yet autonomous enough to truly streamline workflows without a lawyer’s review.”
Clients also said they have themselves to blame. More than 40% said corporate clients have not yet demanded pricing adjustments from their outside lawyers. That may be about to change, however: 61% of respondents said they are ready to pressure outside counsel to alter the way they deliver and price legal services. This includes 24% who said they are very likely to push for change and 37% who are somewhat likely.
“This is a powerful signal that the in-house legal community is not content with the status quo and intends to use GenAI as a catalyst for a more fundamental shift in their relationship with outside counsel,” the survey said, adding that “while the benefits have yet to materialize for many, legal departments are already planning to negotiate for them.”
Bringing Work In-House
Even as they push for changes in their outside counsel relationships, 64% of in-house professionals said they are likely to send less work to law firms because of GenAI. More than 80% said they believe that contract drafting costs are likely to come down as a result, and 46% see cost reductions in regulatory/compliance and general legal counsel work. Forty-five percent see potential savings in litigation and 42% in mergers and acquisition work.
AI may be accelerating a trend that has been occurring for many years—the push to bring more work in-house. In a recently released white paper, the ACC analyzed data from the U.S. Bureau of Labor Statistics to explore key population trends of in-house counsel in the United States. The organization found that the number of in-house counsel has soared by 87% since 2008, increasing from 78,000 to 145,000 in 2024.
Law departments are outpacing the growth of law firms, where the number of attorneys rose by 23%, and in government roles (up 38%), the ACC said.
“After a brief decline during the Great Recession and a stall in 2020 due to the COVID-19 pandemic, the growth has been particularly acute since 2021,” the ACC said, adding that the numbers suggest “a sustained and accelerated trend of attorneys moving inhouse or starting their careers there.”
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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.
