As AI Makes Law Firms More Efficient, Clients Demand Discounts

The integration of AI technologies into the business processes of large law firms has led to client demands for discounts in an industry that traditionally bills by the hour.

Large law firms continue to incorporate AI tools to increase efficiency. Following the announcement of OpenAI's latest model for lawyers, Sullivan & Cromwell introduced its "Agreement Analyzer" tool for contract review, while Cooley launched its "Go Public" system for S-1 drafts in IPO processes. Ropes & Gray announced that it has developed an AI tool capable of preparing due diligence reports that previously took weeks in just a matter of hours. As Google and Anthropic also release AI tools for the legal sector, giants like Kirkland & Ellis have announced major investments to build their own systems and have begun appointing chief AI officers.

However, in an industry where billing is based on hourly calculations, the efficiency gains driven by AI have sparked debate. Clients have begun asking when the efficiency of AI will be reflected in legal bills as discounts. While some in-house legal teams are demanding discounts ranging from 20 to 30 percent across the board, law firms are resisting this. Firms argue that AI changes the composition of hours spent rather than providing direct time savings, while alternative fee arrangements and new AI-focused firms continue to transform the market.