Law Firms Remain Secretive on AI Adoption and Billing, Frustrating In-House Legal Teams
As artificial intelligence tools revolutionize legal workflows in 2025, a growing rift is emerging between law firms and their corporate clients over transparency. While AI promises dramatic efficiency gains—slashing task times from hours to minutes—many firms are hesitant to reveal how they’re deploying the technology or adjusting their billing accordingly. This opacity is “rankling” legal departments, who argue it’s a “cruel irony” to pay premium hourly rates for work that’s increasingly automated, without seeing corresponding discounts or value adjustments.
The Rise of AI in Legal Practice
Law firms are rapidly integrating AI to handle repetitive tasks like document review, contract analysis, and legal research. According to recent benchmarks, AI-enabled associates can draft non-disclosure agreements (NDAs) up to 70% faster than their non-AI counterparts, allowing more focus on strategic advisory roles. Usage has surged, with AI adoption among law firm professionals jumping 315% from 2023 to 2024, and nearly 80% of firms now incorporating the tools into daily operations. Generative AI, in particular, is collapsing research timelines while expanding the scope of reviews through better prompting techniques.
However, this efficiency isn’t always passed on to clients. A stark example comes from Noga Rosenthal, general counsel and chief privacy officer at Ampersand: “I have seen an attorney use it in a lease negotiation and know her time was cut from seven hours to one.” Such cases highlight how AI accelerates negotiations and reviews, yet firms often bill under traditional models without disclosure.
Billing Practices: The Heart of the Tension
At the core of the issue is the billable hour model, which rewards time spent rather than outcomes achieved—a mismatch in an AI era where hours are shrinking. Firms are “cagey” about specifics, rarely detailing AI’s role in invoices or how it affects rates. Some are experimenting with AI-powered timekeeping platforms that automatically capture activities from tools like Outlook, Word, and Zoom, boosting billable hours by 10–30% through better tracking of overlooked tasks, such as short client calls. This can generate tens of thousands in additional quarterly revenue for a litigation firm, for instance.
Yet, without transparency, clients feel shortchanged. More than half of legal professionals anticipate AI efficiencies will erode the billable hour’s dominance, pushing toward alternative fee arrangements (AFAs) like flat fees or subscriptions. Industry forecasts predict AFAs will climb from 20% of firm revenue in 2023 to over 70% by year’s end, driven by client demands for “AI discounts” in requests for proposals (RFPs).
Reactions from Legal Departments: A Call for Accountability
In-house counsel are increasingly vocal about the lack of openness. They view it as a betrayal of trust, especially when procurement teams benchmark firms against AI-optimized vendors in e-discovery or analytics. “Until [AI cuts to hours] and the billable model are aligned, clients will keep paying for inefficiency,” notes one legal operations expert. Departments are pushing for policies that mandate disclosure of AI use in matters, including how it influences billing, to ensure confidentiality and fair value.
This frustration is compounded by ethical concerns: Firms must verify AI outputs, disclose usage where appropriate, and maintain human oversight to avoid errors like fabricated citations in filings. Legal departments now expect real-time portals for matter visibility, AI-powered predictions, and transparent billing—trends that forward-thinking firms are adopting to rebuild confidence.
Future Implications: Toward Outcome-Based Value
The standoff could reshape the attorney-client dynamic, accelerating a shift to outcome-based pricing where fees tie to results, not hours. As AI evolves, it promises to reclaim up to 12 hours per week per lawyer by 2029 for higher-value work, but only if paired with ethical guidelines and client communication. Firms that prioritize transparency—updating engagement letters to reflect AI benefits like cost savings—will differentiate themselves, fostering deeper collaborations.
Experts urge a balanced approach: Leverage AI for efficiency while ensuring it enhances, not undermines, quality. “The future of legal work isn’t about doing more, it’s about doing better,” as one report frames it. With the global legal tech market projected to double to $50 billion by 2027, largely via generative AI, the firms that align technology with client-centric billing will thrive in this new landscape.