The latest report points to a strong trend within legal departments, showing enthusiasm for the implementation of generative artificial intelligence by their outside counsel, according to the 16th annual Law Department Operation Survey by the Blickstein Group and Deloitte. It indicates a significant number of legal departments see generative AI as a potential avenue for extracting better value from their law firms’ services.
The survey, which includes responses from 77 in-house legal and legal ops professionals, each from a different company, indicates a belief among 54.5% of respondents that the use of generative AI by law firms will bring about changes to traditional billing systems, possibly ushering in more alternative fee arrangements (AFAs). A larger percentage, around 68%, hold the belief that leveraging generative AI will improve the value law firms deliver through their services.
Interestingly, while 63% of participants express encouragement for their law firms to implement generative AI, about 28% advise against its use. Brad Blickstein, founder and principal of Blickstein Group, and co-head of the NewLaw Practice at Baretz+Brunelle observed that legal departments are not giving carte blanche for outside counsel to use generative AI unregulated but rather, they’re ensuring its usage aligns with their interests and standards.
Despite showing enthusiasm for emerging tech, a significant portion of legal professionals still express caution. Blickstein noted that while many encourage their firms to adapt to the new technology, a significant number are still restricting it, suggesting a dichotomy might be arising within law firms for their approach to these tools.
Within the realm of generative AI adoption, about 23% of respondents noted their occasional personal use of the technology for document management. Around 21% stated they use it for e-billing, and nearly 17% leverage it, albeit infrequently, for pre-execution contract management. A small fraction, close to 2%, professed to always using generative AI for pre-execution contract management. Blickstein suggested the sporadic use may indicate that legal departments are still testing out the technology’s capacity.
Despite this, the survey shows a strong faith in the technology’s potential. Approximately 85% of the respondents believe that generative AI will be a significant part of most legal departments and law firms within the next three years. Two-thirds are optimistic that the technology will enable them to insource more work, with slightly over 70% predicting lower legal costs due to its adoption.
Despite the continued focus on AI advancements, the survey found a decrease in the confidence of professionals regarding the technology they currently possess. Almost 67% affirmed their access to appropriate technology for their jobs in 2023, down from 79% in 2022. Blickstein conjectures this decrease could be due to legal professionals’ fear of missing out on essential advancements in AI technology, remarking on an emerging “AI FOMO” within the industry.
Nevertheless, the focus on evolution is clear. More than half (52%) indicated their departments have a strategy to “integrate, evolve and replace” their technology systems to meet emerging needs—with an additional 39% in the process of developing such a strategy.
Despite this push for progress, departments face significant challenges. The survey found that a majority, just over 58%, consider “cost containment and savings/managing the budget” amongst their top problems—followed by implementing business process improvements (47%) and staying abreast of law department technology and information technology issues (41%).
Regarding the prospect of outsourcing, nearly 75% of the respondents don’t anticipate changes in their legal ops teams’ size over the next year. However, the use of outsourcing providers like the Big 4 and alternative legal service providers has seen a rise, from approx. 41% in 2022 to around 55% this year. Despite this, the majority (54%) expect their use of these services to remain constant over the next year. A third expect it to increase, while nearly 13% see it decreasing. According to Blickstein, technology could be driving this shift in outsourcing as departments tend to invest more in technology promising immediate returns, such as generative AI.