During the recent Legalweek event held in New York City, conversations were dominated by the transformative potential of generative Artificial Intelligence (AI) within the practice of law. Presented by ALM, many argued AI could significantly reduce the typical mundane workload of legal professions and allow for greater focus on larger issues facing their clients.
Despite the universal selling point of efficiency, caution was urged in relation to the inaccuracies and “hallucinations” these AI systems can sometimes produce. However, assurances were given that privacy and security concerns have been adequately addressed, primarily with the proprietary and more expensive AI systems available.
While the benefits of AI were feverishly promoted, there was one aspect that was largely overlooked – cost. Anecdotal information suggests that the expenditure associated with implementing these AI tools, particularly for more substantive tasks such as eDiscovery or legal research, can, in fact, be substantial. Confidential reports indicate costs for such tools varying from over $150 per user per month up to $1,000 per user per year, with some providers requiring all firm lawyers to be users as well as tying other subscriptions to their AI product.
This revelation is leading to significant concerns from practitioners and law firms, particularly mid-tier organizations. These firms are fearful of a dual negative impact on profitability from both the costs of purchase, implementation and ongoing use as well as the potential decrease in revenue from a reduction in billable hours.
Interestingly, some reports suggest that many clients are opting for smaller, potentially AI-less, law firms due to cost-effectiveness. However, the implementation of AI tools could raise costs, thereby diminishing this advantage. The resulting shift in business could markedly affect traditional law firm models, particularly for mid-tier firms.
While much of the focus was on substantive legal task AI, a number of companies were discreetly promoting Generative AI tools aimed at back-office work and practice management tasks. These tasks, including billing preparation, client intake automation and accounting functions, can all be done more efficiently with AI products with no reduction in revenue, thus improving profitability. Such tools may become an area of focus for mid-tier and smaller firms, allowing them to both contend with larger AI-adopting competitors and handle financial pressures.
Written by Stephen Embry, a practicing lawyer, speaker, blogger and writer. He publishes TechLaw Crossroads, a blog committed to examining the intersection of technology, law and legal practice.