Law Firms: Ask Your Clients About AI Expectations

By Geoffrey D. Ivnik, Esq. | Director of Large Markets, LexisNexis

Corporate counsel have made it clear they are expecting their outside counsel to become more efficient in their operations by leveraging the power of generative artificial intelligence (Gen AI) technology, but there is currently a communications gap between the two sides of the table.

“While top corporate lawyers have a keen interest in how outside counsel will use generative AI, many are in the dark about their firms’ views and strategies on the technology,” reported Law360. “Firms should ask clients about their AI strategies and adoption, and showcase the generative tools they have developed and used.”

This communication gap is already revealing some important disconnects between expectations of corporate clients and their outside law firms.

The LexisNexis 2024 Investing in Legal Innovation Survey: The Rise of Gen AI at Top Firms & Corporations, which surveyed executives in corporate legal departments at Fortune 1000 companies and managing partners and other senior leaders at large law firms, found that 76% of Fortune 1000 respondents expect their outside counsel to use cutting-edge tools, including Gen AI, and that 80% of corporate legal executives expect a reduction in billing from outside counsel due to Gen AI efficiencies. However, just 9% of law firm leaders said their corporate clients have expressed that they expect their firm bills to be reduced as a result of Gen AI.

Corporate legal leaders advise their colleagues that it’s crucial to engage with their outside law firms — and legal technology providers — to make sure their philosophies are aligned and their goals are shared.

“We’re asking our law firms for partnership and open conversation … start the dialogue (on Gen AI) with us,” said Lydia Petrakis, senior corporate counsel and digital strategist at Microsoft, in comments during a recent Wall Street Journal event for corporate executives and law firm managing partners. “Help us understand what you’re doing, where it’s working, where you’re seeing potential and also where it hasn’t worked. Both in-house and law firms need to have an open dialogue and willing to partner and navigate together. Like any new journey, you’re going to get some things right and you’re going to get some things wrong … you keep moving and being agile together.”

Kevin Fumai, assistant general counsel for Oracle, underscored the importance of existing relationships with law firms and legal tech vendors.

“You can always build on those existing relationships, based on the knowledge you have of them and the knowledge they have of you, to identify new opportunities to partner together,” he said.

Fumai warned there is currently a lot of “short-term overhype” in the market for Gen AI tools and stressed the value of working from within trusted relationships on Gen AI adoption because of the “deep connectivity” between longtime business partners. But for those law firms and legal vendors who are reluctant to get on board the Gen AI train, perhaps the best motivation is to quantify the scope of this industry transformation.

“Companies spent $20 billion on AI last year, they’re predicting $40 billion this year and they’re predicting $500 billion — that’s half a trillion dollars — by 2027,” he said. “Just look at that evolution and look at the fact that it’s applying to every company in every industry, regardless of size.”

Justin Grad, director and associate general counsel for Amazon Web Services, added that involving practicing lawyers in the Gen AI adoption process — in-house professionals as well as outside lawyers — will ensure collaboration and maximize the benefits from the deployment of the technology.

This article was based on one of the panel discussions at the Wall Street Journal event, “What Every Managing Partner & C-Suite Leader Needs to Know About Legal AI,” which took place on January 31^st in New York City. Watch the entire session, Generative AI & The General Counsel Perspective, for more insights from industry leaders.