Welcome to Straight Talk, our series where Wolters Kluwer’s Ken Crutchfield, Vice President and General Manager of Legal Markets, and Jennifer McIver, Associate Director of Legal Operations and Industry Insights, discuss how generative AI (GenAI) is impacting legal professionals.
This month, Jennifer and Ken ask: Does using AI always lead to cost savings, and how do you balance the need for efficiency with the desire for improved outcomes?
Jennifer, you’ve been talking to a lot of people about how AI is driving efficiency. What’s one of the things that’s really stuck out for you?
Jennifer: There’s been some discussion about how corporate legal departments need to be cognizant of how law firms are using AI. Are they using it to do the CLD’s work more efficiently? Or are they using it to do their own work more accurately?
Those are two very different questions. CLDs expect their firms to use AI to gain efficiency and take care of matters in a more streamlined way. I think they’re doing that, but that doesn’t necessarily mean invoices are going down. That’s because it seems like many law firms are also using AI to more accurately capture the time it’s taking them to work on matters. So, in some cases, we’re seeing an uptick in billable hours because firms can precisely capture hours they may have missed before.
Ken: That’s interesting to hear. I can definitely see firms using AI to be more accurate in timekeeping and noticing activities that might have otherwise been forgotten.
There are also instances where AI is used to accomplish certain tasks and gets better results. That doesn’t necessarily equate to time savings. Instead, CLDs and firms might achieve better or more certain outcomes on their engagement, because firms’ attorneys might be able to successfully accomplish tasks they couldn’t do well before they used AI.
So, there’s this push and pull between efficiency and rates. You would think that greater efficiency would mean more savings because of fewer billable hours. A task may become more efficient, and the overall invoice might be lower, but the partner-level review may increase. Efficiency will generally drive invoices lower for comparable work. But if AI can help drive a better outcome, the net amount of an invoice might remain the same or even increase if greater value is received by the client.
How will this impact the way CLDs view their outside counsel’s use of AI?
Jennifer: Well, we’ve seen some CLDs include expectations in their guidelines that firms must use AI if they can deliver results in less time or money. But I think they also need to consider the value in spending a little more for better outcomes. It’ll be interesting to see if CLDs have an appetite for that.
It’s kind of like the adage that you get what you pay for. I’m not saying CLDs should always pay more, but high-quality legal services do come at a cost, and AI isn’t going to change that.
Is there any disadvantage to not using AI?
Ken: Absolutely. Today’s CLDs will generally expect outside counsel to use AI when it can improve efficiency, outcomes, or ideally both. If a firm isn’t equipped to do that, it becomes a competitive disadvantage. It’s not even enough for a firm to say they’re evaluating how to use AI. That’s not going to lead to business if a client expects them to be proficient in the technology.
Fortunately, there are many ways to use AI to achieve efficiency and better outcomes that result in a win/win situation for both the firms and their clients. For instance, let’s say a firm is handling a large number of simple claims. The firm can use AI to analyze the claims and identify a grouping that could result in less money owed for the claims. Simultaneously, there might be more complicated or bespoke claims that need extra handholding. AI can look at patterns within those claims to help identify the best ways to handle them for optimal outcomes.
So, how much of the conversation around AI in legal is focused on cost savings versus efficiency and outcomes?
Jennifer: Obviously, there’s still a good amount of discussion on how to use AI to save money. That’s probably never going to change.
That said, use cases are leaning more toward efficiency. CLDs and firms are asking, “How can we do this more quickly so we can move on to more strategic matters?” They’re also thinking about the current economic environment and wondering how they can leverage AI to ensure increased workloads remain manageable. “What happens if we need to cut staff or budget? How can AI help?” These are some of the things that we’re hearing.
I think this is where much of the discussion around AI and efficiency is happening, and we’ll see that continue to play out this year. As for outcomes, that’s a conversation we need to start having. It’s increasingly obvious that AI has an important role to play in delivering desired results, even if it might cost a bit more than expected.
Stay tuned for upcoming Straight Talk blogs, where Jennifer and Ken will continue exploring the balance between cost and outcomes and discuss other emerging AI-related issues.
