AI: Breaking the link between hours and billing
Artificial intelligence (AI) could transform law firm billing “beyond recognition” as the time taken to complete tasks becomes “almost irrelevant”, a report has predicted.
Accountants BDO also said non-lawyer technologists, who were becoming “key” to delivering for clients, could in the future be seen as “more valuable and harder to recruit than some associates”.
In A new era for law firms, it said law firms faced a situation where “expensive AI” reduced the time taken to complete legal work, sometimes to “a fraction of the time” previously taken by associates.
As the technology developed and became increasingly reliable, it was reasonable for clients to expect “a significant proportion” of their work to be done by AI.
“They will argue that as fewer human hours have been spent on the work, the price they pay should also be lower. This will be untenable for the law firms. They will not be able to both invest substantially in implementing AI and charge less for their work as a result.”
One solution would be to “break the link between hours and billing”, but that would mean convincing clients to accept a new link between value and billing.
Law firms would have to “strike a difficult balance” between offering competitively priced work and their own profitability.
Researchers predicted that law firm leaders may initially baulk at the idea of changing the pricing model that has stood them in such good stead for so long but for many law firms, the changes could be “hugely beneficial”.
Pricing by project could allow firms to charge a premium for projects that required skills that were hard to find or greatly in demand.
Alternatively, firms could “seek to adapt their current billing to take into account the costs and the savings related to using AI”, still billing according to time but with rates cards that “evolve” to reflect the impact of AI and other technologies.
BDO held 13 in-depth interviews with senior or managing partners at law firms and a roundtable to inform the report.
It said technology specialists and data analysts would need to sit alongside lawyers to combine the advantages of technology and legal expertise.
“Law firms have always employed non-legal staff, but we could see a situation where the technologists are key rather than incidental to delivering for clients. If a significant proportion of the work for clients is being done using AI, the people who can make AI work effectively become more important.
“They may eventually be perceived as more valuable, and harder to recruit, than some associates. This would represent a significant shift in relationships between legal and business professional staff. It could also significantly change the culture of the law firms overall.”
The challenge would be to “create or maintain some form of common identity and culture when a growing proportion of staff are not lawyers and do not have that shared ‘law’ background”.
On the training of associates, researchers said “a number of law firm leaders” wanted to provide “more formal and structured training” to associates.
“The advantages are that the training is less reliant on the skills of partners, it is easier to introduce new skills or expertise such as those around technology or ‘soft’ skills around relationship building.
“Formal training should also be more comprehensive and balanced. The single biggest downside with this approach is the cost. The firms will have to invest in the delivery of this training and account for the loss of billable time.”
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