As generative artificial intelligence (Gen AI) continues to evolve, in-house legal departments are gearing up to reduce their reliance on outside law firms. According to a recent report by the Association of Corporate Counsel and Everlaw, 58% of in-house legal teams expect to cut back on using external service providers due to the adoption of Gen AI. This marks a significant increase from last year when only 25% planned similar reductions.
Shift Toward AI-Driven Cost Savings
The report underscores a growing trend in which corporate legal departments are turning to AI-driven solutions for cost efficiency. Gloria Lee, Everlaw’s Chief Legal Officer, emphasized that the push to reduce costs through AI is quickly becoming a reality. “With over a quarter of in-house legal teams reporting tangible savings, AI technology is rapidly reshaping the way corporate counsel operates, leading to transformative changes within the legal industry,” she said.
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In just three years, AI advancements have started to create substantial shifts in how legal functions are managed internally, with many departments viewing technology as an essential tool for reducing external legal costs.
Slow Adoption of AI in Legal Work
Despite the optimism surrounding AI’s potential, the report reveals that Gen AI has yet to see widespread adoption within the legal sector. Only 23% of in-house legal professionals currently utilize Gen AI in their daily work. This slower uptake suggests that while many departments recognize the potential benefits, the technology’s full integration into legal processes is still in its early stages.
Law Firms Respond to the AI Challenge
As corporate legal departments move toward AI solutions, law firms are facing their challenges. Many firms are actively hiring technology experts to bolster their AI capabilities and remain competitive in a rapidly evolving legal landscape. However, the road to seamless AI integration has not been entirely smooth.
There have already been instances where legal professionals faced disciplinary action due to misinformation generated by AI. These cases highlight the importance of carefully managing AI tools within legal work, as their misuse can lead to significant professional consequences.
Survey Insights and Broader Implications
The report, based on a survey of 475 in-house legal professionals across the U.S., provides valuable insights into the shifting dynamics between corporate legal teams and external law firms. The growing reliance on AI technology is expected to continue reshaping these relationships, leading to more in-house legal departments handling tasks traditionally outsourced to law firms.
As AI adoption accelerates, the legal industry will likely see further changes, prompting both in-house teams and law firms to adapt to a future where technology plays an increasingly central role.
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