The AI Adoption Gap Between Law Firms and In-House Teams

The AI adoption gap between law firms and in-house teams is widening

Thomson Reuter recently published a new report titled "The ROI of Legal Tech & AI" and it revealed some interesting trends.

While both firms and in-house legal departments are developing and implementing AI strategies at a rapid pace. 79% of in-house teams already have an AI strategy and/or a responsible use policy in place, while only 65% of law firms do.

52% of in-house teams describe their leaderships' attitude towards AI legal tech as positive, compared to 44% of law firms.

Both law firms (51%) and in-house teams (49%) indicate that risk reduction to the business and data protection are key metrics for their business.

The most interesting part of this report to me is how firms and in-house teams look at ROI on AI legal tech spend.

The report defines ROI as the "net benefit the organization is expected to gain from a legal-related technology investment, expressed as a percentage of the original investment cost, over a given timeframe."

It's clear from the chart comparison (see page 8 below) that both firms and in-house teams are optimistic in extracting positive ROI from the use of the technology. However, it's unclear from the report how this ROI is realized from a law firm perspective.

It's easy to imagine how ROI is realized for an in-house team, as the technology will enable improved quality of service for internal business units, reduction in human error, increase internal capacity for legal work, and reduction in external legal spend.

But law firms? They're caught in a fundamental contradiction. AI delivers massive efficiency gains, yet their billable hour model depends on... hours.

The tension is obvious in their top concerns (see page 10 below):

• 68% worry about meeting client expectations
• 45% fear reduced in-house legal spend
• 35% struggle with AI pricing models

As in-house teams develop internal AI capabilities, firms must evolve beyond time-based pricing to capture the value they deliver, not just the hours they spend.

Are you pushing your external counsel toward fixed-fee arrangements as your internal AI capabilities grow? How are you leveraging AI adoption in fee negotiations?

See the carousel below for side-by-side comparisons of the responses between firms and in-house teams.