
A Thomson Reuters Institute survey of professionals across the US, UK and other Common Law markets has found that just over half of those at law firms (51%) believe they should absorb genAI costs and not pass them to the clients. Meanwhile 39% believe genAI will mean more alternative billing, such as using fixed fees.
As seen in the table below, only 9% said genAI costs should be passed to the clients ‘across the board’, with 16% saying this should happen on a case-by-case basis. However, the largest group believed investments and running costs connected to genAI should be swallowed by the firm. Interestingly, tax firms were much more willing to pass costs onto clients.

When speaking to law firms about the subject of tech costs there is usually a mix of approaches. While it may be unusual to charge a client for using the firm’s regular tech stack, some firms feel it’s fair to pass tech costs on for work such as due diligence.
With genAI we have a wide variety of use cases, from drafting, to research, to summaries and more. This tends to suggest lawyers may not be able to develop a standard approach to how to pass on the costs, or when to retain them. Also, how will the firm work out what to charge when perhaps they have an annual licence for hundreds of people?
GenAI and Billables
As mentioned, law firms are also divided on whether genAI will change billables more directly – see below.

While a solid minority see alternative fee use increasing (39%), as genAI means some tasks really don’t make sense to be charged by time, a narrow majority don’t see big changes or don’t know (56%). Plus, a small minority of 6% even believe the hourly model will increase in use.
Also, see below, the overall belief among the survey sample is that rates will stay the same: 58%, while only 11% believe rates will decrease because of genAI. This sounds right. The change to law firm economics because of genAI will come via a move to fixed fees – or more fixed fees. If you live in the time-based legal economy, then hourly rates will generally go up each year because law firms believe the clients will always pay higher rates, just like the belief that house prices always go up. And, this tends to be the case, until they don’t. Hence, genAI or no genAI, firms will keep putting up their hourly rates….because they can. So, they will. It’s as simple as that. We clearly have not reached ‘peak billable hour’…. yet.

Conclusion
As mentioned in last week’s piece that referenced this survey, the data includes small and large firms, so that has to be taken into account. However, the general view is that genAI will have some effect on billing methods, although perhaps not on hourly billing rates if those are kept. Hence, until we move to fixed fees this discussion may be moot.
When it comes to passing tech costs on to clients, the view is fairly restrained, with many firms accepting they must swallow the costs, as they do for other types of tech. In fact, it seems likely that as genAI becomes ‘normal’, the idea of charging extra for it, outside of areas where there is a huge volume of data that creates notable additional costs, passing costs on may seem quite unusual.
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Survey data: The survey was done via an online survey with 1,128 respondents, conducted in January and February 2024. 29% of the total were in law firms or solos, while 46% of all the respondents were in legal sector, whether law firm or corp legal.. The sample was drawn from lists provided by Thomson Reuters, and participants were screened to ensure that they were familiar with GenAI technology. Participants were located in the United States (48% of all respondents), United Kingdom (19%), Canada (16%), Australia (14%), and New Zealand (4%).
Report: Thomson Reuters Institute – GenAI in Professional Services, 2024