A new survey of 475 inhouse professionals across the US has found that 58% of them expect a ‘reduced reliance on outside providers for routine tasks’, because of the use of genAI. Meanwhile, 23% of respondents were already using genAI, with 67% planning to use it in some form.
Also, when asked how genAI would shape their future careers, 35% of inhouse professionals noted that ‘reducing my reliance’ on law firms for simpler matters would be a factor in how their job evolved. That makes sense, given that many inhouse lawyers spend plenty of time finding, then working with, external advisers on a wide range of matters. So, any change to demand there also changes the balance of tasks in their role.
The survey by the ACC and Everlaw – and it’s a very solid survey this site has to say – underlines a fundamental change that genAI could deliver, namely the ability of inhouse legal teams to handle more process work internally.
If this genAI-driven shift happens, and expectations always need to be taken with a pinch of salt, then this clearly changes the game for those law firms that have built a portion of their revenues from handling the lower value end of corporate needs. For example, if they’ve been helping with elements of repeat contract handling, then this may well be displaced as inhouse use of genAI tools play an ever-greater role.
And, as the survey found: 23% of the respondents are using genAI in their work already. Only 10% said they were not using it or planning to, with just under half of this small group raising data security fears.
I.e. inhouse teams are using, or are about to use, genAI. And once they do, and they see the efficiency gains available across a range of areas, from review, to drafting, to improving workflows, and more, this will inevitably change how work is sent out to advisers for the simpler tasks….if such simple tasks are currently sent out.
Balance and Impact
All of that said, Artificial Lawyer spoke to two senior inhouse lawyers at major companies this week, and both said they did not expect to change the amount or type of work they sent out to law firms.
Now, it’s possible this is simply a result of ‘small sample vs big sample’, but it could also point to something else. For example, some larger inhouse teams are already on top of handling many of the basic legal needs they might send out, e.g. via their use of comprehensive contract management systems and teams of specialised staff. So, some very large companies – but certainly not all by any means – perhaps don’t have a lot of basic work to send out these days.
Meanwhile, more complex and risky work will clearly still be sent out to law firms, as it always has been. This is because one can see inhouse teams as in part operating as what this site calls ‘risk distribution functions’, i.e. the wider environment creates legal risks for a business, the business funnels that risk to the inhouse team, and they in turn distribute it out to the best entities externally to defuse the risk.
In fact, one could argue that aside from the expertise and human resources packed into law firms, a key reason to rely on them for complex matters is because they absorb the risk. No matter how far we get with genAI, it doesn’t seem likely that this aspect will go away.
So, which parts of the market would a drop in process work going to external organisations affect the most?
- Small firms may not be the receivers of such high volume, low risk contract work from large corporates, as they don’t have the staffing resources, so they may not notice any drop.
- The leading firms that have no ALSP function will also not be affected, as they likely don’t handle such work on a contractual basis either, though it could perhaps eat away at some of the very low margin work that is part of larger projects.
- But….those law firms that have either A) developed an ALSP to handle contract management / process needs for the clients, and/or B) regularly take on recurring volumes of process work as part of their revenue-generating strategy, may well be affected if genAI is better able to absorb that work inhouse.
- It also puts further pressure on some independent ALSPs, especially around contract work. However, they can of course fight back. One way would be to improve their pricing to make inhouse teams feel that even with major genAI savings it would still be better to use an ALSP. That may mean ALSPs taking on a lot more volume to generate profits, while also wielding genAI as well and keeping a tight cost base, so that pricing arbitrage still wins the day.
There’s a lot more in the survey, you can find it here.
Of course, whether such a drop in work going out materialises is another thing, but clearly enough inhouse lawyers believe it will happen to make it necessary for law firms and ALSPs to take note. GenAI just keeps on promising to shake things up in the legal world.
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