Deloitte Report Predicts AI Agents Could Manage 30 Percent of Inhouse Legal Work
A recent market analysis by Deloitte Legal indicates that within the next three to five years, AI agents may be capable of handling 30 percent of tasks performed by corporate legal teams. The report also suggests that around 20 percent of inhouse legal professionals could function as hybrid engineer lawyers.
The report, titled The AI imperative: Reshaping the Legal industry, was led by Deloitte consultant Richard Punt and draws on insights from a survey to forecast the future landscape of the legal profession. The findings present a spectrum of reactions, ranging from expectations of gradual change to perceptions of a radical transformation.
One significant insight from the survey is that 85 percent of respondents believe AI will substantially alter how law firms price their services. The share of work billed at hourly rates is projected to decline from 72 percent currently to 44 percent within the next two to three years.
If large commercial law firms were to derive less than half of their revenue from time based billing, it would necessitate profound changes to their business models. However, the expectation for such a rapid shift appears overly optimistic, as many industry observers anticipate that the transition away from time based billing will take longer.
Deloitte's analysis also suggests that General Counsel could see a reduction in external legal spending by 20 to 40 percent over the next three years. This reduction could be achieved through collaboration with external counsel to leverage AI benefits and through insourcing certain legal functions.
Despite the potential for significant cost savings, the report highlights a disconnect between General Counsel and their external legal providers. The survey found that 58 percent of General Counsel reported that their external providers rarely or never discuss the benefits of AI with them, with only 4 percent having experienced any advantages from their providers' use of AI.
This raises questions about the feasibility of the projected changes. The lack of proactive engagement from law firms regarding AI benefits suggests that many are not aligned with the evolving needs of inhouse legal teams. While inhouse teams can adopt more agentic tools and hire professionals with engineering skills, this does not necessarily alter their relationships with external law firms unless there is a mutual desire for change.
The report also posits that the anticipated reduction in inhouse staff numbers remains uncertain. While the integration of AI and agentic tools is likely to increase efficiency, it is unclear whether this will lead to a decrease in overall staffing levels or if, conversely, the increased workload will necessitate maintaining or even expanding staff numbers.
As the legal industry prepares for these changes, it is expected that a small number of pioneering legal teams and law firms will lead the way, setting a precedent that others will eventually follow. This evolution may compel law firms to adapt and embrace AI, even as some partners may long for traditional practices.
These themes and other critical topics will be further explored at the upcoming Legal Innovators events in New York on November 17 and 18, and in London on November 5 and 6.