Majority of Corporate Legal Departments Anticipate Gen AI to Slash Expenses: 76% In-House Counsel Agree

The vast majority of corporate executives at Fortune 1000 companies expect their investment in Generative Artificial Intelligence (Gen AI) technologies to increase over the course of the next five years, and they have high hopes for how this investment will ultimately reduce their operational costs.

These findings were derived from our 2024 Investing in Legal Innovation Survey: The Rise of Gen AI at Top Firms & Corporations. In January of 2024, LexisNexis® surveyed executives in corporate legal departments at Fortune 1000 companies, as well as managing partners and senior leaders at large law firms, to better understand the business impact of Gen AI technology on the legal industry.

Among Fortune 1000 general counsel, more than one-fourth (28%) indicate they have a dedicated budget for Gen AI tools this year and 86% expect their investment in Gen AI tools to increase over the next five years. Moreover, GCs predict the Gen AI wave will positively impact company staffing, with 32% saying they anticipate increased hiring of technologists to support corporate AI initiatives in 2024.

What is particularly notable is how the in-house counsel we surveyed expect these increased investments will impact their operational expenses: 76% of GCs believe that Gen AI will decrease costs for their legal departments, and 72% say that more work will be completed in-house as a result of Gen AI adoption.

Top Four AI Use Cases Identified by Corporate GC Respondents

When we dug into specific ways that corporate GC respondents plan to use AI technology, here were the top four use cases they identified:

• Contract analytics (48%)
• Summarize documents (48%)
• Drafting documents (46%)
• Legal research (42%)

In-house counsel also identified some of the potential obstacles to adoption of Gen AI technologies, which provides an important roadmap for Legal AI solutions providers. Just one in three (36%) of Fortune 1000 executives surveyed currently trust Gen AI technology for legal work, though another 52% are neutral toward the technology. GCs specified the three biggest hurdles to widespread adoption of Gen AI: trustworthiness of current solutions (84%); quality of current solutions (78%); and hallucinated/invented content concerns (54%).

Interestingly, Fortune 1000 executives are generally more trusting of Gen AI technology than their counterparts in large law firms and specifically mentioned content hallucinations as an obstacle far less frequently than other legal executives (54% vs. 78%).

Our survey also revealed a surprising disconnect in expectations between GCs and law firm managing partners about a future in which Gen AI technologies are a routine part of their workflows.

Exploring the Influence of Generative AI on Law Firm and Client Dynamics

When we asked for predictions for how Gen AI will impact the law firm/client relationship:

• An overwhelming 80% of corporate legal executives expect their outside counsel bills to be reduced as a result of Gen AI technology, yet just 9% of law firm leaders said their corporate clients have expressed that they expect their firm bills to be reduced as a result of Gen AI;
• More than two-thirds (68%) of in-house counsel said they approve of their outside counsel using Gen AI tools on their company’s legal work, but just one-third (38%) of law firm leaders said their clients approve of law firms using Gen AI in their legal matters;
• While 76% of corporate executives anticipate that Gen AI will decrease costs for their legal departments, fewer than half (47%) of law firm leaders expect that Gen AI will decrease costs for their firms.

Fortune 1000’s High Expectations for Gen AI in Cost-Cutting

The lesson is that Fortune 1000 in-house counsel have higher expectations regarding the potential for Gen AI to reduce routine operational expenses than their counterparts at large law firms, which portends a possible flash point to monitor as Gen AI adoption rises in the years ahead: Most corporate legal executives expect to see a reduction in billing from their outside counsel due to efficiencies created by Gen AI, but just a small number of law firm leaders are aware of this expectation as of now.

Legal industry observers suggest that it’s important to begin to bridge this expectations gap by engaging in candid discussions about this potential disconnect between clients and their outside law firms.

“While top corporate lawyers have a keen interest in how outside counsel will use generative AI, many are in the dark about their firms’ views and strategies on the technology,” reported Law360®. “Firms should ask clients about their AI strategies and adoption, and showcase the generative tools they have developed and used.”

Insights from our survey can help in-house counsel ask more informed questions about the adoption of Gen AI technologies as they interact with their law firms. These conversations may lead to productive ideas for improved client service and future billing arrangements that are mutually beneficial.

Download our free report, "2024 Investing In Legal Innovation Survey: The Rise of Gen AI at Top Firms and Corporations."