A recent survey by Law.com found that Am Law 100 firms are spending more on artificial intelligence and innovation investments than on any other expense category. This shift in investment priorities may influence the performance of BigLaw firms heading into 2027. The firms' increasing AI investments are expected to affect their revenue and profitability, with over 90% of respondents predicting a revenue increase of more than 5% this year. However, 50% of respondents also cited increasing costs as their biggest concern.

Full News Breakdown

The survey revealed that nearly 70% of Am Law 100 firm survey respondents reported that AI and innovation investments increased more than 5% through the second quarter of the year.

• More than a quarter of respondents anticipate these expenses to increase by more than 15% by the end of the year.

• Gregg Eisenberg, a managing partner at Benesch Friedlander Coplan & Aronoff, stated that AI is a significant investment area for law firms.

• Mark Medice, a principal at LawVision, noted that firms should expect greater scrutiny of their use of AI by clients.

• The majority of Am Law 100 firms reported no change in client pushback on rate increases so far this year.

How Does This Affect You?

The survey clarifies that AI expenses are a significant concern for BigLaw firms, affecting their revenue and profitability. This shift creates a compliance obligation for law firms to carefully manage their AI investments and consider the potential impact on their clients and business operations. Lawyers, law students, and businesses may want to consider the implications for their work and operations.

For Lawyers & Advocates

• Law firms may wish to reassess their billing rates and consider the potential impact of AI investments on their clients, taking into account the potential for greater scrutiny of AI use.

• Lawyers may find it useful to provide more efficient services to clients, leveraging AI to reduce costs and improve productivity, while also reviewing their use of AI for transparency.

• Firms may want to review their investment strategies and prioritize AI investments that can drive innovation and growth, while also managing the associated costs and risks.

• Lawyers may consider the potential risks and benefits of AI adoption, including the potential for increased efficiency and improved client outcomes, as well as the potential for job displacement and changes to the legal profession.

• Law firms may want to develop strategies to address the potential pushback from clients on rate increases, including communicating the value of AI investments and demonstrating the benefits of AI adoption.

For Law Students

The decision provides an opportunity to examine the study of law and technology, artificial intelligence and law, and the impact of technological innovation on the legal profession. Comparable cases include Daubert v. Merrell Dow Pharmaceuticals (1993) and Association for Molecular Pathology v. Myriad Genetics (2013), which raise questions about the admissibility of expert testimony and the patentability of genetic material. A bar examiner or professor may ask how AI investments affect the legal profession and what regulatory frameworks are needed to address AI adoption.

For Businesses

• Companies that work with law firms may want to consider adapting to changes in billing rates and service delivery models, including the potential for more efficient and cost-effective services.

• Businesses may want to consider the potential benefits and risks of AI adoption in the legal profession, including the potential for improved outcomes and reduced costs, as well as the potential for job displacement and changes to the legal profession.

• Companies may want to review their contracts with law firms and consider the potential implications of AI investments on their legal budgets and operations.

• Businesses may want to develop strategies to address the potential impact of AI on their legal operations, including investing in AI technologies and developing AI-related expertise.

Key Takeaways

• The legal principle established: AI investments are a significant concern for BigLaw firms, affecting their revenue and profitability.

• The practice consequence: law firms may wish to carefully manage their AI investments and consider the potential impact on their clients and business operations.

• The enforcement consequence: regulators and courts may scrutinize law firms' use of AI and their billing practices, potentially leading to changes in regulatory frameworks and industry standards.

• What to watch next: the development of regulatory frameworks and industry standards for AI adoption in the legal profession, including potential updates to the American Bar Association's Model Rules of Professional Conduct.

• Law firms may want to review their AI investment strategies and develop plans to address potential client pushback on rate increases before the end of the year.

Source: Rising AI expenses could hinder BigLaw performance, new survey shows