• AI adoption by legal professionals has increased exponentially to 79% in just one year, signaling a major shift in technology use.

• Other research shows that General Counsel expect gen AI to reduce their dependence on outside law firms.

• Only 11% of legal departments foresee generative AI being truly transformative, as early hype begins to wane.

Usage of artificial intelligence by legal professionals has increased exponentially, from 19% in 2023 to 79% this year, according to the ninth edition of the Legal Trends Report, released by Clio. The increase is due to the growing incorporation of AI in legal operations, from document review, legal research, to client intake and more.

Other key findings:

• Clients are increasingly supportive of lawyers’ use of AI, with 70% of clients either preferring or neutral toward firms that use AI (42% would be in favor, 28% would have no preference and 31% preferred a firm not using AI).

• Despite the 70% AI adoption rate, only 8% of law firms adopted it universally, while 17% adopted it widely, 34% minimally and 21% partially. 

• Of those holding back on adopting AI, the most common reason given by 59% is that they are unsure it will help them. 

• Up to 74% of hourly billable tasks – such as information gathering and data analysis – could be automated with AI.

• This is why law firms should consider moving away from hourly billing in favor of more flexible billing options such as flat fees. As AI reduces the time spent on various tasks, law firms that adhere to the billable hour may see a decline in revenue, the report says.

Why this matters: “The modern law firm is ripe for automation — nearly three-quarters of a law firm’s hourly billable tasks are potentially exposed to automation by AI,” the report says. “To that end, automation can offer firms the space to focus on the tasks that require a human touch — like high-level legal work, advocacy, and fostering client relationships — while maintaining a high level of service.”

Gen AI to Enable Less Reliance on Outside Counsel

In-house legal departments are also driving AI's rapid expansion, with a new survey by the Association of Corporate Counsel (ACC) and Everlaw highlighting a shift in how companies manage their legal work. As more companies adopt generative AI tools, General Counsel expect their reliance on external law firms to decrease.

• Fifty-eight percent of legal departments expect to rely less on outside service providers because of Gen AI, compared to the 25% in-house legal departments last year planning to cut the number of law firms they worked with.

• However, the report found that Gen AI has still not been widely incorporated. Only 23% of in-house legal professionals are using GenAI for their legal work.

• 45% of respondents said they expect gen AI to have a significant impact on the efficiency and effectiveness of legal departments.

• But only a mere 11% foresee a transformative impact of the technology.

One of the main causes of this rather modest adoption rate and a drop in enthusiasm for gen AI is that companies aren't spending sufficient time or money to lay the foundation for successful adoption, the ACC/Everlaw survey indicated:

• Just 43% of respondents reported having a basic grasp of generative AI.

• Just 42% of respondents said their departments were providing educational opportunities.

• Just 46% said their departments received dedicated resources to support gen AI implementation.

Other signaled issues include incomplete training policies and a lack of "internal alignment" that leaves parts of the organization unaware of what others are doing. "This disconnect could be problematic, as it's difficult to create effective organization-wide policies if the C-suite team isn't aligned on how and where AI tools are being used," the report said.