It's about 𝐅𝐈𝐗𝐄𝐃 𝐅𝐄𝐄 𝐑𝐄𝐀𝐃𝐈𝐍𝐄𝐒𝐒 (Festpreisfähigkeit)

𝐎𝐯𝐞𝐫𝐯𝐢𝐞𝐰:
Recent workshops with law firms (LF) and legal departments (LD) revealed interesting insights into AI's impact on the commercial relationships in the legal sector. The focus on AI has largely been on service delivery, use cases, risks, and opportunities. However, discussions on its impact on legal fees are just beginning.

𝐃𝐢𝐯𝐞𝐫𝐠𝐞𝐧𝐭 𝐕𝐢𝐞𝐰𝐬 𝐨𝐧 𝐀𝐈'𝐬 𝐂𝐨𝐦𝐦𝐞𝐫𝐜𝐢𝐚𝐥 𝐈𝐦𝐩𝐚𝐜𝐭:

✅ 𝐋𝐞𝐠𝐚𝐥 𝐃𝐞𝐩𝐚𝐫𝐭𝐦𝐞𝐧𝐭𝐬:
- Some anticipate significant reductions in external legal spend, with expectations for double-digit cost reductions in specific work types.
- Others prioritize quality and fair pricing, believing market dynamics will address cost concerns.

✅ 𝐋𝐚𝐰 𝐅𝐢𝐫𝐦𝐬:
- Some foresee a negative impact on profits.
- Others see AI as a vehicle to increase market share, revenue, and profits.

What they have in common? LF and LD familiar with AI and its practical applications are better informed and more optimistic.

𝐊𝐞𝐲 𝐋𝐞𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐟𝐫𝐨𝐦 𝐁𝐮𝐲-𝐒𝐢𝐝𝐞 𝐚𝐧𝐝 𝐒𝐞𝐥𝐥-𝐒𝐢𝐝𝐞:

𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭: Both sides need to invest in AI, with law firms incorporating investments into their pricing.
𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲: AI will reduce billable hours on the sell-side but may not necessarily translate to client savings.
𝐈𝐧𝐬𝐨𝐮𝐫𝐜𝐢𝐧𝐠: Increased efficiency will lead to more insourcing by legal departments, reducing external spend and offering more engaging work.
𝐎𝐮𝐭𝐩𝐮𝐭 𝐯𝐬. 𝐈𝐧𝐩𝐮𝐭: AI-supported legal service delivery's output does not align with the traditional input-based model.
𝐕𝐚𝐥𝐮𝐞 𝐌𝐞𝐚𝐬𝐮𝐫𝐞𝐦𝐞𝐧𝐭: The output is either a work package or measured by value, raising complex questions about the 𝐯𝐚𝐥𝐮𝐞 of professional services.
𝐂𝐨𝐦𝐦𝐞𝐫𝐜𝐢𝐚𝐥 𝐌𝐨𝐝𝐞𝐥𝐬: Law firms will need to shift from input-based to output-based commercial models.
𝐒𝐡𝐢𝐟𝐭 𝐭𝐨 𝐅𝐢𝐱𝐞𝐝 𝐅𝐞𝐞𝐬: Like other professional services, the legal industry will move from time-and-materials to fixed fees, a development I observed in my previous career in IT and consulting. And no, the billable hour is not dead!

𝐅𝐅𝐑 involves:
𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭𝐬 𝐨𝐟 𝐖𝐨𝐫𝐤: Legal departments must clearly define the scope of work.
𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐀𝐮𝐭𝐨𝐦𝐚𝐭𝐢𝐨𝐧: Maximizing efficiency through standard practices.
𝐑𝐞𝐮𝐬𝐚𝐛𝐢𝐥𝐢𝐭𝐲: Utilizing project management, frameworks, and templates.
𝐎𝐮𝐭𝐩𝐮𝐭-𝐅𝐨𝐜𝐮𝐬𝐞𝐝 𝐌𝐢𝐧𝐝𝐬𝐞𝐭: Shifting focus from input to output with appropriate KPIs.

𝐀𝐜𝐭𝐢𝐨𝐧 𝐏𝐥𝐚𝐧: We have analyzed time sheets and developed a project structure plan for law firms and legal departments to tackle these challenges. For more information, please reach out.