A new survey of inhouse lawyers has found several key facts: that AI is now widely used within corporate legal teams; internal legal headcount is still increasing for many companies; and that 26% expect to cut spending on law firms in 2026. The use of alternative fee arrangements (AFAs) has also increased.
Those four things combined in the CLOC and Harbor survey for 2025 paint a potentially transformative picture for law firms:
- 26% said they expected decreased spending on law firms in 2026, this is as hourly rates continue to grow at a rapid pace, and while the demands on corporates to obtain legal and regulatory support only ever seems to rise. I.e. overall demand for legal services seems likely to grow, law firms are putting up their prices in anticipation of that growing demand, and yet around a quarter of inhouse teams are saying they may spend less on external advisers.
- Plenty of lawyers are still going inhouse and although expectations of more hires to teams have dropped slightly – 32% from 42% expecting to grow headcount – about a third of companies are still growing the number of lawyers they employ.
- AI is now very much part of inhouse life, with most indicating a serious engagement with the technology – ‘85% of departments have a dedicated resource or special committee managing AI initiatives’ – and with general productivity (74%) seen as the main overall benefit. I.e. a number of inhouse teams are both using AI and still adding headcount, or using AI and keeping headcount the same. The net result is more work done internally.
- And the use of AFAs seems to be steadily growing. This does not mean those AFAs are all fixed fees, as the term covers a very broad definition that includes success fees, value billing, and other methods. But, generally this shows clients are becoming more open to going past the hour, just as AI takes root.
This is an excerpt of an article available through Artificial Lawyer.
- AI
- Law Department Benchmarking Survey