Key Takeaways:
- Artificial intelligence is being used to reduce legal bills from outside law firms
- In-house lawyers are adopting AI tools to increase efficiency and reduce costs
- AI is being used to draft legal documents, check compliance, and compare terms across agreements
- The use of AI is reshaping how legal tech companies build and sell their products
- In-house legal teams are becoming more productive and shedding their reputation as the department that says no
Introduction to AI in Law
The use of artificial intelligence in the legal profession is becoming increasingly common, particularly among in-house lawyers. According to Doug Mandell, the general counsel of chatbot-maker Inflection AI, "To be clear, we’re not replacing outside counsel, we’re refining the process in a way that benefits the company." This shift is being driven by the need for efficiency and cost savings, as legal bills from outside law firms are often one of the biggest expenses for companies. As Mandell noted, "We’re not paying for document review, we’re paying for judgment."
The Adoption of AI by In-House Lawyers
In-house lawyers are adopting AI tools to increase efficiency and reduce costs. These tools can draft legal documents, check compliance, and compare terms across agreements. For example, Melia reports that "Every time [a story is] published, you’ll get an alert straight to your inbox!" This level of automation is becoming increasingly common, with many in-house lawyers now having access to tools that can read contracts line by line and adjust terms to match a company’s internal rules and preferred negotiating positions. As Bogomil Balkansky, a venture capitalist, noted, "In-house lawyers know a finger is being pointed at them, and nobody wants to be in that situation." This dynamic is driving the adoption of new technology that can cut tasks from days to minutes, or help keep work in-house.
The Impact on Outside Law Firms
The use of AI by in-house lawyers is having a significant impact on outside law firms. As John Haddock, the chief business officer of Harvey, noted, "The goal isn’t to replace outside counsel, but to make in-house teams more productive at the work they already do." This means that outside law firms are no longer being asked to perform routine tasks, such as document review, but are instead being engaged for more complex and strategic work. As Cecilia Ziniti, the CEO of GC AI, noted, "Some billable hours are disappearing." However, this does not mean that outside law firms are becoming obsolete. Instead, they are being used in a more targeted and efficient way, with in-house lawyers using AI to prepare and refine their work before engaging outside counsel.
The Benefits of AI in Law
The use of AI in law is having a number of benefits, including increased efficiency, cost savings, and improved accuracy. As Dina Segal, the chief legal officer of Gusto, noted, "It’s been a game changer, letting our legal experts spend less time tracking rules and more time advising the business." AI is also allowing in-house lawyers to be more proactive and strategic, rather than simply reactive. As Mandell noted, "You can come in with an early perspective instead of a blank piece of paper, then build from there together." This shift is allowing in-house lawyers to add more value to their companies, and to be seen as a strategic partner rather than just a cost center.
The Future of AI in Law
The use of AI in law is likely to continue to grow and evolve in the coming years. As Haddock noted, "The crucial insight is that clients are being forced to make increasingly brutal choices about which firms get their limited dollars." This means that outside law firms will need to adapt to the changing needs of their clients, and to find ways to add value in a more efficient and cost-effective way. As Mandell noted, "I wouldn’t pay a law firm $900 an hour to hunt through documents for answers I can get instantly from a tech tool." Instead, outside law firms will need to focus on providing high-level strategic advice and guidance, rather than routine tasks that can be performed by AI.
https://www.businessinsider.com/in-house-legal-tech-ai-cost-cutting-2026-1