AI, the billable hour and the new legal value equation

For more than a century, the billable hour has been the gold standard of legal pricing. Legal AI, however, is forcing law firms to rethink that traditional billing model. With its ability to produce research, summaries and legal drafts in seconds, AI is prompting firms and legal departments alike to reconsider how they measure value, allocate time and define legal work.

A challenge to tradition

The billable hour was built on time — specifically how long an attorney spent on a specific task. In a world where legal expertise was scarce and slow to produce, time served as a fair proxy for value. But AI is rewriting this script. When tools can draft memos, review contracts and extract insights from thousands of documents at a fraction of the time, billing based on hours spent may no longer reflect the value delivered.

According to a 2024 “Future-Ready Lawyer Survey Report” by Wolters Kluwer, more than two-thirds of corporate legal departments and more than half of law firms expect AI-driven efficiencies to have an impact on the billable hour.

Law firms are now grappling with this new reality. Some have embraced AI to streamline work, boost output and focus lawyer time on high-value strategy while others remain cautious, concerned about client perception and the challenges of monetizing faster work. Regardless of approach, the core question remains — if AI reduces time spent, how should legal work be priced?

In-house counsel are setting the tone

In-house corporate legal teams, many under increasing pressure to reduce outside counsel costs, have been no stranger to experimenting with fee structures, whether it be subscription models, flat-fee due-diligence bundles or outcome-based pricing. Their goal is to be faster, leaner and more focused on outcomes rather than hours.

AI is a natural ally in this pursuit. With tools that accelerate contract review, eDiscovery and regulatory research, in-house teams can reduce reliance on external counsel or demand more efficient service when they do engage it. AI also enables smaller in-house teams to scale their capabilities without expanding headcount, shifting the demand dynamic across the legal services ecosystem.

The shift toward value-based legal services

Instead of billing based on input (hours worked), some in the industry have moved toward billing based on output (value delivered). Value-based models, such as flat fees, success-based pricing or tiered retainers, reward efficiency and incentivize the adoption of technology like AI.

Some law firms now use generative AI to power these value-driven services, offering automated contract analysis, on-demand legal summaries and scalable compliance monitoring — services that are less about time and more about impact. These offerings appeal not only to corporate clients but to startups and midsize businesses seeking affordable, efficient legal solutions.

Elevating the lawyer’s role

Despite the efficiencies AI brings, it doesn’t mean lawyers are taken out of the loop. Instead, it liberates them. When routine tasks are automated, lawyers can spend more time on high-impact work such as advising clients, crafting strategy, negotiating deals and navigating complexity. This shift in focus enhances the value lawyers provide.

But to stay competitive, continuous training is essential. Lawyers must become fluent in AI’s capabilities, risks and legal implications and firms will need to invest in education, experimentation and innovation.

A new philosophy

Ultimately, AI is doing more than changing legal tools, it’s changing legal philosophy. The profession is shifting from billing for time to delivering results. From guarding knowledge to sharing it faster. From tradition to transformation.

Firms that adapt will thrive. Those that resist may struggle to justify their value in a world where clients are measuring outcomes, not hours.

Verbit is helping law firms embrace this new era of value-driven legal services. Through AI-powered solutions like Legal Visor, Verbit streamlines everything from deposition prep to real-time testimony analysis, enabling lawyers to deliver insights and strategic recommendations faster than ever.

By automating transcript review, surfacing key admissions and offering instant search and summarization capabilities, Verbit’s AI-driven solutions reduce time spent on manual tasks and allow firms to reallocate resources toward higher-value work. The result? Enhanced efficiency, stronger client outcomes and the ability to compete in a legal market that’s moving beyond the billable hour.