For many years now, law firms have increasingly been expected “do more with less” and deliver better services more efficiently. But today, this drive has stepped up a gear, particularly in the UK. Macroeconomic uncertainty clouds the outlook ahead, and rapid technological advances such as artificial intelligence (AI) are starting to change how law firms operate.
More and more firms are recognising the need to embrace innovation to boost productivity, enhance client service and deliver greater value for profit. This can create a handful of both challenges and opportunities. In a recent webcast, speakers from the Thomson Reuters Institute and law firm leaders discussed strategies for success in this new era.
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Balancing cost pressures with investing in new technologies
The importance of a partnership-based approach built on transparency and trust
Why implementing AI creates a strategic advantage
Putting innovation into practice
Balancing cost pressures with investing in new technologies
As clients pile the pressure on law firms to become more cost-effective, technology can offer a solution by creating significant efficiency gains and ultimately delivering long-term growth. However, there’s a clear tension involved in trying to keep costs under control while committing capital to new tech investments.
To address this, firms must be strategic about how they implement new technologies – both in terms of what they invest in and where. Decisions should align with client needs and with the firm’s strengths and objectives. Firms should analyse what they need the technology to achieve and in which practice areas it could have the biggest impact.
For example, many firms or practice groups could benefit from solutions that reduce the burden of routine tasks by automating processes and deploying generative AI (GenAI). As Mike Beswick, Business Development, Marketing, and Communications Director at Taylor Wessing noted, “AI can take that repeatable work off people’s desks. The tasks that were very time-consuming in the past are now being done in seconds.”
Clients may expect those efficiency gains to translate into cost savings, but it’s important to counter the misconception that using technology will necessarily lead to cheaper services. Instead, this represents a chance for law firms to redefine the value they provide based on outcomes delivered rather than time spent, and seize the competitive advantage.
Thomson Reuters research suggests that many clients are open to the idea of new alternative pricing models that are more transparent and flexible to meet their specific preferences, offer more predictability, or that reflect the value delivered, rather than the hours put in.
According to a recent State of the UK Legal Market report, 68% of clients in the UK now prioritise “value-based billing” arrangements (such as fixed fees, blended rates, or subscription-based pricing alternatives), and 29% of annual spend is now handled on this basis.
The importance of a partnership-based approach built on transparency and trust
The relationship between law firms and clients is changing. No longer is it enough to provide sound legal advice on a purely transactional basis. Now, the legal market is evolving towards a more partnership-based approach, in which law firms take on a more commercially-oriented role as strategic business advisors that deliver real value for their clients.
The recent UK report calls this “delivering client-aligned value,” pointing out, “Amid economic uncertainty and the rise of AI, clients are looking to law firms to help them achieve their efficiency goals and position themselves as strategic enablers of the business.”
This evolution should provide mutual benefits to both client and law firms, creating stronger, longer-lasting relationships. Trust and transparency are crucial here. Beswick put it like this: “Clients want transparency. They need to know if you are the best firm for this particular advice and if they can trust you to give them the best people and a fair price.”
He added that, while the current market uncertainty may prompt some clients and firms to delay strategic decision-making and take a ‘wait and see’ approach until the outlook is clearer, those that seize the initiative and look for opportunities could find their boldness rewarded.
“When there is uncertainty, demand increases for good judgment, good legal advice, wise counsel, and guidance to help people navigate through that volatility.”
Business Development, Marketing, and Communications Director at Taylor Wessing
Why implementing AI creates a strategic advantage
Integrating AI into legal services is not simply a question of driving efficiency and reducing costs. Perhaps even more importantly, it’s a means of creating strategic advantage. Firms that use AI can deliver better outcomes and enhance the quality of work, by reducing or eliminating rote tasks and freeing up more time for more challenging, rewarding or higher-value activities.
“There is an investment that firms are making into AI, and it does play into efficiency, but it also plays into the quality of work that we’re giving to our people and enabling them to focus on solving those complex issues rather than focusing on the volume tasks,” Beswick said.
One of the key findings of the UK report is that AI and technology are reshaping corporate legal teams’ resourcing strategies, leading them to reassess how to allocate work to outside law firms. It’s worth noting that 39% of GCs expect the overall value of work available to law firms in five years’ time to be lower than today, compared to just 11% who think it will be higher.
Law firms that embrace AI stand to gain a larger share of legal budgets. Meeting client expectations around speed, cost and value are one aspect of this – but demonstrating a modern, forward-thinking approach through the use of sophisticated technologies is another. Those firms that can show they are ready for the future will stand out from the crowd.
AI is transforming legal services and represents a major growth opportunity for law firms, especially those that act early. However, those that fail to adapt in a timely manner risk being left behind.
“The time to make an AI move if you haven’t already, is now. Don’t mistake inaction for caution,” warned Bill Josten, Legal Marketplace Innovations Insights Strategist, Thomson Reuters Institute.
Putting innovation into practice
Meeting demands for cost cutting with the impetus to invest in innovation can be a difficult path for law firms to tread. However, by being strategic about which areas to focus on, partnering closely with clients to strengthen relationships, taking the lead on AI and being open-minded about moving towards alternative pricing models, firms can show that they themselves — and not just their tech solutions — are innovative.
Webinar
The era of innovation in law: Market trends and financial insights for 2025 and beyond
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