AI reshapes legal value perceptions

The rise of artificial intelligence is leading to a reevaluation of how value is shared between law firms and legal departments, according to recent reports. A 2026 study by Thomson Reuters found that 71% of legal department professionals expect changes in how law firms charge for their services, while only 28% of law firms have updated their pricing models.

Defining legal value

Legal value is divided into three dimensions: created value, perceived value, and billed value. Created value refers to the actual impact of legal services on a company’s goals, such as risk reduction or securing deals. Perceived value is how useful a client finds the service, which may differ from the technical quality delivered. Billed value is the price charged, often based on time spent, which may not reflect the service’s true economic benefit.

AI disrupts traditional billing

Artificial intelligence is creating a gap between the cost of producing legal advice and its usefulness to a company. For example, AI can reduce the time needed for document analysis, lowering costs while maintaining service quality. However, the value to the company might not decrease and could even increase if faster decisions lead to better outcomes. This shift challenges traditional billing models based on time spent.

Legal departments prioritize broader value

Legal departments emphasize factors beyond technical skills, such as understanding business challenges, making strategic decisions, and improving operations. A 2026 report by Thomson Reuters highlights the importance of decisional, economic, temporal, organizational, and informational value for legal departments. These priorities suggest that legal departments may value contributions to decision-making and efficiency more than just technical accuracy.

Differing perspectives on value

Divergences between law firms and legal departments stem from their different structures and goals. Law firms often focus on expertise, resources, and responsibilities, while legal departments evaluate how legal services contribute to risk management, efficiency, and company objectives. These differing views can lead to conflicting ideas about service quality and value.

Measuring legal value is complex

Measuring legal value is challenging because it is often indirect, uncertain, and influenced by external factors. A favorable court decision might result from good legal advice, but it could also depend on the initial positions of the parties involved. Legal departments can better assess external advisors by combining data on costs, delays, quality of work, and outcomes.

Data integration is key

Combining financial, operational, and legal data is crucial for an economic discussion based on value. Tools like Legal Spend Management, e-billing, and legal control systems help organize expense data and align it with case management details. AI can improve data analysis, but it does not solve the deeper issue of defining and measuring value without a shared understanding of what is important.

Shared value definitions needed

The evolving relationship between law firms and legal departments requires more than just moving from hourly billing to flat-rate models. It demands a clear alignment between the need, expected value, and chosen payment method. This change also requires greater transparency and data sharing between the two parties to create a common framework for performance. Before discussing how to share value, both sides must first agree on what value means in legal services.