Another week, another study demonstrating the gap between what in-house legal professionals want from their outside law firms and what they’re getting when it comes to innovation and technology. Despite all the AI talk, we aren’t there yet.
This time, the study was interestingly from a law firm. Thompson Hine, an Am Law 200 midwestern-based law firm, conducted the study of almost 200 senior in-house legal professionals to look at how they were embracing innovation.
The study, entitled Bridging the Perception Gap-Disconnects, Expectations and Opportunities, also focused on how in house legal perceived their law firms were doing.
This is the fourth such study that Thompson Hine has conducted. Thompson Hine partnered with Corporate Counsel to conduct it.
A Disconnect
As the title suggests, the study found some pretty glaring disconnects. Only 5% of those surveyed said they saw a great deal of innovation from their law firms. That percentage was the same in 2023 and an increase of only two percentage points since 2020. That ain’t much progress.
And here is the first disconnect. When asked how much innovation their firms claim, the respondents said 20% of them are actually claiming to be greatly innovative.
Why the Gap?
As someone once told me, “There are firms that want to be innovative and there are firms that want to say they are innovative.” Quite simply, firms are often telling clients what they think they want to hear when it comes to innovation. Some firms are content to say we did innovation, pat themselves on the back, and check the box.
Just like back in the early days of converting to computers, there were firms that bought desktops for all lawyers just for the optics when clients visited, even if no one knew how to use them.
Then there is a definition problem. In-house legal professionals are interested in innovation and technology to help them get more work done faster and more efficiently. Law firms’ interest in innovation and technology is often limited to reducing non-billable hours or marketing. When a law firm says it’s innovative, it may not be innovative in a way that resonates with in-house.
In addition, note that only 16% of those surveyed said their outside firms were superior to in-house legal departments when it came to innovation. Only 3% said their outside law firms were supplying them with all of the innovation needed.
Think about that. Law firms are often smaller. They operate in practice groups. This should make them more nimble than the large corporations they serve.
Moreover, law firms are service providers. You’d think they’d want to be ahead of their customers in innovation to provide better service, not behind.
We see the same thing with attitudes toward things like AI. Twenty-three percent of the in-house folks say AI has come a long way and should be used versus 18% of the outside lawyers. Outside lawyers are more concerned about accuracy and privacy than in-house. This gap squares with the findings of the Association of Corporate Counsel (ACC) which I reported last week. That survey found that use of AI in-house had grown to close to 70%.
Why the Gap, Part Two
So why aren’t law firms interested in using things like innovation and AI to provide better service? First and foremost, the billable hour model limits robust innovation and use of technology. Adoption of innovative techniques and things like AI inevitability impact the billable hour and law firms know it.
Secondly, the consensus decision-making process engaged by most law firms further inhibits adoption. The partnership model all too often results in too many decision makers, any one of which can say no loudly and long enough to have an impact. Add to the fact that lawyers are skeptical and independent by nature and you get delay and often blindness to innovation.
Add this all up and it’s not a good look for outside lawyers. But they aren’t completely to blame.
So, It’s Easy to Blame Outside Lawyers?
At first blush, it’s easy to blame outside law firms for dragging their feet when it comes to innovation and technology. But there is something else at work which makes it easy for firms to safely and blissfully maintain the status quo and not rush to innovate and adopt technology to provide better service. In-house legal professionals just aren’t demanding change. In fact, they reward their firms for the status quo.
We see this with the Thompson Hine findings: despite the fact that 93% of the survey respondents say innovation is crucial or at least important in selecting firms, they apparently are content with seeing a great deal of innovation from only 5% of their firms.
We saw a similar gap in the ACC Study: 59% of those in-house legal professionals didn’t know if their firms were using technology on their legal matters and 80% were not demanding or even encouraging their outside lawyers to use GenAI.
To paraphrase an earlier observation: there are legal departments that are demanding innovation and there are legal departments who want to say they are demanding innovation.
What Is In-House Legal Rewarding?
Which brings me to another recent study, this one by Thomson Reuters of law firm rates which it conducted. Based on the findings, the study’s conclusion says it all:
The legal profession has achieved what most industries can only imagine: The ability to raise prices year after year, with clients consistently agreeing to pay more. Over the past decade, law firms have pushed rates at twice (or more) the rate of inflation, and 2025 is no exception — worked rates are up 7.4% compared to just a 2.8% inflation rate. This isn’t just a routine cost-of-living adjustment, rather it’s a demonstration of genuine pricing power that has fundamentally reshaped how legal services firms generate revenue.
To be fair, the study also suggests that this gravy train may soon be ending due to a variety of factors. That may be true, although that sounds a little like the “death of the billable hour” that has been predicted as long as I have been practicing law. It hasn’t happened yet.
Mind the Gap
Here is the simple fact: unless and until clients demand change by their outside law firms, it’s not going to happen. And why should it? Law firms, particularly large ones, are making way too much money to change. Their clients aren’t pushing them to change and reward them year over year with large rate increases.
Part of the reason for all this is in-house lawyers are still lawyers. They have the same reluctance to change and skepticism as those in their outside firms from which many of them came. Part of it is because the practice of law is still relational: in-house legal professionals trust and rely on their outside lawyers. They are reluctant to tamper with their law firms’ business and perceived needs. Plus, legal department budgets are often relatively small when compared to that of the overall business.
And just like in-house legal professionals rely on and trust outside lawyer for their expertise, the business must trust and rely on the legal department’s advice and expertise.
Want Change? Demand It
So we all bump along singing a Kumbaya innovation song but with little really changing at many law firms. In-house whines; law firms make changes in name only. Is it about to change with the advent of GenAI and agentic AI? Not unless clients make it so.
Perhaps it’s time for in-house legal to have a gut check with their outside counsel. Or simply vote with their feet. One thing that’s not going to effectuate change is continuing to do nothing.
And the next time in-house counsel complains about their outside lawyers, perhaps remind them to mind the gap.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.