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The Core of Legal Service Business Model – Charging by the Time at an Hourly Rate
There is no universal standard on how lawyers charge clients around the world. The concepts of the billable hour and hourly rates are not inherent truths—nor were they always widely accepted.
For decades, the hourly rate and billable hours have become dominant in legal practice, particularly among firms serving corporate clients globally.
From a client’s perspective, choosing a prestigious firm—say, an Am Law 100 firm—and engaging a partner means paying more than hiring a boutique firm or a junior associate. The hourly rates are disclosed upfront, and billing is done regularly based on the hours incurred. It’s a relatively fair and transparent pricing model.
From a law firm management perspective, billable hours offer the simplest, fairest, and most level-playing KPI to evaluate lawyers’ performance. Likely invented in the U.S., the model reflects a quintessential American ethos: 'Eat What You Kill.'
Still, many in the corporate world question the model. It may seem to reward inefficiency and make it difficult for clients to verify how time was spent. Clients wonder what safeguards exist to prevent duplication of effort, or what constitutes fair value in legal fees.
Trend of Hourly Rates: Steady Growth
Hourly rates have risen steadily, similar to consumer goods pricing. In recent years, large firms have increased their rates faster than smaller ones.
According to a Brightflag report, created in partnership with Priori, the blended hourly rate for Am Law 100 firms reached an average of $1,057 in 2024, marking a 10% rise from 2023.
Partner rates at top U.S. firms now regularly exceed $1,000 per hour—and in some cases, reach $2,000 or more. Associate rates are also getting closer to the $1,000 mark. (“The Biglaw Firms With The Highest Hourly Rates (2024)”)
Clio’s Legal Trends Report shows that small firms are also steadily increasing hourly rates, often outpacing general inflation.
As hourly rates continue to climb across both large and small firms, questions around value, efficiency, and cost justification are becoming more urgent—especially for corporate clients under budget pressure. In this landscape, technology—particularly artificial intelligence—is emerging as both a disruptor and an opportunity. What once seemed like a distant innovation is now reshaping how legal work is delivered, priced, and perceived.
Adoption of AI and How It Will Impact Lawyers’ Work and Earnings
We are just at the beginning of AI adoption, and its transformative power is already visible in the legal sector.
Enhancement of Efficiency
AI can substantially increase the efficiency of—or largely automate—legal research, simple legal drafting, legal translation, cross-language review, clause comparison, issue spotting, and memo/email drafting. In essence, AI can do almost everything that junior lawyers traditionally handle.
Enhancement of Quality
AI enhances consistency, improves accuracy, reduces negligence, and increases speed. As reliance on AI grows, a new demand will arise for skilled lawyers to review and refine AI outputs and prompt instructions effectively.
Beyond the 'Extra Set of Eyes' Metaphor
While some describe AI as an 'extra set of eyes,' that framing underestimates its trajectory. AI represents a profound shift. It is transforming how professionals approach any work rooted in data—whether in law, medicine, science, logistics, business management, or even creative fields like filmmaking.
A Glimpse into the Future: Smarter AI, Faster Deals
AI is evolving exponentially. In the near future—perhaps within five years—it will be capable of drafting comprehensive, cross-referenced M&A documentation based on term sheets and even participate in live negotiations.
Picture this: Two corporate teams wrap up a negotiation. An AI assistant—whether on your phone or integrated into another device—chimes in: “Jim, it seems you’ve reached a successful deal. Would you like a term sheet summarizing the key terms?”
You respond, 'Yes, that would be great.'
Within a minute, both sides receive the first draft. After minor revisions, the AI follows up: “Would you like me to generate the full set of transaction documents in English and French, given that one party is based in an English-speaking country and the other in a French-speaking country?”
You say yes, and within minutes, the AI delivers a complete set of SPAs, shareholder agreements, amended bylaws, IP licensing terms, and ancillary contracts—ready for legal review by a couple of experienced lawyers.
How Much Will AI Impact Lawyers’ Work?
The short answer: AI will fundamentally reshape the legal profession—starting now and accelerating over the next 5 to 10 years.
Once proven reliable, AI will become the go-to assistant for legal research, fast analysis, document review, and drafting. Both large enterprises and SMEs will adopt it widely.
Some legal functions will remain human-driven, including:
1. Courtroom Litigation and Arbitration – Legal representation still requires human presence and advocacy.
2. Relationship Management and BD – Empathy, cultural nuance, and trust-building remain vital, especially cross-border.
3. Strategic Advisory in Complex, Unstructured Matters – High-stakes decisions require business acumen and legal strategy.
4. Oversight of AI Output – As we move from mistrusting AI to over-trusting it, firms will need experienced, tech-savvy lawyers to monitor AI performance and ensure accuracy.
Law firms will hire far fewer lawyers. Those retained will possess hybrid capabilities: legal expertise combined with AI fluency, strong business sense, and strategic creativity.
Could AI Help Lawyers Make $10,000 per Hour?
Yes—but not by doing more of the same legal work. A select group of lawyers, especially at the largest firms, will create 10x more value per hour using AI.
If the billable hour model is abandoned—as it eventually may be—these lawyers will charge based on outcomes and value. In that world, the $10,000/hour lawyer isn't a myth, but a reflection of amplified productivity and strategic insight.
Large corporates will continue dominating the economy and requiring expert legal services—particularly in regulation, cross-border M&A, and complex litigation. The firms that adapt and harness AI will capture greater profits, and surviving partners will see dramatic increases in PPP (profit per partner).
Final Thoughts – How Lawyers Should Prepare
First, embrace the trend. AI is not coming—it’s already here. Use it daily. Understand how it works. If you're early in your career, consider learning prompt engineering or even exploring AI training tailored to legal practice.
For prospective law students—or parents considering law school for their children—pause and reflect. Passion matters, but so does positioning. By 2030, litigators may be in higher demand than corporate generalists.
In the AI era, competitive advantage will come not just from the size of your firm, but from how intelligently you position yourself—and how effectively you use the technology at your fingertips.
For law firms evaluating how to deploy AI internally, issues like data protection, model training, and platform control are becoming critical. For a deeper dive into these concerns, read our post: Legal AI & Data Security: Choosing Between AI as a Service (AIaaS) and Proprietary AI