Outsiders often cite law as an industry under threat from artificial intelligence. But the nation's biggest firms are eager to show off how they've embraced the technology. After Open AI announced a version of its latest A.I. model for lawyers last week, for example, a handful of top-tier firms proudly unveiled new tools. Sullivan & Cromwell introduced "Agreement Analyzer" to help review deals; Cooley brought out "Go Public," a tool for the S-1 drafting process that precedes an initial public offering; and Ropes & Gray said it was developing an A.I. tool that could "produce a detailed, issue-level diligence report in hours, not weeks."

In the past year, Google and Anthropic have also released A.I. tools for lawyers, law firms have begun hiring chief A.I. officers and industry giants like Kirkland & Ellis have announced big investments in the creation of their own A.I. systems. For most businesses, a mounting perception of A.I. prowess would be a clear-cut boon. But in an industry that bills by the hour, it has ruffled some feathers. When clients want to know, is that A.I. efficiency going to lead to lower legal bills? "You're getting to the point where clients are saying, 'That's great that you're using A.I. and it's making you faster, it's making you more efficient,'" Neill Jakobe, the vice chairman of Ropes & Gray, told Deal Book. But, he said, they want to know, "What does that mean for us?"

Some clients are using A.I. to make their argument for A.I. markdowns. Jennifer Leonard, the founder of Creative Lawyers, which advises law firms and corporate legal departments on adapting to A.I., said some law firms and their clients used A.I. agents to spot line items in bills where A.I. could have saved hours. "They literally have struck that out, and say, 'I want a discount on this, we don't want to pay for this part of the work anymore,'" she said. "Or, 'We know you have this new A.I. tool in house because we saw your splashy press release.'" Kyle Poe, who as vice president of legal innovation at the legal software company Legora works with customers to plan for A.I. use in their business models, told Deal Book that in-house legal teams are often asking their firms to knock 20 percent to 30 percent off the bill across the board. Firms often push back on the requests for steep discounts. They say A.I. isn't necessarily saving that much time -- at least, not yet. And that the technology is instead changing the composition of the hours, with less busy work and more substantive analysis. Pressure from clients is arriving at the same time law firms face new, if still small, competition from so-called A.I. native law firms, which rely heavily on A.I. agents and use upfront pricing. Norm AI, a technology company with an affiliated law firm focused on financial services clients, in July raised $260 million at a $1.2 billion valuation from Khosla Ventures, Blackstone and Bain Capital -- and now counts those firms among its clients. Law firms may find themselves in a bind: Using A.I. to work faster cuts billable hours, yet rates can't rise fast enough to make up the difference. But not using A.I. invites your competition to undercut you. Many close to the legal industry believe that the law firm business model will eventually need to change. Thirty-five percent of the 55 large law firms surveyed by Citi last year said they expected to make changes to their billable hour business models in the next year because of A.I., while 65 percent said they expected to make changes by 2035. Jeff Bleich, who serves as international special envoy for Anthropic, recently told a room full of legal professionals, "I don't think the billable hour is the solution, and we've known it for a long time."

Revenue at...