Late last week (30 October 2026), the Victorian Legal Services Board (VLSB) and Commissionerโs Legal Services Research Centre published their The Evolving Use of Generative AI: Findings from the 2026 Victorian Lawyer Census.
The voluntary census received responses from 2,221 Victorian qualified lawyers and found:
55% were using AI in legal practice, up from 37% in 2025;
78% of AI users had increased their use during the year;
79% of AI users relied on general-purpose products such as ChatGPT, Claude, Gemini and Copilot; and
adoption differences between career stages had largely disappeared among lawyers aged under 60.
Some other significant AI-related takeaways from the Report:
Among AI users in fee-charging practice, 26% said AI had produced lower fees for clients. Fee reductions were more common among lawyers principally serving B2B clients.
46% of client-facing lawyers reported clients arriving with inaccurate or misleading information obtained through AI
41% had received AI-generated documents or correspondence requiring correction.
Only 10% reported clients arriving with a better understanding of their legal issues because of AI.
One of the biggest red flags to come out of the Report: 46% of lawyers said it increased the time and effort required to deliver services.
Clearly we have a way to go, and while adoption is up its use still needs improvement.
Interesting though, use of general-purpose AI platforms is much higher than I had thought. Which leads to the question: Where’s the governance?
The most recent Wells Fargo report on the state of the US market has just been published. While obviously US centric, I’m sure many of the trends are being reflected elsewhere, so worth a look.
๐ญ. The impact AI is having on demand is still minimal (actually, it is increasing work on the demand side!). On the productivity side, this may change, but increase demand is, so far, taking up any excess capacity. This (as well as the other indicators in the report) most likely means the Billable Hour will still be with us for some time to come.
๐ฎ. Realisation rates and increased collections times should be a real concern. No point charging $1,000 an hour if you never get paid!
๐ฏ. Amen to this!! – many firms have figured that rates are part of their branding, โand itโs very short-term thinking to try and manipulate rates downward to offset a decrease in demand.โ
My thanks to the team at Legal Practice Intelligence for publishing my thoughts on whether or nor Australian law firms have given up on their Asia dreams following the recent decoupling of King & Wood and Mallesons.
If you want to read the article, here is the link.
The most recent – 2026 – Citi Hilderbrandt Client Advisory Survey Report published earlier this month contains some interesting commentary on how US law firms faired in 2025. None more so than the finding that:
a growing number of firms estimating that more than half their revenue will come from pre-negotiated discounts. (page 23)
Pre-negotiated discounts
The Report does not explicitly define โpre-negotiated discountsโ; however it refers to alternative fee arrangements (AFAs) as including fixed, capped or blended rates. It is, therefore, reasonable to interpret โpre-negotiated discountsโ as encompassing agreed reductions to standard charge-out rates, volume-based discounts and other upfront pricing concessions.
Viewed positively, this trend signals a shift away from reactive, end-of-matter discounting towards earlier and more deliberate pricing discussions. In principle, this should create a stronger foundation for meaningful conversations about value-based pricing, particularly where clients are seeking price certainty, predictability and risk sharing. From that perspective, pre-negotiated pricing is not inherently problematic โ and may in fact represent a necessary transitional step.
The more concerning implication, however, is that for many firms these discussions appear to be anchored primarily in discounting, rather than in value definition. Where pricing conversations begin and end with rate reductions, firms risk reinforcing a price-taker mindset rather than asserting their role as price-setters. Left unchallenged, this dynamic contributes to margin erosion, commoditisation of legal services and an imbalance in client-firm relationships that becomes increasingly difficult to unwind.
AFAs as a pricing option
Despite persistent commentary throughout 2025 that artificial intelligence (ai) will fundamentally disrupt โ or even eliminate โ the billable hour, the data in this Report suggests otherwise. The proportion of revenue derived from AFAs has remained effectively flat, increasing only marginally from 23.5% in 2024 to a projected 23.6% in 2025.
Setting aside the fact that many commonly cited AFAs are, in reality, variations of the billable hour by another name, and acknowledging that it may still be too early to fully assess AIโs structural impact on pricing legal services, one conclusion is unavoidable: the billable hour remains very much alive.
The way forward
With 74% of firms expecting a growing proportion of revenue to come from AFAs by 2027, the issue is not whether pricing models will continue to evolve, but how deliberately firms choose to engage with that evolution; and whether AFAs are used as strategic tools or simply as discounted billing mechanisms.
In sum
Taken together, the findings in this Report further highlight a profession at an inflection point. While the billable hour continues to dominate, the steady rise of pre-negotiated discounts and the anticipated growth in AFAs suggest mounting client pressure for greater certainty, transparency and perceived value.
The critical question for law firms now is not whether they should offer alternative pricing arrangements, that horse has bolted, but whether they are prepared to move beyond discount-led negotiations and engage in genuine upfront value-based pricing conversations.
Firms that continue to compete primarily on price risk entrenching themselves as price-takers in an increasingly sophisticated procurement environment. Those that invest in articulating value, pricing outcomes and structuring risk intelligently will be far better positioned to protect margins and strengthen client relationships in the years ahead.
The decision on the way forward now rests with the firms themselves.
