AI Accelerates the Shift to Value-Based Pricing

Artificial intelligence (AI) is challenging the legal industry’s long-standing reliance on billable hours by speeding up tasks, changing how clients assess the value of legal services. Everlaw’s Petra Pasternak recently interviewed Ken Callander, founder of Value Strategies, about how value-based pricing offers greater cost predictability and reduces outside counsel spend.

Callander draws on prior experience at Davis Wright Tremaine and Uber, helping move much of Uber’s legal work away from hourly billing. Traditional firms, says Callander, have been slow to change because partner compensation depends on hours, and altering the model can create internal conflict. Newer law firms have increasingly adopted fixed fees tied to projects and deliverables.

For legal departments, value-based pricing should be framed around three dimensions: economic, perceived, and strategic value. Rather than focusing on the time required to handle a matter, teams can assess the financial exposure, likely impact, and broader consequences before determining what the work is worth. Fixed fees can then be structured around ongoing legal services, litigation phases, individual tasks, or specific deliverables.

AI is accelerating this shift by allowing in-house teams to complete initial research, analysis, and drafting before asking outside counsel to review and validate the work. As routine tasks become faster, Callander expects more work in areas such as contracts, immigration, employment, and real estate to move toward AI or other alternatives to traditional outside counsel.

Meanwhile, rising law firm rates are making in-house staffing more attractive for some types of work and increasing pressure on firms to provide predictable costs. Callander believes highly specialized matters will continue to command time-based pricing, but much of legal work will increasingly be priced around outcomes, deliverables, and tasks. For firms, that transition could also create opportunities to charge more for advice that produces substantial value for clients.