AI and legal departments enter phase 2: Deloitte survey signals a turning point
Artificial intelligence is no longer a pilot project or a technology to experiment with. For in-house legal departments, it has become a strategic lever set to reshape organisational models, skills and relationships with external law firms. That is the key finding of “The AI Imperative: Reshaping of the Legal Industry”, Deloitte Legal‘s latest report, based on a survey of more than 100 general counsel, heads of legal and legal operations leaders across nine industry sectors.
According to the research, the legal market has moved well beyond the experimentation stage. While in 2024, 76% of legal departments reported no AI adoption, today 61% are actively deploying AI solutions and only 2% have yet to begin their AI journey. The conversation has therefore shifted from whether to invest to how and where to invest.
Investment trends reflect this acceleration. Nearly four out of five legal departments (79%) increased their AI budgets over the past year, with average spending rising by 67%. Yet the survey also highlights a significant imbalance: most investment continues to be directed towards technology platforms and infrastructure, while comparatively less attention is devoted to workforce training, process redesign and knowledge management—areas Deloitte identifies as critical to achieving long-term transformation.
The challenge is no longer simply about improving efficiency. Survey respondents expect AI to automate an increasing share of routine legal work, enabling legal professionals to focus on strategic advisory and risk management. On average, respondents believe that 28% of legal work could be automated within the next two to three years. Among the most promising applications are predictive litigation analytics, large-scale document review for due diligence, and AI-powered legal advice built on organisations’ accumulated knowledge. At the same time, agentic AI is rapidly gaining traction, with 61% of legal departments already experimenting with or piloting autonomous AI systems.
The impact will extend well beyond technology. More than half of the general counsel surveyed expect the overall size of their legal teams to remain broadly stable, but with a fundamentally different composition. Senior professionals will account for a larger share of legal departments, while new hybrid roles—such as legal engineers and knowledge engineers—are expected to emerge. However, 84% of organisations have yet to redesign roles or career paths around AI, and skills shortages remain the most frequently cited barrier to successful adoption.
The survey also points to a profound transformation in the relationship between corporate legal departments and external law firms. In-house teams increasingly expect AI to reduce legal costs while improving service quality, and they anticipate a fundamental shift away from traditional hourly billing models. According to Deloitte, external legal spend could fall by between 20% and 40% over the next three years, driven by greater automation and increased insourcing of legal work. Yet despite these expectations, more than half of general counsel say their external advisers rarely discuss AI-enabled efficiencies proactively.
Deloitte’s conclusion is that technology alone will not determine success. The organisations delivering the greatest value from AI are those combining investment in technology with operating model redesign, stronger data governance, continuous workforce development and a clear transformation strategy. For legal leaders, the real competitive advantage will lie not in choosing the best AI platform, but in rethinking how legal services are delivered and how the legal function creates value for the business.
