Baker McKenzie is moving away from the billable hour as its default pricing model, in one of the clearest signs yet that artificial intelligence is forcing major law firms to rethink how they charge clients.
The global firm’s chair, Sunny Mann, told the Wall Street Journal that the firm has begun adopting value-based pricing, reflecting the growing difficulty of charging clients by time when AI can complete legal tasks far faster.
Hourly billing is not disappearing altogether. But the move is significant for an industry that has spent decades defending the six-minute billing unit.
And Baker McKenzie expects another consequence: cheaper litigation could mean more lawsuits.
The 90 Percent Problem
According to the 2026 State of the US Legal Market report, produced by Thomson Reuters and Georgetown Law, 90 percent of US corporate legal spending tracked in its data still flows through hourly billing arrangements.
Yet AI increasingly allows lawyers to complete work in a fraction of the time previously required.
That creates an uncomfortable question for firms. If a lawyer can complete a ten-hour assignment in two hours, should the client pay less, or should the firm charge more for the value delivered?
The answer strikes at the heart of BigLaw economics.
The Billable Hour Is More Than a Pricing Model
Law firms run their businesses about the billable hour. It relates to associate targets, partner productivity, bonuses, promotions and profitability calculations are all largely governed by recorded time.
Under the traditional system, a lawyer spending ten hours on a task can generate more revenue than a colleague completing identical work in two.
AI has now changed all that and firms are shifting towards fixed fees and value-based pricing must develop new ways to measure productivity, reward efficiency and protect margins.
The question is no longer simply how many hours lawyers work, but how much value they produce.
Could Cheaper Litigation Mean More Lawsuits?
Mann also raised another possibility, that AI-driven reductions in litigation costs could encourage clients to pursue disputes they might previously have abandoned as too expensive.
It is an example of the economic principle known as Jevons Paradox, where greater efficiency and lower costs can increase overall consumption.
Applied to legal services, cheaper litigation could expand the market rather than merely reduce legal bills.
That remains a prediction, not an established outcome. But it suggests AI could create new work even as it reduces the time required for existing matters.
The Six-Minute Unit Faces Its Real Test
Predictions of the billable hour’s demise have circulated for decades, without making much impression on law firm profits. Thomson Reuters reported that average law firm profits rose 13 percent in 2025, while worked rates increased 7.3 percent.
But AI presents a different challenge. It threatens the link between time spent and revenue earned.
The real challenge may not be persuading clients to abandon hourly billing. It will be persuading law firm partners to abandon the financial incentives built around it.
