Joe Skalski Explains Why AI Won’t Wipe Out the Billable Hour
Everlaw’s value engineering lead discusses the impact of AI on law firm profits
Advanced AI will kill the billable hour. That’s the common refrain. But what if the opposite is true? What if generative AI actually helps law firms serve more clients and deliver value that’s measured in outcomes, not time spent? What if GenAI even helps make firms more profitable?
To explore whether legal services will be completely commoditized or stunningly elevated by new technology, Everlaw talked with Joe Skalski, a 25-year veteran of the legal technology space.
Before joining Everlaw as Senior Director of Value Engineering, Skalski’s career spanned Big Four advisory work and operations management on massive antitrust matters. Leading the Value Engineering and ValueAI teams at Everlaw puts Skalski in the gratifying position of being able to help law firms turn the biggest technological disruption in decades into a competitive advantage.
“Generative AI can make law firms dramatically more efficient by creating capacity for more and better work,” Skalski says. “Firms that resist adoption out of fear of losing billable hours are missing the point. By simplifying routine tasks with AI, the billable hour becomes more valuable to clients, not less.”
The conversation ranged from the short and long-term financial impacts of law firms’ tech investments to the existential tension between AI as a cost-cutter or business generator, as a knowledge partner to attorneys and legal professionals and, of course, the future of time-based billing.
The concept of value engineering is gaining traction in the legal industry, but it’s still a relatively unique function. How do you define it, and what does it look like when applied to a law firm financial model?
At the highest level, value engineering is the art and science of defining, applying, and measuring the exact value of the investment a customer makes with us. Together with law firm leaders, we look at things like financial modeling, total cost of ownership, efficiency, and profitability.
We also help our clients understand the impact of generative AI. We look at where a customer sits today — whether they are AI-curious, AI-averse, or actively embracing it. We have the resources to meet them wherever they are.
We look at existing workflows that aren’t yet AI-enabled and help Am Law firms reimagine them to take advantage of this fast evolving technology.
With that also comes the measurement of the impact of those changes. What does it look like to take a workflow you’ve had for 10 years, reconfigure it to take advantage of generative AI, and measure the financial result? How does it benefit a customer? How does it free up resources for additional work?
Then there’s the monetization aspect. We walk firm leaders through exactly how they can look to monetize AI with their own customers.
Let’s tackle the most provocative debate in the industry right now. Some observers predict that legal services won’t be worth paying for anymore because AI is taking over the execution of the work. Do you agree with that?
That’s a stretch right now. AI is replacing certain segments of jobs across industries, but when it comes to the billable hour in legal, you are paying people for knowledge and experience that they have generated over years or many decades of a career. AI may be able to emulate that, but it can’t replace it.
When you bundle true subject matter expertise with accelerating technology, that combination changes the way the industry operates. The big misconception out there is that a more aggressive use of AI automatically means the monthly invoice should be discounted by a certain percentage.
By simplifying routine tasks with AI, the billable hour becomes more valuable to clients, not less.
What’s lost is the fact that there’s also immense expertise required in the application of generative AI and agentic workflows. This is not a simple turn-of-the-switch where everything magically becomes less expensive and goes faster.
I also believe that the billable rates for the most advanced, tenured experts are not going down. Historically, they’ve remained remarkably resilient to external pressure, and I wouldn’t expect those hourly rates to decrease.
There’s a very real fear of revenue loss if automated tools take over high-volume work. If expert rates hold steady, which billable hours are at risk?
If you look at it from the perspective of having an army of document reviewers, sure, that is very much subject to being replaced by generative AI. However, is that fundamentally a decrease in revenue, or is it actually allowing the firm to take on more clients because they are more efficient with the hours they are spending? Additionally, if certain tasks, such as managed review in the litigation context, are a passthrough cost, then a law firm lowers its overhead by using AI.
A lot of my conversations with CFOs, CIOs, and CLOs are about the financial impact of bringing in generative AI.
The biggest preconceived notion is that it will eliminate 90% of associate hours by replacing lower-level associate work and document review. That really is not the case. The technology still requires trained human beings with legal acumen to harness its power.
AI doesn’t just reduce the cost of first-level review, it changes what clients are willing to pay for. The value shifts from processing information to interpreting it.
Looking at it more holistically, if you can redeploy those resources for more valuable work to the end client, there is very little risk of a reduction in billable hours. Our perspective is that it’s not the best approach to ask, “What hours will we lose if we embrace this technology?” It’s more about the bigger picture: What billable hours will you lose if you don’t embrace AI? Because your law firm competitors absolutely will.
If the billable hour isn’t going away entirely, where do you see alternative fee structures or fixed fees making headway?
You are definitely going to see some evolution and creative billing models, depending on the case type. Look at contingency fee arrangements. If you have a massive document review for a contingency fee case, using technology dramatically reduces your input costs. It puts the firm in a position where they aren’t risking hundreds of unrecoverable billable hours on the off chance they lose the case.
We’ve seen every billing model there is, and we’re helping firms build hybrid structures — like a project that is a fixed fee capped at a specific number of hours and then moves to a standard hourly rate beyond that. The alternative fee arrangement is something you’re going to see more of, but I don't think the billable hour is flat-out going away.
You mentioned that AI is fundamentally shifting how law firms go to market with their clients. In litigation, how does replacing the traditional overhead of first-level document review alter the value proposition outside counsel brings to a corporate client?
Having been in this industry 25 years, I’ve helped build many of those traditional review workflows. Seeing technology accelerate those repetitive tasks is incredible. Many believe that first-level doc review will eventually be handled almost entirely by AI and that’s completely possible — provided there is oversight from subject matter experts who truly know the facts of a case.
The real change in how firms go to market lies in shifting from task completion to early strategic execution. Gone are the days when case teams need weeks of document review before they can begin developing a meaningful case strategy. With a tool like EverlawAI Deep Dive, you can surface core facts within an hour or two and begin to build a case strategy from day one.
The true business impact is that teams immediately focus on where they want to go with a case, instead of trying to get their arms around the data.
Firms that build AI into their workflows and into their client pitches will accelerate their business development.
Having worked on large antitrust cases and Second Requests, I know these data-intensive, high-stakes matters have incredibly short timelines. Getting to information faster is a win for everyone.
That’s also where the business model starts to change. AI doesn’t just reduce the cost of first-level review, it changes what clients are willing to pay for. The value shifts from processing information to interpreting it, helping clients make high-stakes decisions earlier and with greater confidence.
For clients, that means outside counsel can provide an early case assessment on day one rather than after months of review. Instead of paying primarily to uncover the facts, clients are increasingly paying for the judgment that helps them decide what to do with those facts.
As AI compresses the effort required to find information, firms have a growing opportunity to differentiate on strategic insight, business advice, and outcomes rather than review capacity alone.
If clients are expecting a different value from law firms in the GenAI era, they’re also looking for something different in the costs of those services. Are firms able to have that discussion?
Absolutely. We hear from our law firm clients all the time that corporate buyers are asking, “How are you using generative AI to reduce my overall bill with you, or reduce risk, or both?” For sophisticated clients, this is becoming the baseline expectation.
Firms that adopt this and build AI into their workflows and into their client pitches will accelerate their business development. Corporate legal departments aren’t just looking for a discounted invoice. They want transparency. They want to know you have a structured framework that mitigates risk while accelerating the timeline to find the truth.
The firms extensively implementing these workflows are already seeing the return. They are gaining more cases, and the hours they are gaining back are at a higher rate — they are gaining more subject matter expertise and true legal experience hours. Simply put, firms are replacing low-value high-volume cost with high-value high-impact strategic insight.
What are the risks for a firm taking a passive approach to AI?
The biggest risk of a law firm not adopting generative AI is that their competitors are adopting it. You risk losing your cases because you’re competing against someone moving 10 times faster. You risk losing clients, and you risk losing top talent.
The newest generation of attorneys coming out of law school grew up with technology; it’s second nature to them. Now, when you look at top law firms’ summer internship programs, there’s an AI component to it. These newly minted attorneys are not interested in going to a firm that is not at the forefront of that.
You don’t have to be the biggest AI power user on day one, but you must default to action.
And there’s an even more immediate risk: your attorneys are already using AI on their own. We hear about it all the time. Associates are logging into their personal Claude, Gemini, or ChatGPT licenses and putting client data into them because they don’t have corporate access.
This lack of strategy, policy, and requirements exposes the firm and the client to risk. It is completely okay to be AI-curious, but curiosity must be paired with a responsible-use framework.
If you don’t adopt a formal AI strategy, you’re either going to have an exodus of talent, or you’re going to have people adopting it internally unmonitored.
For firms that are still on the sidelines, waiting to see how the landscape settles before making a major commitment, what is at stake?
The future of their practice is at stake. If you are not actively preparing to embrace this technology, you are putting both your firm and your clients at a distinct disadvantage.
I view this as a major structural shift very much like when the automotive industry moved to the assembly line. That shift eliminated a certain segment of manual jobs, but it simultaneously enabled an entirely new segment of high-value jobs — the people who engineered the robotics and the assembly line itself. It was a shift, and for folks in the legal industry, this technology is an acceleration for their careers if they choose to embrace it.
If you don’t, it’s kind of like running a marathon without actually training. You can’t just show up the day of the Boston Marathon and expect to run and finish it without either getting hurt or just not finishing at all. You’re not going to place, and you’re certainly not going to win.
I like to borrow a phrase used by one of my colleagues: Default to action. It means get started. You don’t have to be the biggest power user on day one, but you must default to action. The firms that do will capture the market. The firms that wait will be left behind.
