A&O Shearman Commits $1.1 Billion Over Five Years to Lawyer-Built AI Tools

Every practice at the firm will be expected to devote at least 3% of its time to building specialist AI tools and services for its area of law. The firm did not say how much of the headline figure will be spent in cash, The Non-Billable reported. Legal Cheek put the commitment at more than 5% of the firm's annual revenue, which was $3.7 billion in its latest financial year.

The structure of the plan is what sets it apart. For a business that sells hours, lawyers' time is the most expensive resource it has, and diverting part of it from client work to tool-building is a direct cost to income. The pledge is more than double the $500 million Kirkland & Ellis said in May it would spend over three to four years, according to Bloomberg Law. Kirkland had revenue of $10 billion last year.

The firm expects the billable hour to lose importance as AI changes how legal work is delivered, although hourly billing will not disappear, Bloomberg Law reported, citing the firm's statement. A&O Shearman said its share of income from fixed fees had risen by about 15% over the past two years. "Today we sell lawyers' time," David Wakeling, the firm's global head of AI, told Bloomberg Law.

Hervé Ekué, the global managing partner, said: "This significant investment signals where we intend to take the firm over the next decade." He added that "the firm that leads will combine exceptional legal judgment with the speed and scale to apply it consistently."

The firm, formed by the merger of Allen & Overy and Shearman & Sterling, began testing the legal AI start-up Harvey in 2022 and became its first major UK law firm customer. It went on to develop ContractMatrix, a contract negotiation tool, with Microsoft and Harvey. Much of that work sits in its Markets Innovation Group, led by Wakeling. In September, 96% of the firm's partners and 93% of its lawyers used its AI tools, The Non-Billable reported.

Large firms are taking different routes into AI. Goodwin spends about $25 million a year buying and developing AI technology, and Latham & Watkins has installed servers with Nvidia graphics processors to run and customise models in-house, according to The Non-Billable. Kirkland has partnered with Palantir on a fund formation platform. Freshfields, another Magic Circle firm, struck a deal with Anthropic earlier this year that gave nearly 6,000 staff access to Claude models, Legal Cheek reported.

The firm has not published a breakdown of how the $1.1 billion splits between lawyer hours and cash spending on technology and staff, which will determine how much of the plan is new money.