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A&O Shearman has committed $1.1 billion to artificial intelligence over the next 5 years, the firm announced on Nov. 5.
How it plans to fund that commitment matters as much as the headline figure. The firm says most of the investment will come from lawyer time rather than direct technology spending, with every practice dedicating at least 3% of its time to building specialist AI tools and services for its own area of law.
The firm’s announcement does not say how much of the $1.1 billion is cash and how much is lawyer hours.
A&O Shearman, formed in 2024 through the merger of Allen & Overy and Shearman & Sterling, says the plan follows 4 years of testing different approaches to AI. Its conclusion is that AI delivers more for clients when lawyers build practice and sector expertise into the tools, rather than when one set of generic tools is applied across the whole firm.
For general counsel, the announcement raises practical questions about what outside counsel are building, who pays for it, and how it could change the price of legal work.
A&O Shearman’s AI investment is paid largely in lawyer time
The firm’s model puts AI development inside its practice groups. Lawyers in each area of law are expected to turn their expertise into AI modules that the firm can then apply consistently across that practice.
That has implications for clients. Lawyer time spent building tools is time that could otherwise be billed, so the 3% commitment represents a real cost to the firm, even though much of it would not show up as conventional technology spending.
It also changes what in-house teams may be buying. A&O Shearman says it will measure success by what clients get: faster access to its expertise, less friction in legal and commercial processes, and greater cost efficiency. The firm says some of its AI services are already delivered under what it calls novel pricing structures, though it has not detailed them.
David Wakeling, A&O Shearman’s global head of AI, said the firm wants “more upfront client conversations” about how the work, the relationship, and the economics can evolve with AI.
That gives GCs a direct opening. If a firm’s AI investment is funded through lawyer time, clients have good reason to ask how the resulting efficiency will show up in their bills.
Law firms are now selling AI tools straight to in-house teams
A&O Shearman started early. The firm says it became the first law firm to deploy generative AI across the whole firm in 2022. In 2023, it built ContractMatrix, an AI-powered contract tool for in-house counsel, with Microsoft and Harvey.
ContractMatrix has since grown into a product line. The firm says client uptake of services across its ContractMatrix products rose ninefold in the past 12 months. It recently launched ContractMatrix Vantage and, with Harvey, a series of agentic AI tools available to corporates, financial institutions, and other law firms.
Internal adoption is high too. In September, 96% of A&O Shearman’s partners and 93% of its lawyers used its AI tools, according to the firm, carrying out more than 558,000 activities on its ContractMatrix and Harvey workflow tools.
The firm also pointed to an engagement in which a global financial and investment group tested ContractMatrix against an internal data science team, specialist legal AI systems, and foundation model providers. In the client’s own blind evaluations, ContractMatrix scored 8.5% higher than the next closest rival, the firm said, and the result secured a multi-year mandate.
Those figures come from A&O Shearman and have not been independently verified.
For in-house legal teams, the shift creates a different kind of relationship. A firm that sells software to corporate legal departments acts as an adviser and a technology vendor at the same time. That can put expert-built tools inside the legal department, but it also raises questions about data access, reliance on a single firm, and how those tools fit with a team’s existing legal technology.
Responsibility for legal AI governance sits with both sides
A&O Shearman says a qualified lawyer always takes responsibility for the advice the firm gives, whatever role AI played in producing it. Its AI governance committees oversee deployment across practices, sectors, and offices.
That addresses the firm’s side of the risk. In-house teams will still need their own policies on how outside counsel use AI on their matters, what client data feeds those systems, and how AI-assisted work is priced.
The bigger open question is whether the investment reaches clients as lower fees, faster turnaround, or new services sold at new rates. A&O Shearman says it wants to talk about how the economics evolve. How far those conversations go may depend on how hard its clients push.
Source
A&O Shearman
