A major erosion of work is looming for law firms, as a new Axiom report reveals that in-house legal teams are preparing to take over up to 80 per cent of legal matters traditionally sent to external firms over the next two years.
In-house legal teams are set to reclaim a substantial share of legal work over the next two years, as a growing volume of matters traditionally handled by external law firms is brought back in-house.
According to a new report from Axiom, more than half (55 per cent) of in-house legal departments plan to shift up to a quarter of their current law firm work back in-house or to alternative legal service providers (ALSPs) within the next 12 to 24 months.
A further third (34 per cent) anticipate moving up to 40 per cent of that work away from traditional firms, while almost one in 10 (9 per cent) expect to transition as much as half of their external legal work to in-house teams.
The 2026 Axiom Beyond the Billable Hour report identifies this shift – one that should put law firms firmly on notice – as being driven by rising firm rates, intensifying pressure to improve efficiency, and growing confidence in alternative legal delivery models.
This transformation in how legal work is managed is not confined to Australia – it’s a global trend.
The survey gathered insights from over 500 general counsel and senior legal executives across eight countries, including Australia, the United States, and the United Kingdom.
Importantly, the legal work moving from external firms back in-house isn’t just limited to overflow tasks, minor assignments, or temporary secondments.
Instead, the report revealed that this shift goes beyond routine tasks, encompassing “high-quality” and “strategic legal work” that has traditionally been handled by “elite” lawyers and top-tier law firms.
Despite the growing desire to bring more work in-house, Axiom has identified a persistent paradigm at the heart of many in-house legal teams’ operating models.
More than half (56 per cent) of in-house teams continue to rely on law firms primarily as a source of “relief value”, rather than engaging strategically with alternative legal service providers – even as dissatisfaction with the traditional law firm model continues to rise.
When asked why law firms are still used for day-to-day strategic work, nearly two-thirds of in-house leaders pointed to habit rather than necessity, responding that certain matters are sent to firms simply because “that’s how it’s always been done”.
The study found that “inertia” – rather than performance or suitability – remains one of the primary reasons in-house legal teams continue to engage law firms for support.
However, attitudes towards ALSPs are shifting, with two-thirds of in-house leaders now seeing them as a viable option for high-value, strategic legal work rather than solely for short-term or overflow tasks.
Sara Morgan, chief revenue officer for Axiom, explained how these findings provide legal leaders with the benchmark data they need to navigate a generational shift in legal work.
“This research provides the benchmark data leaders need to help navigate what might be another generational shift in how legal work gets done – understanding that there will always be a place for top-tier law firms when dealing with ‘bet the company’ matters, while recognising the definition of who delivers what legal work is fundamentally changing,” Morgan said.
“The question isn’t whether the partnership model and hourly billing will survive.
“The question is whether we’re crossing the Rubicon to a world where in-house legal leaders use law firms for ‘bet the company’ work and, without exception, for everything else, they empower their teams and use an Axiom for work previously reserved for law firms – including getting the best out of AI. There is a better way.”
