Law firms have a client problem. Most of them just don't know it yet.

A new report from Axiom surveyed 516 senior in-house legal leaders across eight countries. The findings are a wake-up call for law firms.

61% of in-house teams continue to send work to law firms because "we have always done it that way." Habit is the biggest driver for law firms’ demand.

"We're seeing a fundamental reassessment of how legal work gets allocated," says Sara Morgan, Axiom's Chief Revenue Officer. "Law firm rates are up, AI is creating new possibilities for bringing work in-house, and Boards and CEOs are demanding better efficiency despite giving legal departments more budget."

Over 80% of in-house teams say they plan to move certain law firm work in-house or to alternative legal service providers (ALSPs) within the next 2 years.

So what's stopping them?

Internal resistance to change and concerns about risk are the biggest factors.

But as firms keep raising rates, that habit becomes harder to justify with each billing cycle.

While only 36% of Australian teams currently plan to bring a quarter or more of law firm work back in-house, that shift is gaining momentum globally.

Here’s the rundown:

Size also plays a role.

63% of large legal departments (51+ employees) are making the move, compared to just 29% of small teams. Most Australian legal departments are smaller than their US and European counterparts, which could partly explain the lag.

But the budget pressure is the same everywhere. Two-thirds of departments globally received a budget increase this cycle, averaging 12%. Yet 90% still face pressure to do more with less.

And globally, the frustration is showing.

Only 8% of in-house leaders say they're "extremely satisfied" with their law firms. A quarter sit somewhere between indifferent and unhappy. Axiom is an ALSP itself, so it has skin in the game. But the data is hard to argue with.

On pricing, just 5% say their rates are fair. On a 10-point scale where 5 is "just right" and 10 is "can't justify the cost," 65% cluster around 7 or 8. Australia’s leading firms are leaning heavily on rate rises and cost discipline to increase profits.

Eye-watering rates make sense when the stakes matter. A $5bn takeover, a bet-the-company class action, a cross-border restructure. That's what top-tier firms are built for.

But that's not what keeps the lights on. The steady churn of everyday matters — the work that fills timesheets across every practice group — is where client relationships are built, and it’s a pipeline that feeds the big-ticket instructions.

If firms keep pricing that work like it's bet-the-company, 80% of GCs are telling them exactly what happens next.

Source: Axiom