At Alturas Capital Partners, advances in generative AI have enabled in-house legal teams to handle lease work traditionally outsourced to outside counsel, delivering significant cost savings and faster turnaround times. This shift threatens some external providers with irrelevance as AI reduces their role, reshaping how firms define their services. While some firms expand their offerings, others lose business to clients adopting AI internally. The pressure on pricing is evident, with major banks recently urging law firms to reduce fees due to AI efficiencies.
Generative AI is lowering costs for producing legal documents, market insights, creative assets, and software, enabling in-house teams to replicate many functions once outsourced. To stay relevant, service providers must not rely solely on expertise but also compete on production cost and ease of delivery.
Providers should focus on three key strategies:
1. Improve Unit Economics: By investing in scalable, automated systems and leveraging proprietary data, firms can produce outputs more cost-effectively than clients can in-house. WPP exemplifies this with its agentic marketing platform and self-serve options that combine data, expertise, and AI tools.
2. Simplify Procurement: Reducing the friction in purchasing services by integrating AI agents that fulfill requests directly within clients’ existing tools makes outsourcing more attractive. Moody’s and law firms like A&O Shearman demonstrate this approach by embedding AI-driven services into clients’ workflows.
3. Manage the Operational Burden: Taking on quality control, compliance, and ongoing maintenance costs that clients face if they internalize work strengthens the provider’s value proposition. Thomson Reuters’ CoCounsel Legal product is an example, offering robust, legally vetted AI research that firms cannot easily replicate internally.
Service providers must critically analyze which deliverables are vulnerable to in-house AI production and develop cost-effective, easy-to-access, and low-maintenance offerings. Success lies in making outsourcing cheaper, more convenient, and operationally less burdensome than building internal AI capabilities. While AI challenges traditional expertise, it also raises the bar for providers to innovate and integrate technology with human skills to stay competitive.
