What happens when clients really have command of their data? In Part I of this series, I explored how the reimagined law department can redefine who does legal work and how it gets done, while ensuring its institutional knowledge is accessible to AI.
The next question is what happens to the relationship with outside counsel. Corporations increasingly have access to many of the same AI capabilities as law firms, making general legal knowledge more readily available to both clients and firms.
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Businesses pay the bills for Biglaw. As they reengineer their legal departments around AI, the ripple effects may be profound.
Corporations will continue to rely on firms for specialist knowledge, credibility, capacity, and judgment. Work that is a distraction or where the organization lacks experience will still be sourced to firms.
Firms will continue to be trusted for bet-the-company litigation, strategic work, and important M&A activity. Political air cover and the “insurance” of outside experts will remain standard practice. Saving fees doesn’t matter if litigation is lost or a deal falls through.
Think of a seesaw. On one side is the specialized expertise and judgment of a law firm, and on the other side are clients rethinking their law departments.
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Here are three likely power shifts that tilt the seesaw toward clients.
The Battle Over Context
Corporations are notorious for losing institutional memory amid organizational changes and employee turnover, but AI can change that. A corporation with mastery of its information can develop context for its business and decision-making.
Additionally, the same AI can understand the law, spot legal issues, develop alternatives, and even provide what amounts to legal advice. Clients may no longer need to engage a firm for many of the basics. They can have AI informed by their data.
As general legal knowledge becomes more readily available through AI, proprietary context becomes more valuable for both the client and the firm.
A company may now know why it accepted a particular clause two years ago and how the decision was made, eliminating the need to seek counsel when negotiating the same clause again.
When outside counsel is engaged, expertise and judgment can be scoped more narrowly. Issue identification for an employment dispute over executive compensation might be drafted in-house. The advice from an employment law partner could be framed to review the identified issues and alternatives, and then draw on their experience and judgment from similar situations. The client might complete the work traditionally done by an associate.
From OCGs To Harnesses
Law firms are governed by Outside Counsel Guidelines (OCGs). In addition to billing guidance, OCGs increasingly focus on how work gets done and when automation is expected. What if clients directed more of the systems that law firms use?
What if firms were required to perform certain work within a client-controlled research environment, perhaps by leveraging a client instance of a legal research service? The client could gain additional insights into how the work was done, including search strategies and the AI prompts used to approach the matter. That information could help with risk assessment and decision-making. It would also become part of the client’s institutional knowledge so future matters have greater context.
The same could hold true for workflows defined by the client using its preferred AI platform, or legal operating system, as some vendors call their platforms. Think Claude for Enterprise, Harvey, Eudia, or other solutions.
In the future, panel participants might be required to use a “legal operating system” to complete work.
In AI, a harness is the surrounding infrastructure that constrains and directs a model’s operation. Perhaps OCGs evolve into something resembling Outside Counsel Harnesses (OCHs), defining not just billing rules but the technology and processes that firms must use to perform the work.
Matter information already travels with a lateral between firms to put the client first. Wouldn’t it make more sense for the matter information to just stay with the client in the first place?
This may be jolting for law firms, and to be fair, there would be much to think through. There will be situations where a firm has proprietary know-how and shouldn’t expect to give it up. Complicated situations, such as multiparty litigation, would pose challenges too. To be clear, I’m not suggesting that all work becomes controlled by the client, but the seesaw may tilt more in that direction.
The very expertise that clients rely upon may atrophy if firms can’t benefit from the knowledge gained on a matter, too. That’s not good for anyone. It’s also in clients’ interest for firms to retain their ability to specialize.
In the future, clients will require firms to conform even more closely to their preferences regarding how work is completed.
Legal Operating Systems As Marketplaces
Amazon’s retail business collects information about what products flow through it. As a result, Amazon-branded products, from batteries and ibuprofen to sofas and golf balls, can be purchased alongside brand names. Amazon knows which private-label items it can deliver profitably and which to leave to others.
Vendors that pursue legal operating systems may have a similar opportunity. The first step is straightforward. What if legal operating systems incorporate features for RFPs and panel management? Clients might bid their work out to panel firms through those platforms.
The second step is more interesting. The platform could see which categories of work are being purchased, how much they cost, and potentially how efficiently they are completed. Then comes the Amazon question. If the platform can identify legal services that can be delivered predictably and profitably, why merely facilitate the transaction? A vendor might eventually offer its own or affiliated legal services. Depending on the jurisdiction and regulatory structure, that could involve an MSO, affiliated legal provider, or other structure.
That would raise significant questions about professional independence, fee-sharing, conflicts of interest, and regulation.
The Limits Of Client-Directed Work
If legal operating systems and marketplace features take hold, there would be a practical limit to how many can serve the market. It would be impractical for law firms to learn a dozen different production environments for their clients. Client confidentiality, portability of work, conflict checks, and safeguarding the law firm’s intellectual property are just a few of the broader implications, not to mention the ethical considerations. Interoperability may be needed between platforms.
The most consequential impact of the reimagined law department may ultimately be control over institutional memory. Organizing internal data for AI means that each request, exception, negotiation, and outcome can inform the next one.
That creates more than efficiency. It creates buying power. The future law department won’t do everything itself. It will still need exceptional outside lawyers. But increasingly, the client may own the environment, the context, and the institutional intelligence through which legal work gets done. The firms will continue to provide expertise, while the client increasingly owns the system.
AI was used in the creation of this article.
Ken Crutchfield has over forty years of experience in legal, tax, and other industries. Throughout his career, he has focused on growth, innovation, and business transformation. His consulting practice advises investors, legal tech startups and others. As a strategic thinker who understands markets and creating products to meet customer needs, he has worked in start-ups and large enterprises. He has served in General Management capacities in six businesses. Ken has a pulse on the trends affecting the market. Whether it was the Internet in the 1980s or Generative AI, he understands technology and how it can impact business. Crutchfield started his career as an intern with LexisNexis and has worked at Thomson Reuters, Bloomberg, Dun & Bradstreet, and Wolters Kluwer. Ken has an MBA and holds a B.S. in Electrical Engineering from The Ohio State University.