TLDR: The traditional law firm pyramid model faces disruption as generative AI transforms legal service delivery economics. Legal leaders from BrightFlag, Gunderson Dettmer, Mill, and PubMatic discuss how AI will reshape outside counsel relationships, potentially reducing costs by 25%, enabling smaller specialized firms to compete with BigLaw, changing talent development pathways, and shifting from administrative to strategic work. The panel presents actionable strategies for renegotiating outside counsel arrangements and redefining quality-speed-cost expectations.

As generative AI reshapes the legal profession, how will the relationship between corporate legal departments and outside counsel evolve? At our recent SpotDraft Summit 2025, industry leaders explored the economic impact of AI on legal service delivery and what it means for the future of law firms.

Corporate legal departments typically spend 40-60% of their budgets on outside counsel—a significant investment that's about to undergo profound change. While the demand for legal services continues to grow, generative AI is transforming how these services can be resourced and delivered, creating both opportunities and challenges for traditional law firm business models.

Meet our expert panel

Our discussion featured perspectives from both sides of the client-firm relationship:

• Kevin Cohn (Moderator), Chief Customer Officer at BrightFlag, an e-billing and matter management platform
• Joe Green, Chief Innovation Officer at Gunderson Dettmer
• Vineet Shahani, General Counsel at Mill
• Andrew Woods, General Counsel at PubMatic

The pyramid model under pressure

Law firms have operated on the same economic model for over 150 years—a pyramid structure with highly paid partners at the top supported by a larger base of associates and staff. However, as generative AI takes over more routine work, this structure faces existential challenges.

Joe Green from Gunderson Dettmer didn't mince words: "I think the pyramid model of law firms that has been the dominant feature for the last 150 years, isn’t going to last."

Green believes that while clients will continue to value the strategic guidance of experienced partners, "the way that work gets done is going to be quite different. Probably done by different types of people, certainly using more technology, more focus on process and product."

Action plan: Preparing for the new law firm model

As the traditional pyramid structure evolves, legal departments should prepare for significant changes in how they engage outside counsel:

1. Reassess work allocation strategies

• Identify which matters truly require BigLaw resources versus boutique firms
• Consider moving routine work to smaller, tech-enabled firms with lower overhead
• Reserve premium firms for board-facing, high-stakes matters where brand perception matters

2. Rethink provider selection criteria

• Look beyond traditional prestige factors to assess technology capabilities
• Evaluate firms on their ability to leverage AI for greater efficiency
• Consider how firms are developing talent in an AI-augmented environment

3. Anticipate new service delivery models

• Prepare for more productized legal services with standardized pricing
• Expect more consulting-style delivery focused on strategic guidance
• Watch for increased specialization as firms focus on core strengths

Demonstrating value with AI

With generative AI capable of handling more routine legal work, corporate clients are questioning whether the traditional billing model makes sense. Andrew Woods from PubMatic described how other business units view the situation:

"Our finance team looks at this, and they think, okay, great, we should be seeing these same sorts of productivity gains in all of our vendors. I expect our bills to come down 25% across the board."

This creates new pressure on law firms to demonstrate value beyond the billable hour—especially as clients consider alternatives like smaller boutique firms empowered by AI tools that can now compete with larger firms on certain matters.

Action plan: maximizing value from outside counsel

As AI reshapes the value equation, legal departments should take specific steps to ensure they're getting maximum value from outside counsel:

1. Develop clear AI-adjusted pricing expectations

• Benchmark productivity gains in other professional services (25%+ in some cases)
• Set targets for efficiency improvements in legal services
• Consider requesting AI-specific discounts on routine work

2. Implement strategic matter stratification

• Categorize matters by strategic importance and complexity
• Develop tiered sourcing strategies for different matter types
• Create clear guidelines for when premium firms are justified

3. Demand greater business context

• Request advice tailored to specific stakeholders (CFO, CMO, engineering)
• Ask for benchmarking against market practices and peer companies
• Expect firms to provide explicit "marketability" of their advice

The talent pipeline concern

One of the panel's most thought-provoking discussions centered on talent development. As generative AI takes over more first-draft work traditionally handled by junior associates, how will the next generation of partners develop?

Vineet Shahani expressed concern: "Who does the first drafts at law firms? First through third year associates. So how do you get trained? What's the evolution of a law firm person's career if you're taking out that part of the stack?"

This isn't just a problem for law firms—it affects the entire legal ecosystem. As Kevin Cohn pointed out, "Most in-house counsel worked at a law firm and they left after associate years." Corporate legal departments depend on the training that future in-house counsel receive at law firms.

Action plan: Supporting legal talent development

As the traditional development path changes, legal departments should take action to ensure future talent remains strong:

1. Partner with firms on new training approaches

• Discuss how your law firms are adapting associate development programs
• Consider joint training initiatives that benefit both firm and client teams
• Explore secondment programs that provide alternative development paths

2. Look beyond traditional credentials

• Reevaluate hiring criteria for in-house counsel positions
• Consider candidates with non-traditional development backgrounds
• Value AI proficiency alongside traditional legal skills

3. Invest in your talent pipeline

• Develop more robust in-house training programs
• Create mentorship relationships with senior outside counsel
• Build career paths that don't depend on traditional law firm experience

The future of legal service delivery

The panel concluded with provocative data points from BrightFlag showing that only 5% of billed hours involve direct client communication—the rest is offline work. This revelation sparked discussion about how AI might transform service delivery.

Kevin Cohn shared his vision: "My vision for generative AI is five years from now, that 80-20 has been flipped, right? 80% of the time is spent talking to the customers, 20% of the time is spent doing the desk work."

This vision resonated with in-house counsel on the panel who value strategic guidance but also want their outside counsel to develop a deeper understanding of their business contexts.

Action plan: Reimagining client-firm communication

As AI takes over more routine work, legal departments should push for more strategic engagement:

1. Examine your communication patterns

• Review outside counsel invoices to understand communication percentages
• Calculate the true value you're getting from client-facing time
• Set expectations for minimum direct engagement levels

2. Create opportunities for deeper business integration

• Invite outside counsel to key business meetings beyond legal topics
• Structure retainers to include non-billable business immersion time
• Design matter staffing to maximize partner-level strategic guidance

3. Leverage technology for effective collaboration

• Implement shared platforms that enhance visibility and reduce friction
• Use AI tools to automate routine updates and status reports
• Create digital knowledge repositories that preserve institutional knowledge

The bottom line: Quality, speed, and cost

The classic challenge in legal services has been "speed, quality, cost—pick two." Historically, corporate legal departments have chosen speed and quality while absorbing the cost. But generative AI is changing this calculus.

Action plan: Negotiating for all three—Quality, speed, and cost

As AI changes the fundamental economics of legal services, legal departments should take action:

1. Reset expectations around the quality-speed-cost triangle

• Challenge the assumption that you can only have two of the three
• Create specific metrics for all three dimensions
• Make trade-off decisions explicit rather than defaulting to historical patterns

2. Develop an AI advantage strategy

• Set clear expectations for how AI should benefit your department
• Request transparency around how firms are using AI tools
• Create incentives for firms to share efficiency gains

3. Implement a staged transformation approach

• Start with low-risk, high-volume work areas for AI implementation
• Develop proof points for quality maintenance with reduced costs
• Use successful examples to drive broader change across your legal spend

The path forward

The disruption of the traditional law firm model is inevitable—the only question is how quickly it will happen. As Joe Green noted, "How many years do we have before this whole industry is a totally different thing? I don't know. It's definitely less time than I thought it was when I started in 2020."

For corporate legal departments, this transformation represents both an opportunity and a challenge. By taking a proactive approach to redefining outside counsel relationships in the age of generative AI, legal leaders can deliver greater value to their organizations while helping to shape a more effective and sustainable legal services ecosystem.

This blog post is based on the panel discussion "Engaging Outside Counsel in the Age of Generative AI" from our recent SDSF event, featuring Joe Green (Gunderson Dettmer), Vineet Shahani (Mill), and Andrew Woods (PubMatic), moderated by Kevin Cohn (BrightFlag).

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