AI-Enabled Firms’ Unbundled Offerings to Split the Legal Market

A third way is emerging in legal services: tech-first platforms building law firms from scratch, targeting the high-volume, process-dense “industrial legal” work that has long been a profit engine for traditional firms. Part one of this series examined how these new entrants are forming and the structural advantages they bring. The question now is how traditional firms respond—and what the legal market looks like as a result.

Big Law has navigated disruption before—adapting to the rise of large-scale in-house departments, adjusting to alternative fee pressures, integrating technology across practice areas. The assumption that they will simply be displaced underestimates both the durability of their model and their capacity to evolve.

Still, this emerging environment poses a new kind of challenge—and opens the door for alternative law firm models that will better meet the moment.

The AI Adoption Gap

Many traditional firms have adopted AI tools with considerable fanfare. But so far the volume of announcements is inverse to the degree of actual change. The enhancements introduce relative process improvements, not foundational transformation. And crucially, the default posture has been to deploy these tools to protect margins, not pass savings to clients.

The tech-first platforms, by contrast, are building business models where efficiency accrues to clients by design—not as a discretionary pass-through. Some are billing clients based on outcomes and value, not hours. That’s not a marketing posture; it’s a structural feature of building a firm without the legacy of hourly billing.

The Economics of Unbundling

If industrial legal work migrates to tech-first platforms and in-house teams, what remains with traditional firms is a “judgment legal” practice—high-stakes, high-expertise work commanding premium rates. The question isn’t whether that practice survives, but what it looks like—and how it’s priced—when it stands alone.

One possibility is that client consternation about partner rates—top-level rates now reaching $4,000 an hour—evolves into acceptance of even higher rates. This could coexist with net savings on law firm spend, reflecting clients’ willingness to pay more when directly allocable to partner expertise and judgment rather than for a bundled package that includes high-margin associate work. In certain respects, that is the most economically pristine model: a pure value exchange, unbundled.

But not all firms can make the transition to an unbundled future. The challenge is greatest for the largest firms built on scale, where the leverage model—partners supported by deep benches of associates—is foundational to the economics.

READ MORE: GC x AI: Reinventing the General Counsel Role in the AI Era

Beyond the Moat

The “judgment legal” practice will likely remain as a moat around the most elite firms. But the future will also include a parallel infrastructure for industrial legal work—built on different economics. As tech-first platforms claim the industrial work, traditional firms will adapt in different ways.

Boutiques. The first emerging model is the accelerated rise of boutiques and low-leverage firms. Prominent lawyers are already leaving large firms to create lean partnerships built around name-brand talent and deep expertise—the Kobe beef of the legal market: rare, premium, and highly sought. AI significantly augments their capacity and reduces barriers to entry, making the model even more accessible and attractive. A name partner with an elite team, perhaps charging significant fixed fees for high-stakes matters, works alongside tech-enabled platforms that handle the industrial work.

Hybrid Firms. The second is the hybrid firm—a legacy institution that reinvents itself by pairing traditional judgment capabilities with a tech-enabled adjacency. These firms say to clients: You don’t need to engage a startup staffed by engineers, even if it’s chaired by a former Big Law leader; work with our integrated offering—the efficiency of AI and the confidence of a known brand. The MSO model that McDermott is reportedly exploring—where private equity invests in a firm’s technology and business operations while the lawyer-owned practice remains separate—is one version of this hybrid path. It’s auxiliary capital that operates at the margins of the firm’s core economics rather than reinventing them.

Legacy Firms. The third is the firm that looks much like it does today—using AI to achieve efficiencies but fundamentally delivering what it always has: brand confidence, global resources, and one relationship that handles most everything. For clients who value the confidence of a single, trusted relationship over the comparative complexity of a bespoke, multi-provider model, this approach will endure—at least for a time.

Middle Market Pressure—And Opportunity

The middle-of-the-market law firms face vice-grip pressure for some and emergent opportunity for others. Firms that lack the brand equity to draw premium judgment work and the tech infrastructure to compete on industrial legal face compression from both directions.

But for firms with name-brand practices that nonetheless live in the middle market because of lower leverage ratios, unbundling may be an opportunity. The economics that once made them less profitable than their larger competitors become an advantage when the leverage model is breaking and the judgment practices that undergird their firms become most prized—and capable of higher rates. The chairman of one such firm shared with me his message to the partnership: “This is our moment—let’s seize it.”

What the Future Asks

Taken together, these individual adaptations point to something larger than any one of them. This is not a further evolution of legal practice. It is speciation—the market splitting into fundamentally different forms. AI-native law firms compete directly for industrial legal work at radically different price points. Tech platforms expand the capabilities of both in-house teams and firms. In-house departments, increasingly tech-augmented, capture routine work and build institutional knowledge. And traditional law firms become more concentrated around judgment-intensive practice, where expertise, relationships, and prestige command premium fees—but can no longer be bundled with high-volume, high-margin work.

For decades, the legal industry was capitalized by partner capital calls and bank debt. Now, external capital is funding both legacy firm operations and the platforms disrupting them. As the market becomes capital-competitive rather than partner-capitalized, the pace of institutional innovation accelerates.

Of course, it’s still early days. The tech-first platforms are largely unproven at scale; their systems work but it remains to be seen whether they deliver across thousands of matters. And while private capital can propel growth, it comes with its own constraints.

For traditional firms, the question is whether partnership economics permit the investment the moment demands—or whether the profit-and-prestige pull of near-term distribution will defer adaptation until it’s too late.

For the new entrants, the question is whether they can deliver at scale what they promise in theory—and earn the trust that incumbents have built over decades.

For general counsel, the question is where to place work—and whether the cost-efficiency of new models justifies the complexity of managing a more complex legal-services provider landscape.

The rapid acceleration of AI, the availability of private capital, the mobility of legal talent, and the emergence of tech-enabled law firms have opened a doorway to a fundamentally different future. It’s one that confronts everyone in the legal market. But what they find on the other side will depend on what they do now.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Eric Dodson Greenberg is executive vice president, general counsel, and corporate secretary of Cox Media Group. Eric also writes about leadership, legal operations, and the intersection of law and AI for Bloomberg Law’s Good Counsel column.

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