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As the balance of power in the legal industry shifts back towards in-house legal teams, law firms are under growing pressure to rethink how they deliver value – or risk being left behind in an increasingly competitive market.
A quiet shift is reshaping the legal profession, as in-house legal teams increasingly take on work that was once routinely outsourced to external law firms.
Driven by tighter budgets, growing business complexity, and the rapid rise of artificial intelligence, in-house teams are becoming more self-sufficient, steadily redefining how legal services are delivered and who delivers them.
As that transformation gathers pace, it is forcing law firms to rethink not only how they deliver legal services, but the value they bring to clients, as in-house teams tighten their grip on an increasing share of legal work.
Alison Laird, director of innovation at the College of Law, warned that law firms can no longer assume their value is obvious, with in-house clients now scrutinising every instruction more closely as they weigh up whether work should be done externally at all.
“Law firms need to stop assuming that their value is self-evident,” she said.
“In-house clients are already asking harder questions about cost, efficiency, AI use, pricing versus value, and whether the work should be outsourced at all.”
For firms to survive the next wave of disruption, she pointed out that the winners will be firms that can clearly demonstrate something clients cannot easily replicate, whether through specialist expertise, innovative delivery models, or by becoming trusted strategic advisers.
“The firms that remain relevant will likely fall into a few categories. Some will be true specialists with deep expertise that clients cannot sensibly (or financially) replicate internally. Some will build efficient, tech-enabled delivery models for scale work,” she said.
“And some will move into a more strategic role, helping clients build capability through secondments, managed services, legal operations support, AI advisory, playbooks, and transformation work.”
However, she warned that the greatest risk facing law firms is failing to evolve, cautioning that those clinging to traditional business models will steadily lose ground as in-house teams become less reliant on external advisers.
“The firms that struggle will be the ones still trying to sell traditional leverage, traditional pricing, and traditional turnaround times for work that clients can now do, or manage, themselves,” she said.
As the shift accelerates, Laird noted that it is already transforming how organisations engage external counsel, with in-house teams becoming far more deliberate about when, why, and where they seek outside legal support.
While she does not believe external law firms are disappearing, Laird argued the era of routinely sending legal work to outside counsel is rapidly drawing to a close, as advances in technology and increasingly sophisticated in-house teams absorb work once considered the domain of private practice.
“Potentially, it leads to both, but not in an easily defined way,” she said.
“I think it may reduce the role of outside counsel for some categories of work, especially routine, repeatable, and moderately complex matters that in-house teams can now handle with better tools and better internal systems.”
Instead, she shared that, moving forward, external lawyers will be called upon more selectively, with firms increasingly judged not by how much work they handle, but by the depth of expertise and strategic insight they deliver when it matters most.
“But it doesn’t make outside counsel irrelevant. It redefines the role,” she said.
“External counsel will be used more selectively, for genuine expertise, high-stakes ‘bet the farm’ judgement, independent validation, major transactions, disputes, regulatory complexity, surge capacity, and transformation support.”
Ultimately, Laird argued the future is not one without law firms, but one in which every instruction must be earned rather than assumed, as clients become more deliberate, discerning, and demanding in how they allocate legal work.
“So the future is not ‘no law firms’. But it might be fewer automatic instructions (the way we’ve always done things), favouring more deliberate, considered decisions on what sort of work should go where, and which, much higher expectations,” she said.
“Outside counsel will need to earn the work in a way they have not always had to before.”
