By Elizabeth Duffy & Ragunath (Raghu) Ramanathan
There are four distinct business model scenarios for law firms in the age of AI. All of these emphasize how strategic clarity and adaptation to client-driven AI expectations are essential for firms to thrive amid rapid industry transformation:
- Strategic clarity is essential. Law firms must clearly choose and communicate a business model in today’s marketplace, because trying to be “a bit of everything” puts firms at risk of being squeezed out of the market altogether.
- AI capabilities are now a key selection criterion. Corporate clients are already evaluating law firms based on their AI maturity and ability to deliver efficiency and quality, even before clients themselves have fully developed their own AI strategies.
- The “dangerous middle” is vulnerable. Firms without a distinct strategic position — neither fully automated, elite, scaled, nor protected by regulation — face existential threats. They must act quickly to assess their current state and align on a direction while adapting their talent, technology, and client engagement to survive and thrive.
By the middle of 2025, many corporate legal departments began evaluating their outside law firms based on AI capabilities — even while figuring out their own strategies. An outside firm's AI prowess became a selection criterion before the corporate legal team had developed its own AI plan.
The disconnect here is obvious — clients are evaluating the AI maturity of their outside law firms before developing their own. As many law firms focus on deployment of advanced AI-driven tools, a more fundamental question looms: what business are these law firms building?
For example, if more than half of a firm's work is susceptible to automation, that firm needs a fundamentally different strategy. Building on the three-wave framework introduced in the Thomson Reuters “The future of the law firm” white paper from February 2025, these scenarios explore what “Wave 3” transformation could look like once law firms move beyond optimization and re-engineering to fundamentally reimagine and redesign their business models.
Indeed, the firms that will dominate by 2030 are making their strategic choices now, while competitors debate which tools to buy.
To help law firm leaders navigate these strategic choices, the Thomson Reuters Institute has developed four potential business model scenarios for how legal services might be delivered and purchased over the next decade. These scenarios are not predictions; rather, they represent distinct strategic paths that firms could pursue, each with different implications for talent, pricing, client relationships, and competitive positioning.
Scenario 1: The tech-led disruptor
Automating routine legal work to create an almost self-service model
In our first scenario, AI-native platforms would deliver legal services with minimal human oversight through self-service subscription models. Proponents argue this model could achieve dramatic cost reductions — potentially up to 80% — by automating compliance, drafting, and research work. Nearly all work would be fully automated, with humans intervening only for edge cases.
The legal work that would be well-suited to this model includes high-volume, repeatable tasks such as non-disclosure agreements, standard employment contracts, basic entity formation, regulatory compliance filings, and straightforward trademark applications.
Plaintiff-side firms may be particularly well positioned for this model because the volume economics and contingency-fee structures create strong incentives to automate case intake, document preparation, and settlement negotiations. The pattern is consistent — you need well-defined legal parameters, limited variables, and outcomes that don't require strategic judgment.
If this model emerges at scale, small and midsize businesses would gain access to sophisticated legal services that were previously available only to large corporations.
The client experience would shift from traditional service relationships — which are time-consuming and costly — to platform interfaces with specialist consultation for exceptions only. A small number of attorneys supervise these AI platforms, managing case volumes that once required substantial staffing, enabling the dramatic cost reductions this model promises. Technology companies and alternative legal service providers building use-case-specific AI are best positioned for this approach.
Scenario 2: The elite boutique
Mixing ultra-premium expertise with AI augmentation — not replacement
In this scenario, a select number of firms would command premium rates 50% to 100% above average for the highest-stakes, most complex work. Senior partners would receive support from technology specialists rather than teams of associates. The work would require uniquely human capabilities — judgment, creativity, and complex negotiation skills — with minimal routine work remaining.
Client teams would transform dramatically — replacing the traditional pyramid of 20 or more associates with two to three senior partners plus technology specialists. Plus, the role of the lawyer would evolve. For example, mergers and acquisitions (M&A) partners would become business risk advisors and deal facilitators, litigation partners would become strategic counselors that can navigate high-stakes disputes, and regulatory partners would be policy strategists rather than compliance processors.
The type of legal work best suited to this model includes bet-the-company M&A transactions, complex cross-border disputes, novel regulatory matters, and high-stakes intellectual property (IP) litigation. What connects these work matters is that they all carry significant business implications, tackle unprecedented legal questions, and feature situations that require exceptional judgment and relationship navigation.
The appeal of this model is understandable. It preserves the essence of an elite legal practice while embracing technological efficiency. However, market economics can support only a limited number of firms in a true premium position such as this.
In this case, “boutique” means selective — this path cannot support firms currently in the broad middle, including many large, full-service law firms. Firms in this category would need to have genuinely proprietary expertise in discrete, high-stakes practice areas, not merely good lawyers doing quality work.
Scenario 3: The integrated powerhouse
Combining scale-driven consolidation with systematized excellence
In this third scenario, large global law firms would leverage their scale advantages through systematized approaches and AI-enabled delivery teams — the legal industry's equivalent of elite consulting firms that deliver top-tier quality through process excellence, not despite it.
The critical transformation is that commodity work would be automated entirely, allowing firms to systematize sophisticated but repeatable tasks to elite-quality standards. The result would see firms maintaining premium positioning while delivering across comprehensive client needs, an A-to-Z capability with consistent high-quality benchmarks.
Legal work that’s well-suited to this model includes multijurisdictional regulatory reviews, cross-border M&A with standardized diligence workflows, global employment matters, large-scale contract management programs, and comprehensive commercial work across multiple practice areas.
Those firms finding success on this path would need the scale capability to coordinate across borders when required. However, their larger advantage would be their ability to serve the full spectrum of a client's sophisticated legal needs through systematized excellence.
This scenario differs from Scenario 2. Unprecedented and novel matters would go to the elite boutiques; however, sophisticated but repeatable work — whether single- or multijurisdictional — would flow to these integrated powerhouses.
Client teams for these powerhouses would involve cross-border, cross-practice orchestration in which senior partners provide strategic direction while technology-enabled teams execute systematized workflows globally. Global platform firms with a presence spanning 50 or more countries excel in this model because they have the necessary scale and can meet the significant consolidation required to succeed.
On this path, success demands heavy investment in process infrastructure, knowledge management systems, and standardized delivery methodologies.
Scenario 4: The traditional firm
Preserving traditional human-delivered services through regulatory barriers
It would be remiss not to consider the fourth scenario, in which regulatory restrictions preserve the traditional methods of delivering legal services.
In this scenario, bar association rules and professional licensing requirements would mandate human lawyer oversight for many legal services, limiting AI deployment despite its groundbreaking technological capabilities. Work would remain largely as it is today, with human lawyers delivering services with AI as a supporting tool rather than a transformative force.
Geographically, the reality is complex. Major jurisdictions within the United States, including California and New York, already mandate lawyer involvement in AI-assisted work, with bar associations actively resisting changes that would allow greater automation. Professional licensing requirements would mandate human sign-off, creating regulatory compliance overhead that clients must pay for regardless of any efficiency that AI use could provide.
The practice areas most affected would include those involving court filings, regulatory submissions, and any legal work requiring attorney certification. In situations where jurisdiction or matter type legally requires human lawyer involvement, law firms operating under traditional models would retain protected market positions, at least temporarily.
However, this protection would be a delay, not an immunity. As competitive pressure mounts from jurisdictions with lighter regulatory approaches and clients increasingly demanding efficiency, regulatory barriers would likely erode. Firms relying on regulatory protection without simultaneously building transformative capabilities would eventually find themselves vulnerable when new rules are adopted.
A client-focused path forward
What do these four scenarios mean for law firm leaders who are making strategic choices today? As AI offers efficiency gains around repeatable, routine tasks, corporate legal departments will migrate this work to tech platforms or automate it in-house.
Firms that can automate more than half of their legal work will face existential pressure. As automation takes over, regulatory compliance costs could become too expensive for smaller firms to handle profitably — or their clients may switch to larger competitors that can price the work lower.
Client pressure is building faster than internal capabilities can keep pace. Even corporate legal departments new to AI are asking pointed questions of outside counsel. The legal department leader of a multibillion-dollar retail company spoke with the Thomson Reuters Institute about their approach to AI and legal spend. They said they’re still working out the basics, but they've made one expectation clear to their outside firms: articulate how AI will deliver better quality and greater efficiency, now.
Despite lacking its own AI integration strategy, this legal department recognizes that selecting firms to represent them for the next three years depends on evaluating AI capabilities right now. This pattern is repeating across client organizations — the demand for AI-enabled legal services is outpacing clients’ own AI maturity. That means firms cannot wait for their clients to figure out what they want before developing AI strategies, because clients are using AI capabilities as a selection criterion today.
The future is already unfolding. One large technology company's legal department co-designs AI workflows with outside counsel, mandating specific tool use at specific workflow stages and benchmarking quality outcomes against best-attorney baselines. Sophisticated legal services buyers are moving in this direction — and the gap between leaders and followers is widening rapidly.
Seeds of all four of these scenarios already exist today. What will change by 2030 is which scenarios will dominate, not whether they're each possible. The close-up view of 2030 will still show lawyers, firms, client relationships, and professional judgment. However, if you take a step back, the market composition becomes unrecognizable due to significant consolidation, fewer firms, dramatically different size distribution, and new dominant players.
What can law firms do now to ensure they’re on the right path?
For those law firm leaders who want to choose the best strategy for their firm, they first need to know where they are now.
Warning signs your firm is in the “dangerous middle”
The dangerous middle ground comprises law firms without clear strategic positioning — neither fully automated, nor elite premium, nor true global scale, nor protected by regulation. These firms face the greatest squeeze. Even though they’re doing good work for reasonable clients at fair rates, that’s no longer enough. Without a compelling answer to why they should remain their clients’ legal provider of choice as market dynamics shift, these firms will falter.
In fact, the firms that do thrive won't be those deploying AI tools fastest — they'll be those redesigning their businesses around fundamentally different value propositions.
For example, firm leaders should ask themselves three questions to determine their current position:
- What percentage of our work is fully automatable?
- Which scenario are we building toward?
- How quickly can we move work from routine to strategic?
Indeed, while too many firms are still focused on the Wave 1 adoption — outlined in the white paper mentioned previously — their future competitors are already building Wave 3 business models.
Your firm may be at risk if:
- Your partners can't articulate what makes your firm different from competitors
- Your AI strategy consists of buying tools without changing how work gets done
- Even if you're profitable today, you can't explain why clients will choose you in three years
- Several different practice groups are pursuing incompatible strategies
- You are waiting for clients to tell you what they want before building capabilities
- Your answer to the “which scenario” question is “a bit of all of them”
Where to start now?
First, audit the volume and nature of your work matters. Categorize revenue by complexity level — routine, sophisticated, or unprecedented — to understand your exposure. Survey your clients explicitly about their AI expectations rather than assuming you know what they want. Assess where your partnership thinks the firm is headed, because misalignment can kill transformation before it even starts.
Next, choose your scenario. Even if the choice feels imperfect, declare a direction and communicate it clearly. Identify the gaps between where the firm currently is and where it needs to be, especially regarding capabilities, talent, and technology. Start a pilot program in a single practice area to learn by doing rather than planning indefinitely.
The bottom line is that strategic clarity beats strategic ambiguity. Firms that attempt to be “a bit of everything” risk being squeezed from all sides. The window for making deliberate choices is closing.
