MikeOSS and the New Bargaining Power in Legal AI

Will Chen, a developer, saw enterprise legal AI demos and realized their premium pricing wasn’t justified by basic features like chat interfaces or prompt templates. By building and releasing MikeOSS, he showed that much of what is marketed as sophisticated legal AI can be reproduced by skilled individuals.

When Will appeared on a fireside chat with Jamie Tso and Raymond Sun of Legal Quants shortly after, the conversation moved quickly to what MikeOSS actually revealed. Three bargaining power shifts are happening at once. Each follows from the same underlying move: someone who was assumed not to understand what they were buying figured it out. That happened first between firms and vendors. It is now happening between innovative lawyers and the firms that employ them, as well as between clients and outside counsel. The client shift is the one most firms are not watching closely enough. When an in-house team runs the same calculation Will ran, watching a demo and asking what it would cost to build, the case for sending routine work outside gets harder to make.

What You Are Actually Paying For

Vendors charge what they charge because buyers have not been able to evaluate what they are buying. MikeOSS changes that. The chat interfaces, the playbooks, the document review tables: those are replicable, as Will demonstrated. What companies like Harvey and Legora legitimately earn their fees for is the enterprise wrapper: security, deployment, configuration, and support. That is a service business, not a moat. Before your next renewal, the question worth asking is which of those two things you are actually paying for, and whether the price reflects it.

The next round of legal AI value will not come from general platforms. Will was clear about this in the fireside chat: generalist tools will be copied, and the firms that build on top of them for a specific workflow or jurisdiction will be the ones creating defensible value. That applies to vendors building on MikeOSS, and it applies to the lawyers inside your firm who understand a workflow well enough to improve it. General capability is becoming a baseline. Depth is where the advantage will be.

The Harder Problem Is Inside the Firm

The harder challenge is inside the firm, and this is where you need to be honest with your partners. Most compensation systems reward production. They do not reward the creation of tools that make other lawyers more productive. If you want that to change, build incentives around what you actually want to reward. A lawyer who makes twenty other lawyers more productive has created real value for the firm. Integrate that recognition into formal evaluations alongside billable production.

Consider this: If a junior lawyer created a tool that saved forty hours on a fixed-fee matter, how would your firm reward them? Typically, origination credit goes elsewhere, and fewer billable hours may even penalize the innovator. Law firms lack an equity-sharing system like those used by software companies.

Will described how most firms reward output rather than the creation of tools that boost others’ productivity. Jamie pressed him on this misalignment. The implication of that conversation is direct: if your firm wants real innovation, the compensation system has to recognize it.

What Happens to Your Billing Model

Jamie raised pricing directly: If AI increases lawyer productivity, what happens to billing? Fewer hours mean the rate-times-hours formula works against you. Move to value-based or fixed pricing before clients require it. Most firms haven’t. They add AI subscriptions but keep billing unchanged. Clients will soon get better tools, making this model hard to justify.

Raymond Sun pressed Will on this directly. Will’s answer was that client relationships still matter, but clients will increasingly want measurable results from AI. Right now, saying the firm uses Harvey is no longer a differentiator. Clients will want to see concrete outcomes. A firm that cannot show what its AI investment produces is competing on a claim that the whole market is already making.

Raymond Sun’s questions pushed toward the strategic position of law firms and in-house teams. If AI-native firms charge premium prices, where does the money come from? If client legal budgets remain constrained, will in-house teams use open-source tools to do more themselves?

Will agreed that this is a real possibility. In-house teams may not replace outside counsel for complex transactions or high-risk litigation. But they may use open-source tools and enterprise AI subscriptions to handle more repeatable work internally.

The Real Lesson

This is why MikeOSS matters. It is not only a product. It is a signal that the cost of building is falling and that law firms should no longer treat legal AI as a black box.

Commercial legal AI platforms will still matter. Many firms will prefer supported, secure, enterprise-ready tools. But the existence of open-source alternatives should make the market more honest. Vendors will need to show where their value really sits. Firms will need to understand which workflows are worth buying, which are worth building, and which should be redesigned altogether.

The firms that benefit most from AI will not necessarily be the firms that buy the most impressive platform. They will be the firms that understand their own work deeply enough to know where AI can create economic value.

That is the real lesson of MikeOSS.

Legal AI strategy cannot simply be a software purchase. It touches pricing, compensation, governance, client service, training, and profitability. The firms that understand that will have more bargaining power than the firms that simply buy what they are sold.

Strategic planning and the high-performing law firm

By Colin Cameron and Susan Van Dyke

Originally published in BCLMA Topics, Winter 2022 Edition

A fractured partnership, compensation concerns, retention headaches, work delegation issues and a myriad of other significant struggles inside a firm are massively disruptive, stressful, distracting and ultimately, very expensive. In the past few years, we’ve seen managing partners and executive committees who are hard-working and well-meaning but frustrated and tired.

Strategic planning assignments are significant undertakings and sometimes with a lot at stake. Firms invest time and resources to ensure they get it right, and implementation requires long-term commitment to achieve goals.

Colin’s AI assistant Eric

To get most partners on side, a bespoke plan must:

  1. Reflect the culture of the firm and desires of the partners
  2. Be powered by your firm’s data with a professional financial analysis
  3. Be developed at a pace that achieves a tipping point of support by key partners
  4. Emphasize implementation of strategies 
  5. Be facilitated by credentialed experts with experience in law firm planning

Every major component of the firm is connected. For instance, if compensation doesn’t reward desired behaviour most lawyers will only focus on current work. When firm governance is unclear or poorly structured, decisions take too long and leadership is lacking or missing altogether. Leadership is fundamental to a highly functioning operation and essential to implementing your strategic plan. 

Talent retention is another significant issue lately. When associate retention is low, partners lose the benefits of leverage and spend too much time on billable work rather than mentorship, business development (BD), recruitment, or management. And average costs of losing an associate are now north of $300K, and some suggest more. 

Let’s look at some of these issues further.

Compensation model isn’t working for us

Many firms mistakenly decide on a compensation system before developing a plan. This often results in one of two compensation models: An “eat what you kill (EWYK)” formula-based model or an equality model with a lockstep compensation system. Both options have risks. 

The EWYK model encourages “lone wolf” behavior at the expense of a team effort or what’s in the firm’s best interest. It can be divisive and stunt growth as only individual effort is rewarded. The equality model can lead to mediocre firm performance and underperforming partners. We’ve seen firms lose high performers under this model. 

Instead, we recommend a “subjective merit” model where both qualitative and quantitative criteria are considered in partner compensation. A compensation committee typically evaluates partners’ contributions with the Managing Partner. As a performance-based model, it motivates high performers, rewards good management, encourages team effort and discourages lone wolf behavior. Partners are motivated to do non-billable tasks, help achieve firm goals, and encourage the right partner behaviors, such as firm building and levering work to associates.

Firm governance needs adjusting or an overhaul

Many firms have governance systems that are not advancing the firm’s interests. We have seen the following symptoms when the wrong structure is in place:

  • Leadership can’t make decisions 
  • The firm is stuck and not moving forward
  • There is a lack of focus
  • Decentralized decision-making without oversight
  • Firm-wide confusion of who does what
  • No written firm plan

Many firms run as a democracy where partners operate independently and are not accountable to anyone. Firms are hesitant to manage themselves like other businesses with a CEO with authority and responsibility. Instead, committees handle day-to-day operations, including a management committee with little power to execute a plan, if there is a plan. 

Indecision results in lower profitability, missed opportunities, high opportunity cost of partner hours spent on slow decision-making, and a loss of good partners who grow frustrated with the lack of firm progress.

The solution is to appoint a Managing Partner (MP) to act as the CEO and coordinate creating a firm plan approved by the partnership. The MP will execute the plan with authority to achieve the firm’s goals. The partnership will evaluate the MP’s performance to recognize the MP’s efforts like any regular business is key. Once this centralized governance system is in place, your firm will become far more profitable and competitive in the market.

Retention of associates is a significant challenge 

Retention challenges are causing significant disruption for partners and interfering with firm profits and growth. Of course, associates leave for a variety of reasons, however, firms can recalibrate to better accommodate their needs and desires to win loyalty and a long-term commitment.

Susan’s AI assistant

The associate experience is not what it was 25 years ago, which is stating the obvious. But we regularly engage in discussions with partners who are either puzzled or inflexible to the needs of today’s associates. Many are looking for alternative career paths, meaningful opportunities for growth, client contact, fair compensation, some flexibility to work from home, robust mentorship, coaching and skills training, and work/life balance. Partner investment in associate development should be baked into annual plans.

Engaging with associates on these issues, welcoming ongoing dialogue and taking corrective action are essential in creating an associate-friendly culture. 

Our lawyers don’t know how to develop work

A fulfilling career and an opportunity to earn a greater income usually requires developing skills to attract new work. Again, this investment must be supported by rewarding non-billable time for marketing and BD and skills training. Most associates are interested in learning how to retain clients and win new work and expect firms to support this growth. Without associate participation in BD the firm’s succession plan in rainmaking is hindered.

It takes years to generate work, benefit from referrals and develop a desirable practice. Some leave training too late and provide this support too infrequently. Aside from mentorship, BD is one of the largest investments you should make in associates.

Partners frustrated that associates aren’t participating in attracting new work should revisit their training programs, individual business plans, BD budgets and how they reward participating in marketing and BD and origination of work.

Strategic planning connects all your organizational components and links your vision to your goals and actions to create a high-performing firm with an enduring legacy. 

Colin Cameron is a chartered accountant and former COO of a large regional Vancouver-based law firm and founder of Profits for Partners, Management Consulting Inc. Susan Van Dyke has held several senior legal management positions and is Principal of Van Dyke Marketing. Together, Colin and Susan bring 60+ years of vast legal management experience in small to large law firms to their strategic planning projects.