Category: Client Satisfaction

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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.

laptops at office and woman speaking on phone

When the Phone Stops Ringing

What Big Law Figured Out – Part One of Four

The most dangerous threat to your firm will not announce itself. Clients will not explain why they move on. The work just stops.

Jae Um, legal analyst and founder of Lumio, explained this on the AI and the Future of Law podcast, hosted by Jen Leonard of Creative Lawyers and Bridget McCormack of the American Arbitration Association. In some practices, the phone simply stops ringing. You are left guessing. A client found a cheaper way and the work got done elsewhere. No announcement, no discussion.

One in-house counsel completed a $10,000 matter with a $20/month tool. The former law firm never knew. You cannot measure what you never received.

That is the nature of this threat. Missed matters go untracked, making the competitive loss invisible.

Most firms focus on visible work at risk: commoditized, high-volume matters with price pressure. But a bigger risk is work leaving the firm unnoticed. When clients handle legal matters elsewhere, no one notices until the pattern has continued for months. The key question is not where price pressure appears, but where work disappears before you see it.

The most exposed position, in my experience, is serving clients you barely know. If you do not truly understand these clients’ businesses, you will not spot a problem before it becomes a decision. When a $20/month tool is viable, the client weighs it against your cost. If your value is not clear, they choose differently. They will not say why; they will simply stop calling.

If clients are solely focused on price, the risk of loss is high. Lawyers must be able to communicate their value beyond just the price, including judgment, experience, track record in court, $ won, $ saved, reputation, creativity, references, etc.

A general counsel in Um’s analysis said it plainly: “If a firm isn’t cannibalizing its own inefficient billable hours, we will find a firm that will.”

Take that as a forecast. Clients already have alternatives, and they are signalling what happens if you do not act first.

Um described how this pressure arrives to a room full of managing partners in London. It never comes as one event. New business gets harder to win, and existing matters shrink. Realization rates slip, and it will be hard to say why.

If you are asking the right questions, you are already ahead. A Cleary senior partner advised: envision the business that would put yours out of business. This explains the threat faster than any market analysis.

For each major practice area, ask: how hard is it for clients to solve this another way? The competitor may not be another firm, but a $20/month subscription. If the honest answer is “not very hard,” that area is more exposed than you may be treating it.

The most at-risk work is process-driven: matters where clients with the right tool and some internal capacity can reach an acceptable result without you. Think work that follows a predictable process and produces a predictable result. The work least at risk requires judgment that the client cannot buy off the shelf, especially where the stakes are material and getting it wrong costs far more than the tool costs to try. Most firms have both: the question is whether you know which is which.

If your firm is smaller, you have a real advantage here. Close client relationships are an early-warning system, but only if you use them that way. Ask clients directly what they are handling without you. Learn what tools or services they are already using. Knowing this before you need it gives you time to respond.

This is not a cause for paralysis. The same disruption pulling work away from firms that are not paying attention is creating real opportunity for those that are. If you understand what you deliver and can make that case against the alternatives, you will be in a stronger position at the end of this period than you are now.

Don’t wait for silence to signal risk. Contact clients now and ask specifically why their needs are changing. Taking initiative to reach out demonstrates attentiveness, not desperation. Approach these conversations as opportunities to help clients with their challenges and reinforce your commitment to their success. Be proactive: schedule conversations, request candid feedback, and use what you learn to adapt immediately. The managing partners who do this consistently and directly are the ones who stay ahead of shifting client expectations.

This article is the first in my “What Big Law Figured Out” series, inspired by the AI and the Future of Law podcast featuring Jae Um. In Part two, learn how to design AI investment around a distinct competitive strategy, not by following others. Part three will walk you through essential foundations to put in place before any investment discussion. Act on these insights today to outpace competitors tomorrow.

Pricing the Client, Not the Work: A More Flexible, Value-Driven Approach to Legal Billing

I often see lawyers debating on LinkedIn about the merits and disadvantages of hourly billing versus value-based pricing. I don’t see it as a question of doing it one way vs. the other. Each client will have their own unique needs regarding how they prefer to be billed. And it doesn’t have to be just one way. The right way to price/bill is the one that best meets your client’s needs.

We need to start offering options: that could mean two or three different options, including hourly billing or value-based pricing, or a hybrid billing option, which includes a monthly retainer plus hourly billing, etc. This is my twist on “Price the client, not the work”, as Ron Baker recommends.

Clients Have Different Needs, So Give Them Different Options

Some clients still prefer hourly billing. Others want predictability through flat fees or monthly retainers. Some are open to value-based pricing or outcome-contingent models. A few are even willing to pay a premium for guarantees or guaranteed availability.

All of these models can coexist. Your job is not to convince every client to fit your preferred pricing/billing method. Your job is to understand what the client values, then design a fee structure that reflects that.

In Implementing Value Pricing, Ron Baker lays out a clear, eight-step process for moving firms toward value-based pricing models. But even Baker doesn’t argue that it’s all or nothing. Instead, it’s about moving along a continuum, away from pricing based on effort, toward pricing based on value.

Hourly Billing Isn’t Going Anywhere, But It Shouldn’t Be the Only Option

Let’s be realistic: hourly billing isn’t disappearing anytime soon. And that’s okay. What we can do is evolve from relying on it as our only pricing model.

Hybrid models are often more practical and better aligned with both firm and client interests. A client might be on a monthly flat fee for routine advisory work, with defined scope projects priced at a fixed fee, and a litigation file on a success-based arrangement.

The point is flexibility. And when you build tailored fee structures, you change the conversation from “what’s your hourly rate?” to “how can we work together in a way that makes sense for both of us?”

Unique Pricing Drives Unique Value and Breaks the Race to the Bottom

If your pricing model looks like everyone else’s, then you’re just another commodity. That’s when clients start comparison shopping based on price alone.

But if you’re structuring your pricing based on deep knowledge of the client’s goals and preferred ways of working, you’re no longer interchangeable. You’re delivering something tailored and valuable. You’re a legal professional, not a plumber.

And most importantly, you’re helping the client win, which means you’ll win too.

Track Your Time Even When You’re Not Billing It

One more essential point: I believe you should still record time, even when using non-hourly billing models.

Time tracking isn’t just for billing. It’s how you understand your internal costs, opportunity costs, and profitability. If you abandon time tracking altogether, you lose visibility into whether a fixed fee or value-based arrangement is actually working for your business.

Think of it as managing a portfolio. You need data to know what’s sustainable and where the value really lies.

Value Pricing Doesn’t Mean Taking All the Risk

A lot of firms resist alternative billing because they think it means giving up control or taking on all the risk. But that’s not the point.

A good pricing model finds a win-win. The client gets predictability or performance incentives, whatever they need most. The firm gets fair compensation aligned with results and client satisfaction.

Bartlit Beck LLP, the original poster child for alternative billing, still did 50% of its work on an hourly basis in the early years. Why? Because not every client was ready to make the shift. Some simply weren’t comfortable. And even the most visionary firms need to meet clients where they are.

Stop Arguing. Start Listening.

We don’t need to keep arguing about which model is superior. Hourly billing is not the villain. Value pricing isn’t a panacea. What matters is what your client wants and needs.

If you build pricing options around that, you’ll build trust and long-term success for both you and your clients.

References and Further Reading:

  • Ron Baker, Implementing Value Pricing: A Radical Business Model for Professional Firms
  • The American Lawyer (1995), Diamonds Are This Firm’s Best Friend – Profile of Bartlit Beck and its hybrid approach to alternative fees