Cleary Gottlieb makes its money billing clients for legal tasks. Cleary Gottlieb also owns a subsidiary, ClearyX, building tools to help clients handle those tasks on their own — and to do them cheaper and faster.
In ordinary times, firms don’t cannibalize their own business model, but Cleary Gottlieb does not believe these are ordinary times.
ClearyX began as a captive ALSP performing the sort of tasks that clients would prefer not pay law firm rates to perform. But this month, ClearyX stepped beyond the traditional ALSP role, launching its own AI software products branded as CX+ and marketing them directly to clients. CX+Insights aids in-house teams trying to figure out what’s actually in their contract portfolios, while CX+Transact assists clients with M&A diligence. ClearyX claims these tools delivered 40-60 percent time and cost savings based on more than 150 deals. Which is great for the clients, but not necessarily as great for the parent institution still billing by the hour.
Unless Cleary Gottlieb is right that AI is poised to steal away huge chunks of billable time over the next few years no matter what. In that case, the firm is hedging its bets by bringing its credibility to the disruption party.
ClearyX CEO Carla Swansburg acknowledges that her company has an unconventional relationship with the firm. “One of the questions that gets asked a lot, and more of the partners and the leadership of the firm is, ‘isn’t this cannibalizing some of the firm’s business,” she said, before answering her own question. “Yes, it is.” But that doesn’t really matter once lawyers accept that it’s work that largely goes away anyway.
When Claude unveiled a legal plug-in, the markets briefly — to use the technical term — freaked the hell out before remembering that the dedicated legal AI providers have a far better handle on the idiosyncratic needs of lawyers than a product that occasionally wipes a company’s whole database. But any legal process that can be automated by seasoned experts can eventually be mastered by a language model given sufficient time. Providers hoping that legal know-how is a moat will find that body of water shrinking rapidly. But that doesn’t mean legal tech providers will be left without defenses.
Addressing the Claude plug-in sized elephant in the room, Swansburg explained that in-house teams “don’t have the support technology tools” in the budget to take their chances with a consumer model and a slick skill. “They don’t get the budgets to buy six different tools, a general AI tool, and then four point solutions. And then they don’t have engineers or knowledge workers or the sort of resources that we all take for granted in the law firm environment.” While legal tech may be wrong that their expertise cannot be learned, they’re very likely right that in-house teams aren’t going to have a robust support staff to deal with the fallout when GPT goes wrong. Or when a novel legal problem presents itself requiring a unique tweak. The cardinal rule of the computer industry since its inception is that companies salivate over flashy new products and features but the real value is in supporting that product.
Research shows in-house teams plan to cut outside counsel spend, even though everyone acknowledges increasing demand for legal services. That’s an equation that ends with in-house teams trying to tackle more of the workflow on tighter budgets and that screams out for tech.
For all the Biglaw posturing about “leaning into AI,” the tasks that AI is best suited to perform are tasks where clients really don’t need outside counsel pushing the button. Whatever the tool, clients will find a product capable of moving expensive yet automatable work in-house. Trying to cling to that business over the next few years will just end in massive write-downs, frustrated clients, and damaged relationships. With ClearyX, the firm continues to profit from the natural migration of that work while doubling down on the tasks outside counsel have to perform. And even though ClearyX is a separate entity and not necessarily tied to Cleary’s existing client base, it offers a warmer handoff if a client using a product developed by the Cleary brand eventually needs to hire human outside counsel for higher level work.
Cleary is, in a sense, drinking its own milkshake.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
