Legal tech companies face a critical inflection point: with 62% of law firm managers making operational changes due to AI, the pressure to deliver AI capabilities is mounting. The key question isn't whether to add AI - it's how.
Hidden Costs of Building
Developing proprietary AI costs far more than most legal tech companies expect. Beyond developer salaries, companies must invest in training infrastructure, data acquisition, and ongoing maintenance. Regulatory compliance and security testing demand constant attention. Documentation, support systems, and implementation resources quickly multiply the initial budget. When these factors combine, most companies find they've underestimated their total costs by half.
The Case for Buying
Third-party AI integration offers clear advantages for legal tech companies. It accelerates market entry, reduces overhead, and includes built-in security compliance. Updates happen automatically, costs stay predictable, and reliability comes pre-tested. For many companies entering the AI space, these benefits make third-party integration the sensible choice.
When to Build
Despite the advantages of buying, building makes sense when:
Your Core Value Proposition Demands It
If AI processing is central to your product's competitive advantage, keeping it in-house may be worth the investment.
You Have Unique Data Requirements
Standard AI solutions might not handle specialized legal data formats or requirements effectively.
Security Requirements Are Exceptional
Some legal tech products require security measures beyond what third-party solutions offer.
The Hybrid Approach
Smart legal tech companies are adopting a hybrid strategy:
Buy for Basics Use existing AI services for:- Text analysis
- Document classification
- Basic natural language processing
- Standard machine learning tasks
- Specialized legal analysis
- Unique workflow automation
- Proprietary algorithms
- Custom integration layers
Implementation Framework
Whether building or buying, follow this sequence:
1. Assessment- Map current capabilities
- Identify integration points
- Define success metrics
- Calculate total cost of ownership
- Test with limited features
- Gather user feedback
- Measure performance
- Adjust approach
- Expand gradually
- Monitor usage
- Track costs
- Optimize performance
Moving Forward
The build vs. buy decision isn't permanent. Start with third-party solutions while developing internal capabilities. Focus on solving real problems rather than chasing technological sophistication.
Decision Matrix
Consider these factors:
- Time to market requirements
- Available resources
- Core competencies
- Security needs
- Budget constraints
- Competitive landscape
- User expectations
The right choice depends on your specific circumstances, but generally, buy what's common and build what's unique.
