With wide-ranging global developments reshaping the operating environment for businesses, in-house teams are rethinking how work gets done and where expertise comes from. In-House Perspective reports on the era of the hybrid legal function.

Wide-ranging global developments are reshaping the operating environment for businesses across every sector. From geopolitical uncertainty and shifting supply chains to talent shortages, economic pressure and rapidly evolving technology, organisations are having to adapt at speed. Unsurprisingly, these pressures land on in-house legal teams, who face a rising demand for support in a climate of growing regulatory complexity, specialist skills gaps and expectations of faster, more tech-enabled delivery.

As a result, traditional models of legal resourcing are being outpaced. In-house teams are rethinking how work gets done and where expertise comes from. The era of the hybrid legal function – where permanent counsel, fractional general counsel (GC) and alternative legal service providers (ALSPs) work together, alongside AI-enabled tools – has arrived.

Cost and capacity pressures remain among the strongest drivers shaping in-house strategy. The Association of Corporate Counsel’s (ACC) 2025 Chief Legal Officers (CLO) Survey found that operational efficiency is the top strategic priority for those polled, followed closely by technology implementation. The global survey, covering 48 countries and 20 industries, also reports that 42 per cent of legal departments received a cost-cutting mandate in the past 12 months.

Anne Macdonald, Co-Chair of the IBA Law Firm Management Committee, provides additional context. She says that ‘in-house teams are under pressure to ensure that external legal advisers provide real value to their organisation’. This is particularly important, she explains, ‘with new models of delivery available to in-house teams – such as organic growth to increase bench strength and creating more depth within the in-house team, the efficiencies of AI and alternative ALSPs – the onus is on law firms to really show their value’.

Hybrid teams and working together

These pressures are reshaping not only how in-house teams work with external partners but also how law firms structure their own delivery models. According to Thomson Reuters, ‘firms that use ALSPs gain several competitive benefits, both for themselves and for their clients’. ALSPs, meanwhile, can offer predictable pricing through flat fees or subscriptions and use technology to deliver efficiencies in high-volume work such as document review or contract management. In turn, this frees up their legal professionals to be deployed more flexibly to oversee variable workloads, and the cost savings can ultimately be passed on to in-house teams.

The Thomson Reuters 2025 Legal Department Operations Index reinforces this shift. It finds that legal operations are evolving beyond a traditional cost-control function to focus more deeply on systems, processes and technology. Despite this, many legal departments remain under-resourced, and while almost three-quarters of respondents plan to use advanced technology to automate legal tasks and reduce costs, nearly half also describe the pace of technology adoption in their departments as slow. Such gaps are accelerating demand for external solutions that can scale more quickly.

Against this backdrop, fractional GCs are becoming an increasingly attractive option. As senior professionals, they offer strategic counsel without requiring organisations to commit to the overhead of full-time senior hires. Funke Abimbola, a fractional general counsel and AI governance expert working through The Legal Director, highlights that during periods of economic uncertainty, it’s not a matter of ‘less legal’, but ‘about smarter deployment of senior legal expertise at the moments it matters most’. She adds that it’s a model that works particularly well in scaling companies and in businesses experiencing a transformation.

Abimbola highlights governance changes, new market entry and regulatory reviews as ‘peak complexity’ scenarios where CFOs can secure spend predictability ‘while ensuring the executive team still has access to strategic legal leadership. Organisations can scale the legal support they require according to their shifting priorities, bringing in senior counsel when needed. The result is agility without compromise on quality’. This trend is mirrored in the ACC survey, where 43 per cent of CLOs plan to increase the volume of work outsourced to law firms, with the shift linked to the ‘evolving global regulatory landscape, highlighting the growing complexity and risk associated with navigating these changes’.

However, hybrid teams can encounter challenges when it comes to integrating fractional GCs into environments with existing in-house staff and external partners. Abimbola highlights expectation alignment as the biggest hurdle, as without clarity of scope, reporting lines and decision-making authority for fractional GCs, tensions and work duplication can result. She adds that ‘successful integration requires clear sponsorship at executive level and transparency with the existing legal or compliance teams,’ so that the fractional GC strengthens rather than competes with the in-house team.

Most legal teams now also operate in hybrid workplace environments. Remote and flexible working have reshaped how in-house and external teams collaborate day to day, increasing reliance on digital tools, shared platforms and communication protocols. Such working patterns further reinforce the need for strong governance and consistent standards across dispersed teams.

Resourcing models

Beyond supporting flexible and hybrid working, digital tools are driving new opportunities. Generative AI, in particular, offers considerable potential for legal teams, with many organisations adopting secure, closed systems to safeguard client confidentiality. Jeffrey Elkinson, an officer of the IBA Professional Ethics Committee, has recently co-drafted the IBA’s draft guidelines on the ethical use of AI, which aim to help lawyers navigate the fast-changing environment of AI-enabled legal work.

According to LexisNexis, a February survey found that in-house corporate legal teams are leading the way in adoption, with 72 per cent of respondents reporting that they make use of generative AI tools. AI adoption is slower in regulated sectors such as finance, healthcare and energy, and among GCs in the EU – reflecting the more stringent regulatory oversight under which they operate. However, across jurisdictions there’s broad agreement that these tools now play an important role in the modern, hybrid legal workplace.

This aligns with the Thomson Reuters 2025 Legal Department Operations Index, which underscores that legal operations work is evolving beyond cost-control into system, process and technology enablement. While more than half of legal departments describe themselves as under-resourced, almost three-quarters plan to use advanced technology to automate tasks and reduce costs. Yet nearly half still describe the pace of technological advancement within their organisation as slow, further reinforcing the need for clear standards and ethical frameworks.

AI’s ethical dimension

Both law firms and in-house legal teams are being called upon to demonstrate responsible AI deployment. This is emerging as an area that can strengthen organisational reputation and even open new advisory opportunities.

While standards and guidelines exist, global influence plays an important role. As with the EU’s General Data Protection Regulation (GDPR), which inspired the adoption of ‘GDPR-like’ national laws outside of the EU and the European Economic Area, for example in Brazil, Kenya and Japan, the so-called ‘Brussels Effect’ is shaping global standards through the EU AI Act, arguably as part of proactive compliance but more importantly due to extraterritorial reach. Multinationals are using the Act as a baseline for AI governance, risk evaluation and compliance expectations, regardless of where their legal teams are based.

The EU AI Act is driving structural change: prompting investment in compliance, reshaping workflows and raising expectations around responsible AI use. The financial and reputational consequences of non-compliance are significant, making proactive governance and multidisciplinary upskilling essential. This includes assessing AI systems for bias, ensuring alignment with data privacy requirements and maintaining safeguards in connection with fundamental rights.

Funke Abimbola believes the shift towards automation has implications for how legal expertise is perceived. ‘AI is accelerating the shift from time-based value to judgement-based value,’ she says. While drafting, document review and other high-volume tasks continue along the automation path, she warns that ‘the interpretation of risk, ethics, governance and strategic trade-offs still require experienced counsel’. In other words, while operational aspects of legal work become more efficient, AI is no substitute for the work of experienced lawyers.

Elkinson, who’s a consultant at Carey Olsen in Bermuda, highlights the need for lawyers to prioritise justice and honesty over financial gain. He calls for them to behave ethically and to be aware of their obligations when using AI tools, as ignorance of the law isn’t an excuse. Traditional ethical duties, Elkinson emphasises, apply just as forcefully to AI-assisted legal work. While trust and client confidentiality are critical issues, there’s a need for proportionality in how these concerns are managed. He suggests that lawyers can anonymise data when using AI, to preserve client privilege, while emphasising that ultimately, they must take responsibility for their actions.

In relation to honesty, Elkinson’s take on using AI is ‘don’t be shy, don’t be coy’ – lawyers should be transparent about using AI tools, and he stresses the importance of human intervention to verify and refine AI-generated work, especially in complex legal matters. By way of example, he explains that some judges now use AI when writing their judgments but then spend hours refining and editing the output. Elkinson says that he himself used AI when working on the aforementioned IBA guidelines, and that, for the purposes of disclosure, he included a note to that effect within the document.

Elkinson warns that some lawyers aren’t consistently examining how or why they’re using AI tools, giving rise to both ‘accidental and wilful ethical blindspots’. While the repercussions of this may vary, client confidentiality remains a particular area of vulnerability.

The need for legal oversight

Elkinson characterises the current moment as a ‘honeymoon period’ for AI. Much like the early days of social media, during this time enthusiasm may outpace oversight. When social media was in its infancy, there were documented cases of lawyers revealing confidential client information either inadvertently or inappropriately. This is where regulatory bodies such as the Solicitors Regulation Authority (SRA) have a role to play. The SRA addresses the obligations of legal professionals in England and Wales in relation to social media, emails and all communications in practice or other business capacity, including outside of work, through its Principles and Codes of Conduct which include warning notices.

Elkinson draws attention to a further issue. ‘There is the risk that legal advice could be provided by anyone using AI, and this is not limited to third parties – individuals could use it too’, he says. Without oversight by lawyers, such individuals could be exposed to financial or legal liabilities.

The importance of legal oversight and ethical accountability is made clear by the Post Office Horizon IT scandal in the UK. The case, which was the subject of a public inquiry, involved hundreds of sub-postmasters – individuals who operate a local Post Office branch under a franchise-style agreement – being wrongly accused of theft and fraud due to faults in the accounting system used by their employer. The scandal highlights the critical need for robust governance processes and careful oversight of technology-driven decisions. In relation to the case, the Post Office has said it’s ‘deeply sorry for the suffering caused to so many people by [its] past actions’ while Horizon’s manufacturer offered ‘its deepest apologies to the sub-postmasters and their families’.

Ian Pay, Head of Data Analytics and Tech at the ICAEW (Institute of Chartered Accountants in England and Wales), draws attention to a broader lesson for legal and business professionals. ‘The Horizon case is a timely reminder, with all the current talk of AI “hallucinations”, that computers have a long history of getting it wrong,’ he says. This, Pay believes, also shines a spotlight on the risks of automation bias, where users may overly rely on automated systems, including AI tools, while ignoring contradictory evidence or even their own professional judgement, resulting in serious consequences.

Elkinson says the Post Office scandal is a good example of accountability in hybrid legal environments that aren’t only multi-party but are also tech-enabled, and that GCs must adhere to the same professional obligations, regardless of their working arrangement.

Building hybrid legal teams

Macdonald, who’s a partner at Harper Macleod in Glasgow, reveals that her firm is ‘increasingly seeing mini-competitions or pitches being issued for major projects and high-value work to panel firms. These projects tend to be long-term and allow for strong relationships and partnership working between the in-house team and our firm’. Arrangements of this nature help to create a ‘unified project team across the client organisation and our own’.

The collaborative nature of such engagements creates additional benefits for in-house teams in the form of routine interaction and knowledge-sharing, reducing the need for the cost of formal instructions. ‘We call this “Colleague down the Corridor” – we are always around to help and I think that is really important for in-house teams,’ says Macdonald. ‘Conversations can be had without the clock running.’

A similar collaborative approach is echoed by Abimbola who schedules regular cadence meetings to ensure alignment and creates and maintains structured ‘knowledge maps’, which she uses for each client organisation as a method of integrating her role within a hybrid model. The maps cover governance frameworks, key risks, contracting principles and stakeholder priorities. ‘A high-performing hybrid legal function is one where clarity, communication and trust are embedded,’ she says, and one where members of the hybrid team are respected for the strengths they bring, making the legal function ‘proactive rather than reactive and genuinely business-enabling’.

The future of the hybrid function

Recent insights from the 2025 CLOC State of the Industry Report highlight how hybrid legal teams – combining in-house counsel, external providers, and ALSPs – can deliver measurable benefits. Departments that adopt centralised matter management and collaboration platforms report improvements in operational efficiency and resource management. Such platforms also enable teams to track key metrics, including effective financial resource management, matter resolution and workload distribution, all of which help to demonstrate the legal function’s value beyond a traditional cost centre.

Hybrid models further support transparency and collaboration, allowing in-house teams to coordinate effectively with external providers. Structured workflows and centralised tracking reduce work duplication, improve decision-making and ensure accountability, including for complex or high-volume matters or cases.

In addition, the CLOC report underlines that technology can act as a key enabler of legal expertise. By integrating AI, matter management tools and process automation with skilled human counsel, hybrid teams can scale capacity, manage complexity and maintain high standards of quality and governance.

The hybrid legal function represents a clear shift in how legal teams and professionals work together and how such arrangements can evolve. The most agile teams will be those that shift to a capability and connection model. They will balance human expertise, legal leadership and flexible partnerships with AI-enabled intelligence, using evolving legislative and ethical frameworks as their guardrails. And the success of such hybrid legal teams will grow out of new ways of working that embrace trust, collaboration and intelligent automation.