The answer is: the market will work it out eventually. Clients will push for more work to be fixed-fee/outcome-based rather than billed hourly. There'll be some small firms who'll successfully grab lots of lower value clients who are willing to use digital tools to handle their work and don't particularly care about having a big fancy office in London or New York if it means lower bills (and they can then basically use the relationship they've had providing the supervised online service to be the first point of call when said client wants something that's less off-the-shelf and needs more work).

Also, an interesting example: in English litigation (where, broadly, loser pays unlike America where each side pays), maximising billable hours is not always a viable strategy for anybody if those costs aren't recoverable on success. Someone involved in large-scale commercial litigation involving disclosure of millions of documents who doesn't use algorithmic document classification (now pretty broadly accepted as normal) potentially runs the risk of a judge determining that the costs of going through all the documents by hand isn't recoverable. Insurers/litigation funders aren't going to want to risk padding the costs so much that the judge prevents them from recovering their stake in the litigation.

Customers using their own LLMs: yep, they might do that. I think the pitch from the legal LLM providers is "we've got legally trained people doing RLHF to make it more accurate" mixed in with "also we've got a partnership with Lexis/Westlaw/etc. so we can do legal research that's better than what's on the open web", with a little bit of "if you get sued for professional negligence, 'I used the legal AI thing that's built into Westlaw' is gonna be more convincing to a judge and jury (and your insurance company) than 'I used ChatGPT, yes, like the app you've got on your phone'...".