This analogy really only works assuming that maintaining [insert company]'s institutional expertise requires N engineers to maintain individual lines of code manually.

This is already showing not to be true with AI. Institutional knowledge is not the same as knowing how to implement low-level software details. Even today, every company does not need engineers to remember git cli syntax by memory, how to write parsers for JSON, or write the large amount of boilerplate from scratch that is at every software company. Most company's already hire engineers who have zero experience in the existing code base, yet they are productive despite this lack of institutional knowledge. For a company to maintain institutional knowledge they may only need N/K engineers.