AI Drives Corporate Insourcing Wave: Companies Replacing External Vendors with In-House Teams
Ethan Mollick documents a confirmed trend: large enterprises are increasingly replacing external vendors in legal, marketing, and software development by hiring small internal teams that leverage AI to produce equivalent or superior output. The motive is value capture — rather than paying a vendor who uses AI to serve you cheaper, companies hire the team and keep the margin. The shift happens gradually as vendor contracts expire, with hybrid outcomes likely at equilibrium.
Why It Matters
This is a structural demand shift for AI-first service providers, including agentic consultancies: the customer set of "companies that want to buy AI output" is being replaced by "companies that want to build AI capability in-house." Service businesses must reframe from output delivery to capability transfer to remain relevant in this dynamic.