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The Margin Sandwich: Where the AI Services Dollar Lands

The article introduces the 'Margin Sandwich' framework to analyze AI-driven restructuring of the professional services value chain. AI-native firms can deliver services at 2-3x lower prices and 4-8x lower internal costs compared to traditional firms. The $3.9 trillion global professional services market will be redistributed across three layers: infrastructure (floor), middleware (middle), and AI-native full-stack firms (ceiling). The middle layer is squeezed from both sides, while the ceiling benefits from structural advantages in capital structure, lack of legacy, and native AI architecture.

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The Margin Sandwich: Where the AI Services Dollar Lands
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Key points

  • AI-native firms deliver the same legal memo at 1/2 to 1/3 the price and 4-8x lower internal cost.
  • The $3.9 trillion professional services market is being redistributed across a three-layer 'Margin Sandwich'.
  • Middleware (AI wrappers and legacy platforms) faces compression from both model companies and AI-native firms.
  • AI-native firms built from scratch have structural advantages over incumbents retrofitting AI onto legacy systems.

Highlights and analysis are generated automatically and may contain errors. Check the original source.

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