Posted by: johnocunningham | March 9, 2014

Trends in Law Department Spending

An article  by Lauren Chung in the December-January issue of Today’s General Counsel offered up an interesting summary of findings from the 2013 HBR Law Department Survey, particularly with regard to trends in law department spending.

First, the article noted that legal spending for staff and resources inside of company law departments continues to increase much faster than anemic growth in outside counsel spending, a signal that law departments are continuing to bring more legal work in-house as a cost containment measure.

Second, the article noted an increase in the percentage of respondents using the typical array of methods being used for control of outside counsel spending (such as the use of alternative fee arrangements, project management and budgeting), but it also noted a particularly strong percentage of companies using two newer methods that have grown rapidly in recent years:

  • Pushing law firms to use legal process outsourcing (for projects relating to due diligence, document review, e-discovery, predictive coding and other “assembly line” tasks); and
  • Increasing the use of regional and local boutique firms (a trend noted on this blog just last month).

More than 50 percent of all companies are now actively pushing their outside firms to do more outsourcing of component tasks involved in sizeable litigation or transaction matters, and nearly 50 percent are increasing the use of small to mid-sized local and regional firms to save money on matters appropriate for those firms to handle.

For all law firms, the challenge now is clear. You have to communicate your commitment to keeping costs down, and you have to demonstrate that you can do it by employing process improvement, project management, outsourcing and logistics skills while slashing overhead and extraneous costs that clients do not want to pay for (such as expensive offices lined with leather, mahogany and rare art).

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