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Bar News - November 16, 2012

Corporate Counsel Looking Inside & Out to Cut Costs

A survey of 200 chiefs of corporate law departments indicates that to keep down their legal costs, corporate counsel are renegotiating outside counsel fees, shifting work to lower-priced law firms, increasing in-house capacity, opting for alternative service providers and using new technology.

"Chief legal officers are not waiting for law firms to change their business models," said Daniel J. DiLucchio, of Altman Weil consulting firm, which conducted the survey. "They are taking change into their own hands in 2012 to create a new internal value proposition."

Among findings are from the Altman Weil 2012 Chief Legal Officer Survey.

Cost Control and Efficiency

The survey asked chief legal officers (CLOs) what they have done in the last 12 months to control costs.

The number one answer, from 71 percent of respondents, was to negotiate price reductions from outside counsel. In addition, 47 percent of law departments shifted work from law firms to in-house lawyer staff; 41 percent shifted law firm work to lower-priced firms; and, 36 percent reduced the total amount of work sent to outside counsel. Ten percent of CLOs were reducing the number of law firms they contract with.

Law departments are economizing through internal changes as well. Sixty-three percent of departments improved the efficiency of their own procedures to cut costs; 36 percent shifted in-house work from lawyers to paralegals or other paraprofessionals; 35 percent used contract lawyers; and 25 percent of law departments outsourced work to non-law-firm vendors to save money.

Price reductions and shifting work in-house were the most effective cost-reduction strategies, respondents said.

Staffing and Budget

In 2012, 46 percent of law departments increased their internal budgets; only 28 percent reduced their internal spending. More growth is ahead: 38 percent plan to increase their in-house lawyer workforce in the next 12 months; only 7 percent plan to shrink their departments this year.

In the next 12 months, 29 percent of law departments expect to decrease their use of outside counsel, compared to 14 percent that foresee an increase.

Inside – Outside Relationship

Chief legal officers have clear preferences when it comes to choosing law firms. Knowledge of their industry was their top factor; other influencers were referrals from colleagues, personal contacts, and written material demonstrating a lawyer’s expertise.

Read the entire survey.

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