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UNSTABLE
ECONOMY DRIVES LEGAL
BUSINESS MODEL PARADIGM
SHIFT |
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“Those firms that have
found ways to produce
good enough services for
less cost have become
more attractive to
corporate counsel,
creating pressure on
other outside counsel to
find ways to reduce the
cost of their services
as well. As firms find
it increasingly
necessary to compete on
price, they are driven
to find standardized
solutions to their
clients' legal needs at
prices consistent with
their clients'
expectations and their
own requirements.”—
Trotter, Michael H.
“Legal services have
transformed into legal
commodities.”
Daily Report,
Oct. 22, 2008. |
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As many legal services
have become standardized
these days, those
services begin to look
more like legal products
or commodities. Large
legal institutions have
begun to resemble large
institutions in other
areas of business,
requiring the same
cost-cutting, lean
reactions to maintain
and compete for
business.
Differentiation of
services is disappearing
except in the most
specialized areas, as
proven by increasing
fragmentations of large
law firms, making price
the overriding
consideration for many
clients. According to an
American Corporate
Counsel Association
survey, 86% of general
counsel surveyed cited
external legal costs as
their primary concern.—
The Economic Times.
To date, law firms have
responded to GCs’
demands for lower legal
costs by pushing work
further down the ladder
to new associates,
paralegals, and
secretaries in an effort
to maintain the
traditional legal
business system, yet, in
the face of a global
recession, more drastic
changes are necessary.
Facing legal department
budget cuts and an
increasing volume of
legal matters, GCs have
been forced to allocate
fewer resources across a
growing pool of legal
matters.
Emboldened by pressure
to keep legal fees down,
GCs have responded by
bringing more work
in-house, using smaller
firms, demanding flat
fees and discounts,
challenging invoices,
and bidding out more
commodity-type work.
Just as a savvy
businessperson expects a
television manufacturer
to run a lean
manufacturing operation
capable of supplying the
cheapest, highest
quality television set,
so do GCs now expect law
firms to be cutting
costs in any way they
can instead of just
passing on the overhead.
Although headlines
boasting of new
associates receiving
salaries ranging from
$120,000 to $160,000
merely perpetuate GCs’
perception that outside
counsel have ignored
their concerns, law
firms are feeling the
pinch, too. Facing lower
realization rates, staff
reductions,
restructuring, and even
dissolution, law firms
are also scrambling to
adjust to the new
economic environment.
So, how will your legal
practice or department
respond?
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THE LEXPOINT ADVANTAGE |
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qualified overseas
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as your sole contact and
project manager,
Lexpoint’s work flow
process blends seamless
communication with
stringent quality
control standards,
resulting in
U.S.-quality legal
services at an unmatched
price. In addition to
helping legal
departments reduce their
overhead and effectively
resolve all of their
company’s legal matters
without exceeding their
budgets, Lexpoint
enables law firms to
continue offering
high-quality
commoditized services
for a lower price,
improve their
profitability, and to
attract new business by
telling GCs, “I
understand what you want
me to do and I am doing
it.”
To learn more about the
Lexpoint Advantage,
click here.
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Recent Developments |
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Recession portends the end of inefficient, oversized law firms, billable hour.
Outsourcing document production to India saves Rio Tinto $1.5 million on one transaction—one-seventh the cost of outside counsel.
In-house counsel/large corporations advise their outside counsel/BigLaw to work with Indian attorneys or lose their business.
In order to cut costs, 38% of FORTUNE 500 legal departments now outsource legal work to lower-cost small- and mid-sized law firms.
Despite rhetoric, 75% of polled CLOs have “no confidence” that large law firms are serious about adopting a new, lower-cost legal model.
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