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By Yin Wilczek
May 29 — Corporate reliance on outside counsel has dropped to a 15-year low, a new survey shows.
According to BTI Consulting Group, a large company typically relies now on 36 law firms, compared to 47 firms in 2014.
This continues a two-year trend in which companies have slashed their law firm panels, BTI said.
There are several implications for outside and in-house counsel from BTI's findings, BTI President Michael Rynowecer told Bloomberg BNA.
In its survey, the consulting firm found that 60 percent of respondents added one new law firm to their rosters. However, this doesn't show the true picture of how deep the cuts are, Rynowecer wrote in a May 27 blog post.
The fact is that general counsel are interviewing only a very small group of law firms and these “informal and extended conversations” can last from five to eight months, Rynowecer wrote in the post.
He also noted that if firms stop meeting corporate counsel's “ever rising expectations,” their corporate work will slowly dry up with no warning or discussion. “The only hints you will have are the lack of new business, or less client-initiated engagement,” he wrote.
BTI previously released findings that large companies—in line with a three-year trend—continue to move legal spending in-house.
• There is more work available for those firms that remain on the roster—as few law firms will be splitting the same amount of business. This would compel law firms to view each major client as a business development opportunity even though there is no announced RFP (request for proposal) process;
• Clients expect more from the law firms that remain as relationships become larger and more important;
• Clients have little interest in rehiring law firms that fall off the roster—meaning the lost work will run deep; and
• Clients are constantly evaluating performance, and law firms are always competing with the other firms on the roster.
• most corporate counsel view managing a large number of law firms as a burden and these actions lighten the load;
• corporate counsel who spend less time managing their law firms have more time to focus on their business;
• corporate counsel benefit from concentrating knowledge about their company in a few core firms; and
• corporate counsel have been adding staff over the last three years, resulting in less need for outside firms and more resources to find better ways to manage outside counsel—which means using fewer firms.
Meanwhile, John Gilmore, managing partner at BarkerGilmore, a consulting firm that recruits candidates for in-house counsel, similarly told BBNA that general counsel are looking to build up their internal resources so that they rely less on outside counsel. “They are looking for the same quality individuals for us to recruit that they would normally turn to on the outside so that the quality of legal work that’s delivered to the business team is the same exceptional quality, just at a much lower rate,” he said.
Gilmore said his firm also is seeing more law firm partners trying to make that move in-house. “They're under great pressure from fee arrangements as well as just getting the business itself because so many GCs are hiring and building their own internal legal staff,” he said.
In the past, law firm partners trying to move in-house typically would not take less than a general counsel, chief legal officer or chief IT counsel position, Gilmore added. Today, however, BarkerGilmore is fielding, almost on a daily basis, calls from individuals “looking for us to help them make that transition” in-house, and “they're willing to look at positions outside of that leadership role,” Gilmore said.
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Rynowecer's blog post is available at http://www.btibuzz.com/buzz/2015/5/27/clients-drop-11-more-law-firms-hitting-15-year-low.html.
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