One reason legal costs are high is that the customers – general counsels – are cut of the same cloth as their BigLaw suppliers. I’ve predicted that CFOs would need to step in to wrestle control of legal costs (see, e.g., Who’s Failing – Clients or Law Firms?, Aug 2006) . Now, some evidence for that. 

Trials and Tabulations (CFO Magazine, 1 Dec 2008) is sub-titled “Want to advocate for lower legal fees? A number of new options deserve a hearing.” This article is a good first step for CFOs who want to understand how best to control legal costs. Options discussed include:

  • Keeping more work inhouse
  • Shifting work from BigLaw to smaller and regional law firms
  • Re-using documents (“knowledge management” unsaid)
  • Fixed fees and alternative billing (including performance bonuses)
  • Volume discounts
  • Competitive bidding
  • Offshoring (legal process outsourcing)

I’m disappointed this list stops there. As I discussed last month in Law Department Operations Survey Shows GC Apply Limited Cost Saving Tools, there is way too much focus on pricing, purchasing, and payment terms and not nearly enough on process, that is, how lawyers actually do their work. Corporations have inserted themselves deeply into the practice of medicine to save money – how much longer before they do the same to lawyers. Of course, it will have to be the CFO and not GC who does this.

[Side note: the article cites the recent Fulbright litigation study, which found only 2% of companies offshore legal work overall but that 8% of large ones do so. It suggests that McDermott introduced staff attorneys last year “in part as a response to the increasing amount of work competitors were sending off shore.”]