With Law Departments Building More, Should Law Firms Build Less?
Every organization must decide whether to build or buy what it needs. Corporate law departments today are building more than they did and, when they buy, buying from different sources. Large law firms need to figure out the implications.
Three blog posts and an article yesterday illustrate the shifts. Until the 1980s, most corporations bought most legal services from law firms. Today, many build instead of buy: the Wall Street Journal blog in In-House Lawyers Gaining the Upper Hand, Says ACC reports on a just-released ACC survey that finds in-house counsel hiring is up and the use of outside counsel down.
When GCs do buy today, their percent of purchases from small law firms is up. Bye-Bye Big Firm in Corporate Consel reports that “corporate lawyers are flocking to small firms.” The article offers anecdote, not data, but I suspect the data would confirm the trend.
And it’s not just small law firms that get more business today. Patrick Lamb, commenting on this article in Disaggregation pushing demise of BigLaw? notes that small firms are only part of the story and that law departments also buy from law firm alternatives such as legal process outsourcers (LPO).
These shifts contribute to the flat demand and price pressure large law firms face. Smart firms will adjust how they operate. Some are already in on the action. The Hildebrandt Blog post Eversheds Pilot Contract Lawyer Service Becomes Permanent reports that UK firm Eversheds’ pilot program of offering contract lawyers is now permanent. It sounds similar to Fenwick’s FLEX and to Berwin Leighton Paisner’s Lawyers on Demand. All three offer more flexible and lower price options to corporate clients.
With all the shifts, large law firms may need to re-think their own build v. buy decisions. Historically, they favored buying. On the lawyer side, they hired associates only. Today, they hire staff attorneys and “buy” (rent) contract lawyers. And some firms continue to experiment with more flexible staffing models such as working with alumni. On the technology side, firms are moving from owning infrastructure to renting it in the cloud or at data centers.
As law firms adjust their service delivery model with legal project management, process improvement, technology, and other tools, they may also need to adjust their staffing approaches, finding ways to buy / rent more than they build.
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