BigLaw and the Big Three
October 31, 2008 | Filed Under Cost Control, Law Firm Trends
Here in the Midwest, we are witnessing the end of the domestic auto industry as we know it. Whether or not GM and Chrysler merge in the near term, The Big Three may become the Big One (when you throw Toyota and Honda into the mix).
This has been coming for years, and the problems have been apparent for decades.
How does this relate to BigLaw?
By comparison to the domestic auto companies, it’s bracing how quickly a large law firm can race from robust to go-bust. Once things start to hit the press (such as with merger discussions or partner defections), what was once a months-long process can now be over in weeks.
This results in an open question for BigLaw firms:
Is it management or the model?
Managing partners want to believe it’s the former. Some bankers and clients are starting to ask: what if it’s really the latter?
Next week, a look at why this matters to GCs. Our working title:
“The Con in Convergence.”
In these scary times, Halloween seems tame by comparison…
Managing Outside Counsel Survey - Part II
October 24, 2008 | Filed Under Cost Control, The Client Speaks
Here is a short follow-up to my previous post that covered the ACC/Serengeti study released this week.
All five items I highlighted are important. The one that caught my eye, however, was the part about less work going to outside firms (it’s at the top of page 4 of the press release). At first blush, you’d think this is merely work being brought in-house. But there may be more going on here. If inside resources are relatively flat (a high likelihood today), then in-house counsel are doing something. Among many possibilities, here are four that come to mind:
(a) pulling back on more generic work (redefine as low-risk and perhaps non-legal);
(b) trying to re-use or re-cycle some work, and have it done by non-legal personnel (including clients);
(c) using technology to automate or streamline work; or
(d) have it done by “non-law firm” firms, whether here or offshore (flat rate or fixed price).
Whatever the reason, perilous times does one thing: it focuses the mind.
While I will develop this observation a bit more down the road, its significance to me boils down to this:
Some work taken away from law firms isn’t coming back any time soon.
And if this is indeed a growing trend, it has profound implications for law firms and legal departments alike.
Managing Outside Counsel Survey
October 21, 2008 | Filed Under Cost Control, The Client Speaks
The Association of Corporate Counsel and Serengeti Law are using the occasion of ACC’s annual meeting to roll out the results from their 2008 “Managing Outside Counsel Survey.” The press release is here.
A few highlights today, and a couple of comments later this week.
Survey items that caught my eye:
1. 40% of outside counsel report terminating a law firm relationship.
2. Convergence appears to be slowing down.
3. Clients seem to prefer hourly rate discounts to alternative billing schemes.
4. Hourly rates are still increasing (bad news), but less work is going to outside counsel (reality check).
5. In-house counsel are using more purpose-built technology to monitor outside spending, but this is still in its early stages.
All these items are of interest; but I think one is more intriguing than the others. Guess which and see if you’re right on Thursday.
The American Lawyer has its own take here.
This had to be a discussion item at many of the receptions going on in Seattle nightspots this week. I wonder if any sponsoring firms have a sense of humor and are only serving light beer?
Post-Time for Billable Hours Reform?
October 20, 2008 | Filed Under Cost Control, Law Firm Trends
When the shop-worn billable hours topic emerges from legal publications and goes mainstream, you have to take notice.
Today’s Washington Post clocks it rather well, in an article written by Dion Haynes (Another excellent article by the same writer that mentions what Howrey has done in response to client demands is here). An excerpt:
New efforts to jettison hourly billing are being driven by in-house corporate lawyers, who say they have grown frustrated seeing fees to outside firms soar even as they slash their own costs. They said they want more certainty in their legal budgets and worry that outside firms are spending unnecessary amounts of time on their matters.
The article goes on to mention the Value Challenge of the Association for Corporate Counsel; this subject is certainly on the agenda at ACC’s annual meeting, being held this week in Seattle.
More from the Post:
In a recent survey conducted by the Arlington-based Corporate Executive Board, a for-profit organization that does research on best practices, 800 in-house lawyers said they spent 50 percent more last year on large outside law firms than in 2002. They said the hourly rates they paid jumped 70 percent between 1996 and 2005.
Sort of like Moore’s Law in reverse; there’s an interesting graphic showing 2006-2007 median legal spend trends here.
Heck, even Simpson Thacher is doing so-called “bailout” work for the Treasury on a fixed-fee basis.
It will take GC and in-house leadership for change to take place.
However, law firms thinking that this is somehow a financial meltdown related dust-off of the billable hours banner may find themselves surprised down the road.
A VC Take on the Economy
October 10, 2008 | Filed Under Cost Control, Crisis Planning
Some of the smartest guys in the room at Sequoia Capital have briefed their portfolio companies on how they see the economy, and what to do about it.
A copy of the PowerPoint has been posted to the Internet. You can view it below, and it works quite well on full-view when you click on the movie screen icon on the bottom right.
Slides 47 and 53 have a good summary of the VC Rx.
Certainly the first and third slides aren’t something you usually see in a mainstream corporate briefing.
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