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Outsourcing In-House Lawyers

March 31, 2010 | Filed Under In-House Trends, New Services 

A trend or a tactic?

Legal Week reports on a potential deal between Thames Water and UK law firm Berwin Leighton Paisner to transfer a significant portion of the former’s in-house legal department to the firm. (The Lawyer has more here).

BLP has formed a managed services group that is focusing on this option. A BLP partner, John Bennett, sees this as a big deal:

“This is a paradigm shift for the legal sector. The project itself is very exciting and a win-win-win situation. The client gets guaranteed performance standards, reduced legal costs, budget certainty and greater focus on its core business. There are also significant benefits for the general counsel and in-house team, as well as for BLP.”

(BLP is apparently seeking talent for this group here).

Legal industry veterans will experience a bit of deja vu, and recall a full-on outsourcing of Continental Bank’s law department to the Mayer Brown firm about 20 years ago. That deal had some one-off attributes and certainly didn’t start a trend (I think the Continental Bank GC became a partner of Mayer Brown, for example).

In this case, 13 out of 20 attorneys at Thames Water would go to BLP. One of the seven remaining lawyers includes GC Joel Hanson, and the sense is this frees him up (and the others staying) to focus on higher-value, strategic counsel.

The Thames Water/BLP arrangement could go from an outlier to a pacesetter. But you really need to understand the staffing model of the law department (and a roughly how it benchmarks headcount-wise against the competition). Also, the business dynamics of the corporate client may require it to consider this approach across other shared services such as finance, HR and IT. This sort of deal has been done with IT groups for years.

Kudos to Thames Water and BLP for exploring different ways to deliver legal services. It’s a reminder that some of time spent focusing on alternative fee arrangements can be used to pull back a bit so the bigger picture can be taken in.

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Good News for Law Firms?

February 2, 2010 | Filed Under In-House Trends, Cost Control 

Upon first glance, this headline from a story in the Phoenix Business Journal would appear to give managing partners some reason for cheer:

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A return to the Continental Bank strategy of the 1980’s?

Probably not. After a closer look, you see that what law departments are doing is to cut costs. To be fair, the author quotes a survey from last year that showed budget strategies included:

.. a reduction of noncore spending in areas such as travel, meetings and training. Legal staff compensation also has been impacted by salary freezes or minimal increases.

While those strategies included headcount reductions over the last 18 months, most companies are still focusing on finding cost cuts outside, especially with their external law firms. Richard Susskind noted last week that London-based companies are looking for substantial savings:

…many general counsel say that they are under pressure from their boards to cut legal budgets severely from between 20 to 40 per cent. Naturally, they are turning to their law firms to ask them to rethink their hourly rates and charging models.

It’s clear to anyone who has managed the budget of a law department that 20%+ percent cuts don’t come just from cutting back on travel and training. And beyond a certain point, cutting internal headcount garners only short-term savings, allowing some work to migrate back outside, and impacting risk control and compliance efforts.

So is there good news for law firms?

Yes, in the sense that most GCs are probably more open to new ways of doing things, at lower unit costs. This includes approaches from firms other than their current incumbents.

No, in the sense that “same wine, different bottle” probably won’t get past round one and onto the short list.