Professional services software provider InfoTrack recently conducted the In-House Counsel Trends for FY18 survey, which yielded some interesting results regarding how in-house teams select law firms to brief.
Of the 138 in-house lawyers surveyed, nearly 64 per cent said they generally outsourced legal services to mid-tiers, while only 32 per cent preferred global/top-tier firms. The remaining 4 per cent said they generally briefed NewLaw firms.
These results contradict recent research from the Association of Corporate Counsel (ACC) Australia, which showed that mid-tiers are losing favour with in-house teams.
The ACC found that 27 per cent of planned external legal spending was allocated to mid-tiers this year, down from 31 per cent in 2015 and significantly lower than the 46 per cent allocated to top-tiers.
InfoTrack CEO John Ahern told Lawyers Weekly this disparity could be due to the demographics of the survey respondents.
“If respondents were predominantly from large to mid-size companies, I’m not surprised,” he said.
“In-house teams in this demographic are experienced buyers of legal services and know many of the mid-tiers have similar expertise to their tier one and global colleagues.
“They are also aware that many of the larger firms have developed NewLaw offspring to provide a more cost-efficient alternative to emerging companies and they don’t see themselves in that space.”
Mr Ahern said the results reflect the importance of a firm’s value proposition.
“Over the past few years we’ve seen an increasing number of tier one and magic circle firm partners join mid-tier firms, enabling mid-tier firms to offer the specialist expertise in-house teams look for at significantly reduced fees,” he said.
“I also suspect that over time we will see more in-house lawyers brief NewLaw firms because of a ‘cultural fit’. Take a company like Uber, for example; young, innovative and agile, so it’s reasonable to expect that they will seek out legal firms with similar attributes, which will definitely point them in the NewLaw direction.”
Mr Ahern’s assessment was supported by some of the comments from survey respondents, such as: “I outsource to individuals who I know have the necessary expertise and who are commercial in their advice” and “No need to pay top dollar for quality with the number of top-tier partners joining/starting mid-tier and boutiques”.
Several respondents said they outsource to various firms depending on their relationship, while others said they appreciated the experience and reputation of the top-tiers.
The InfoTrack survey also shed light on the innovative ways in-house counsel are responding to the increasing commercial pressures they face.