find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Firms face ‘cut-throat’ competition as in-house budgets shrink

Firms face ‘cut-throat’ competition as in-house budgets shrink

Trish-Hyde

In-house counsel have slashed spending on external legal service providers and are pressing firms for a better deal, a new report has shown.

The In-house Report: Benchmarks and Leading Practices, produced by the Australian Corporate Lawyers Association (ACLA) and Corporate Lawyers Association of New Zealand, showed that median external spend of in-house legal teams has fallen 25 per cent since 2012.

“[This has] the makings of a cut-throat environment where firms have to work harder to maintain a share of shrinking legal budgets,” said ACLA CEO Trish Hyde (pictured). 

The average external spend across a wide range of organisations, including publicly listed companies, government and the not-for-profit sector, fell from $2.2 million to $1.8 million.

As 89 per cent of in-house counsel’s external budgets go to law firms, this is where the brunt of the cuts will be felt.

Organisations have reduced their reliance on external firms by strengthening internal legal teams and switching to less costly alternatives such as direct briefing the Bar and using legal process outsourcers, Ms Hyde said.

“This trend will accelerate as the in-house profession continues to mature and becomes more adept at actively managing costs and extracting better value. 

“The good news for the firms able to adapt to these new market conditions is that there is an ongoing work stream, provided they can meet higher client expectations.” 

Practice areas that will be least affected by the cuts are litigation and alternative dispute resolution, as these are the most commonly outsourced.

Only 51 per cent of organisations said their main firm provided advice at a reasonable price and only 60 per cent said quotes were realistic. One in 10 in-house counsel were dissatisfied with their primary law firm.

“[This] should be a wake-up call for law firms,” Ms Hyde said. “In the current environment, it’s no longer acceptable simply to coast on the historic strength of a relationship.

“Law firms need to always be focused on what their clients want, innovate where necessary and constantly validate why they deserve the business.”

Time billing is unpopular

The demand for alternative fee arrangements such as blended rates, volume billing, value-based billing, fixed pricing or risk-reward billing is growing, according to the report. 

Only 7 per cent of in-house counsel surveyed agreed that time-based pricing models were the best option.

“Too many firms remain shackled to time billing, even though it’s an outdated formula that clients find deeply unsatisfactory,” Ms Hyde said. 

“The legal profession has been talking up the importance of alternative fee arrangements for many years. Yet the rhetoric has simply not been matched by action.”

Twenty-nine per cent of organisations being offered alternative fee arrangements said the experience was a failure, indicating that firms have a lot to learn.

“[It’s] disappointing that the profession has ... yet to develop alternative fee arrangements that consistently work well”, said Ms Hyde. 

“A pricing formula that bears no relationship to value or quality does nothing to encourage innovation or excellence in legal services.”

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Firms face ‘cut-throat’ competition as in-house budgets shrink
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...