Recently, I had the pleasure of speaking with Nancy
Jessen, SVP at Legal Business Solutions at UnitedLex about a survey recently
completed with ALM on legal department insourcing, entitled “Build or Buy? The Evolution of Law Department
Sourcing”. Our chat was really interesting, different
than what I expected. Here’s what I learned.
firms – the rise of competitive pressure, rate
squeezing, the need for better project management so as to be able to
not only price and staff matters effectively but also turn a profit. We also know of the impact of legal
technology in the e-discovery space, in contract drafting etc. and all of the
many AI applications that are threatening to take jobs away from lawyers. We
think of these issues and many others as law firm issues rather than legal industry
issues and look to the alternative model law firms, and outsourcing as the
answer or at least on the path to legal market euphoria. Nancy, and some of the ALM survey findings,
point out, however, that legal departments face many of the same issues.
pressures and expectations that almost every other corporate function faced — cost
management, return on investment, justification for new resources, and
technology-driven efficiency to name a few. Then, 2008 hit and everything changed. Not
just for firms, but for in-house departments, too. In-house teams were also
being forced to demonstrate value, provide legal recommendations that supported
business objectives, create internally efficiencies AND strategically direct external
counsel. A difficult task for
in-house counsel, just as it is for law firms trying to make sense of the new
world order in legal.
litigation software, supervising external counsel and overall legal spend is
table stakes for in-house departments. Like their firm counterparts, today,
almost 10 years later, General Counsels are focused (or trying to focus) on
demonstrating value by increasing operational efficiency of the in-house team,
from balancing high-cost/low-value staff against low-cost, inexperienced staff;
dealing with the constant fear of the next budget cut – something Nancy referred to as “death
by a thousand cuts;” or the hardest part of it all, insourcing/staffing
strategic lawyers who can sit with the C-Suite, make business decisions, help
the company grow, avoid risk and support initiatives with the highest and best
Intelligence 2016 Corporate Counsel Insourcing and Outsourcing Survey, highlight
some of these moving parts:
In 2017, only
26% of law departments expect their annual operating budgets to decrease, while
32% expect an increase, and 42% expect it will stay the same.
In 2016, 34%
of respondents said the number of full-time, in-house lawyers stayed the same,
and 52% plan on maintaining that level in the next 12 months, indicating that
increased insourcing within law departments may be slowing down.
In 2016, 39%
of legal departments surveyed decreased their overall use of outside counsel,
and 43% estimate they will do the same in 2017. Similarly, those who said their
utilization of outside counsel would not change increased from 43% in 2016 to a
projected 47% in 2017. Only 4% said they would increase the use of outside
counsel in 2017.
Alternative Service Providers, 57% of respondents send work to ASPs. Of those,
25% said they plan on increasing the number of ASPs they use in the next 12
months, and 28% said the amount paid to ASPs will increase in the next 12
budgets, doing more with less, engaging technology, and resourcing efficiently.
their paradigms, it seems the in-house departments are also looking to shift
the paradigm. We see this in some small ways, with bold statements from in-house
departments wanting firms to increase diversity. In-house departments can do
more to change the archetype, but whereas firms have to deal with the
complexity of the partnership models, in-house teams face obstacles around
C-Suite buy-in, and personal reputation.
question is, how can you best be strategic, deliver value, increase
efficiencies AND operationalize all of it?
Would you buy it, or build it?