Law Practice Management

Facing ‘Unrelenting’ Price Pressures, Law Firms Turn to Outsourcing, Innovation

Law firms faced with “unrelenting” pricing pressures from clients are beginning to outsource basic legal work, create new categories of lawyers, and take a “loss leader approach” to pricing.

In an article for the Am Law Daily, Dan DiPietro and Gretta Rusanow of Citi Private Bank’s Law Firm Group base their conclusions on roundtables with managing partners at more than 150 law firms, both here and in London. Law firms are trying to save money so they can compete on price, the article says, and they are trying to please clients with approaches that go beyond alternative fees and discounted rates.

Some law firms have already moved back-office functions to cheaper locations, either within the United States or overseas, according to DiPietro and Rusanow. Sometimes the firms are hiring offshore service providers and sometimes they are creating their own captive offshore operations.

Now some law firms are going further, the article says, and are beginning to outsource basic legal work. Within firms, new categories of lawyers are being created to do work at lower cost than traditional partner-track associates.

Firms taking the “loss leader” approach heavily discount fees early in the client relationship to get a foot in the door. The hope is that the client will accept higher fees after it sees a difference in quality. Some firms are also offering discounts to start-ups in hopes of a long-term profitable relationship.

Firms are also offering “value beyond price,” the article says. In some cases, associates are sent to work in the offices of corporate clients for a negotiated price. Some clients are being offered a set amount of free telephone consultations. Other firms are offering “knowledge tools” such as a database of client work product, or access to research help.

“Firms are embracing the challenges they’ve faced in this soft demand market,” the article concludes.

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