Law Practice Management

Microsoft Has Cut Legal Budget By 15%, Asked Outside Counsel to Trim Fees 10%

Over the past 18 months, amidst a global financial crisis, Microsoft has cut its legal budget by 15 percent, laying off 5 percent of its in-house employees in order to do so.

Before the cuts, the software Goliath had an annual legal budget of $900 million and 1,050 employees in its legal department, including 450 attorneys, reports Legal Week, relying on information from the National Law Journal.

In response to the recession, Microsoft also has asked outside law firms to cut their fees by 10 percent and is moving away from billable hours as a basis for billing, the company’s general counsel, Brad Smith, tells Legal Week.

The company now has a list of 10 preferred legal services providers in the United States, down from 16 last year. Among those now on the list are Cadwalader Wickersham & Taft; Covington & Burling; Orrick Herrington & Sutcliffe; Sidley Austin; and Weil Gotshal & Manges. Off the list are Arnold & Porter; K&L Gates; and Sullivan & Cromwell, reports Legal Week.

Smith tells the National Law Journal that he saw two basic reactions from law firms dealing with the dismal economy: Some cut their rates to maintain or even increase their market share, while others held the line and lost smaller clients.

“Firms that decided to maximize market share will be the biggest winners,” he predicts. But, asked by the NLJ whether the worst is over financially he says it’s too soon to say.

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