Law Firms Will Have to Work Harder for Hefty Profits, Competitor Predicts
Despite rich profits recently reported by some of the nation’s biggest and best-known law firms, the legal work landscape is changing for the vast majority of corporate practitioners. Faced with budget caps and ever-increasing scrutiny of what they spend, general counsels of client companies are flexing their considerable muscle to keep legal costs down, the leader of a competing “new model” law firm predicts.
Even the most successful law firms that continue to get top dollar for “premium price-insensitive bet-the-company work” will face renewed cost-cutting pressure. However, others will have to try harder to bid their services competitively for “run the company” matters that competitors can do just as well, in an environment that, increasingly, treats legal work as a commodity rather than a specialized service, according to a National Law Journal article written by Mehul Patel. He is executive vice president and general manager of Axiom Legal, a “new model” firm with low overhead.
Also adding to the cost-cutting pressure is the fact that general counsels are more willing to split up work between a number of providers rather than routinely funnel all matters to the company’s longtime law firms.
In addition to other law firms, competitors for “run the company” work include the corporate clients themselves, which are increasingly handling work in-house, and, for less-skilled legal process work such as document review and contract administration, outsourcing companies that may be located in foreign countries such as India.
“This unbundling of the typical law firm pyramid for major matters could result in GCs paying partners for expert advice on M&A deals or major litigation; paying in-house lawyers, smaller firms or new-model firms to manage the process and draft the key documents or briefs (instead of senior associates); and paying offshore entities to do the diligence review (instead of junior associates and paralegals),” Patel writes. “The cost efficiencies would be significant at each level and should far outweigh the increased administrative costs of working with three or more providers as opposed to just one firm.”
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