General counsel look for alternatives as law firm fees continue to soar

Strategic Legal Advisor's launch survey finds general counsel under pressure.

Keeping a lid on costs is the most pressing issue for general counsel, by some distance. Two-thirds of the 81 general counsel who took part in the survey mentioned cost control as one of their three main challenges, with 33% describing it as their biggest single issue. Meanwhile, a little over a quarter of respondents say that defending their teams from cutbacks is one of their key concerns.

Overall, legal budgets look set to remain static, although there is considerable variation between companies. While 11% expect to see a significant (10%+) increase in their legal budgets and a further 22% expect a slight increase (5%+), very similar proportions of in-house counsel anticipate the opposite, with 7% predicting a significant decrease and 22% expecting a slight fall in their budgets.

Against this background, many feel that their external advisers are not helping. Despite the obvious cost pressures generated by the economic downturn, more general counsel expect their bill for external legal advice to increase either significantly (15%) or slightly (26%) than expect it to fall, either significantly (11%) or slightly (22%).

With 46% of respondents saying that law firm partners charge them more than £350 (€450) per hour for routine work and 77% saying they are charged the same for transactional instructions, it is perhaps not surprising that 70% describe transactional fees as being too high and 63% saying the same about the cost of routine legal work.

There is growing evidence that corporate clients are kicking back against relentless fee increases. Thirty-three percent of general counsel say they frequently or always challenge the bills they receive from their external advisers and 43% say this usually achieves a saving of between 11% and 20%.

It may also explain why many heads of legal are looking at alternative options to law firms, such as legal process outsourcers (LPOs). Almost six in 10 general counsel estimate that a quarter of their workload is routine 'commoditisable' work and a further 27% put that proportion at closer to half of their caseload. Consequently, 41% would be happy to put some of this workload in the hands of an LPO in their home country, although notably fewer (28%) would be comfortable sending it to an LPO overseas.

Many general counsel also look set to retain more of their work in-house as technology enhances their ability to handle major projects in-house and to access the knowhow required to keep sophisticated jobs in-house. As a result, despite the budgetary pressures they face, 22% of general counsel surveyed by Strategic Legal Advisor expect their departments to grow further in size, compared with just 4% who expect them to shrink.