In-house teams to spend less on law firms, counsel, suggests survey

Wednesday, 27 April 2016 By Legally India In-house counsel

Law firms may lose company referral business if the predictions of general counsel (GC) surveyed by event management company IDEX Legal and information firm Thomson Reuters come true.

The two companies surveyed over 65 Indian general counsel (GC) and other senior counsel in March 2016.

74 per cent of the participating GC declared that they planned to decrease the use of external counsel over the coming 12 months.

Around 83 per cent stated that they intend to increase the size of their legal team over the next 12 months.

This finding isn’t a new trend – in 2015’s version of the survey, 56 per cent of the GCs had reported that their legal team had expanded in the last 24 months.

Law firm fee currently eats up more than one-third of the in house legal budget of the GCs companies.

Law firm allocations

Survey participants said that on an average 34 per cent of the total spend of their departments consisted of fees of engaging external counsel.

The largest share, 47 per cent of the budget, was spent on the in-house legal teams themselves, with the remaining budget going to “non law firm vendors” (see graphic below).

Comments

Guest 28 Apr 2016, 03:26

+0 -0

Just 65! Too small a number to be called a 'trend'!

kianganz 28 Apr 2016, 05:54

+1 -0

I'm not a statistician, but I think a sample size of 65 can be fairly representative if they are selected properly and scientifically (which probably didn't happen here).

In any case, it's an interesting finding that's not unsurprising...

The Dude 28 Apr 2016, 07:02

A sample size of 20 is sufficient for making statistical predictions.

2 cents 28 Apr 2016, 11:56

More interestingly, it is hard to digest that 34% of the total spend of in-house departments surveyed consist of fees of engaging external counsel, while 47% of their budget is being spent on themselves. Typically, law firms bill hefty amounts on deals and litigations and one wonders how in-house counsels justify spending more on themselves. Further, if one factors the bills of Senior Advocates (who charge more than the solicitors), the survey findings don't seem to add up!

Just saying. I am no expert. However, I can certainly say that in-house counsels will continue to pay external litigation counsel because they cannot handle litigation merely because they "know the facts".

In House Counsel 28 Apr 2016, 05:10

+2 -1

With the price war unleashed by the law firms, it's a major boon for GCs. Of course, most companies in India (MNCs included, not just Indian companies) have the L1 mentality, and don't care much about paying a premium for quality. This shows even in recruiting, where highly skilled but expensive candidates are routinely rejected for less qualified but cheaper candidates.

@Kian - one assumption you may want to explore further is whether GCs have any discretion in the legal budget. Most companies impose across-the-board cost reductions in uncertain times, so couldn't care less what the specific dynamics of the legal team are. A company with a large litigation roster would obviously find it tough to cut costs beyond a point, similar to a very acquisitive one. The question therefore should be whether the GCs have been asked to reduce spend, not whether they intend to!

kianganz 28 Apr 2016, 05:53

Very good point. I'm under the impression that most have to request their budgets at the beginning of the year, and most will be under pressure to cut costs, as every cost centre in a company usually will be.

In House Counsel 28 Apr 2016, 06:11

Exactly. Very few GCs (would say none, but I can think of a couple of exceptions) would volunteer to cut budgets when they know (a) law firm rates usually rise, (b) salaries HAVE to rise for the team and (c) the CFO will chop it down a few percentage points as a matter of principle. Even at the best of times, budget discussions are more fraught than any merger negotiation.

Fun house In house 28 Apr 2016, 08:40

+6 -4

Working in-house is no different from working in a law firm, except for the fact that in law firm, there exists an artificial pressure on the associates by way of close deadline and charging companies by hours at exorbitant rates.

GCs/Legal heads are well aware of this phenomenon and building up their teams to get the work done at reasonable expenses.

Not In House 1 May 2016, 10:10

+2 -2

Those "artificial deadlines" are mostly on account of in-house setting arbitrary deadlines - deadlines for sending documents which they will not review for three days or on which they come back with proof reading errors or 30,000 feet above sea level comments. This is, of course, broad-brush and exceptions to this rule do exists - but they are few and far between.

GCs/legal heads may very well be aware of this phenomenon but if they wish to leave home at 5pm (along, of course, with weekends not working) and spend quality time with their wife / children then they will continue to outsoure work to law firms. In any event, anyone going up the ladder in a law firm would not leave to join in-house for no other reason but because its considered the easy way out.

Really? 2 May 2016, 05:58

+0 -1

LOL. How many GC's do you work with dreamer?

Fun house In house 3 May 2016, 11:06

If that be the case, then legal departments would not have been expanding and "lazy" in-house guys would have smilingly passed on the "arbitrary deadlines" to your esteemed law firm. Around 70% of legal work is now done at in-house level, albeit within reasonable deadlines.

You need to understand the commercial sense and changing scenario of in-house departments before forming any opinion.

gupta bros 29 Apr 2016, 07:19

plenty of corporates - i can tell u 5 - now taking in laterals with experience in a "law firmy" kind of role which usually does not have day to day relevance to the kind of work they would be expected to do.

Name and Alias 29 Apr 2016, 08:46

Why do they look for such people if they don't have the relevant experience for the role?

anon4 2 May 2016, 05:06

is there a real difference between GC and Head of legal department?

Commenting is closed for this article.