Clients Bring $4 Billion In-House: For All the Wrong Reasons

Corporate counsel are shifting big-time spending back in-house—resulting in $4 billion moving in-house*. This also marks the 8th year of legal spending moving in-house out of the last 10, the second largest move in-house in 16 years.

Top legal decision makers make no excuses—they want to save time and money. They tell us of increasing rates, runaway scopes of work, and an inability to leverage the relationships they have in place to benefit from their current firms’ institutional knowledge.

The move to save money may not come as a complete surprise. Just over one-half of clients think ­law firms don’t want to or can’t change. The big move in-house comes one year after the top hourly rate in the market hit $2,000 an hour. The headlines around increases in associate salaries also contribute to the aura of higher legal costs—whether real or not. Everyone can make the leap from higher salaries to higher hourly rates.

The work moving in-house is primarily in the following areas:

  • Commercial Litigation
  • IP Litigation
  • Investigations
  • Environmental
  • Real Estate
  • Smaller M&A
  • Licensing

This continuing flow of legal dollars in-house compels every law firm to step back and really look at the world from their clients’ point of view. Bringing work in-house is not easy. Clients have to recruit, hire, train, and invest in an in-house attorney and support staff. Clients have to feel strongly motivated to make this kind of investment and are sending a clear signal they want more value and lower costs.

You can add value and save your clients money even when they bring the work in-house. Reach out to them and offer to help educate these newly hired attorneys—maybe even develop training material. Get feedback about your client’s plan and start offering up potential candidates from your network.

Perhaps most powerful of all—find out why your clients are moving work in-house and where. Polish up your Alternative Fee Arrangement skills. Start thinking about secondments to meet your clients’ needs. Turn the move in-house into a business development opportunity.

Clients have now established a long history of in-sourcing work. This often feared trend presents one more opportunity to help your client. The firms who openly engage their clients about plans and intent will be the firms who find hidden work in one of the most unexpected places.

MBR

*Based on BTI research conducted on a rolling basis between February 2016 and August 2016. BTI conducted more than 330 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.