The Pendulum Swings Back to Outside Counsel

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What goes around comes around. Finally. Clients are sending substantially more work to outside counsel for the 2nd year in a row. The spending increases are widespread and across the board.

10 Practice Areas Slated for Growth. 5 to Shrink.

Cybersecurity and M&A Lead All Growth

Spending is increasing most in Cybersecurity as GDPR, California regulations, and public scrutiny skyrocket. M&A follows closely with the 2nd biggest increase in outside counsel spending in 2019. These 2 areas are leading in client mindshare as well as spending.

IP Litigation and Private Equity Slotted for 5% Gains

IP Litigation will see fewer matters but more spending. This means bigger matters and higher risk for clients—and more outside counsel need. Private equity firms see increased activity driving new and more spending.

Tech, Health Care to Lead the Spending

High Tech companies are planning the biggest and broadest increases. Look for these big spenders to be sending substantially more money to law firms in 9 practice areas—and expecting to pay higher rates. Health Care plans increases in 7 practice areas—as does Pharmaceuticals—and expects higher rates from outside counsel as well. Financial Services and Energy companies plan to increase outside counsel spending in 6 practices.

Plummeting Settlements Adds to Outside Counsel Spending

Clients tell us they settled 38% of their active matters—down substantially from 61% just 2 years ago. Fewer settlements means more legal fees. They face more complex and high-stakes matters than ever before—making these matters harder to settle.

Unintended Impacts and Outcomes

The shift to more outside counsel spending is placing unrelenting pressure on everyday routine and recurring matters. Clients realize they will be paying higher rates for the new more complex matters—but overall budget increases aren’t going up enough to cover the higher rate spending. This means they are forced to spend less on lower-risk matters. It also means more use of alternative fees for both new and existing matters.

Getting while the Getting Is Good

The new spending will go to the law firms who seek it out and develop the business early. Those who wait for RFPs will be left behind. This compels all client relationship managers to engage in deep discussions about strategy, current priorities, upcoming needs, and new strategies to improve settlement rates. The lion’s share of the gains will go to the firms who cannot only engage with clients but also get to clients first.

You can pinpoint where each and every practice will grow and command higher rates in the newly released BTI Practice Outlook 2019: Changes, Trends and Opportunities for Law Firms.

MBR

(Based on more than 350 in-depth interviews with top legal decision makers conducted between January 2018 and September 2018 conducted by The BTI Consulting Group.)