Before COVID-19 took hold in the United States, legal departments rarely relied on outsourcing and were moving more work in-house. Legal experts suggest this trend will be here to stay even after the end of the recession because of the increasing sophistication of corporate teams and overall cost savings.
According to a survey conducted by the Corporate Legal Operations Consortium in 2019, 28% of respondents said they shifted work in-house, compared to 20% who outsourced more legal work.
The results followed up on a similar CLOC survey conducted in 2018, and show the recent and ongoing trend in the legal department toward relying more on in-house counsel-like legal operations, and on alternative legal services providers.
Legal experts told Law360 they think the trend will go beyond the pandemic for many corporate teams, as it is a notably cost-effective substitute to outside counsel.
“I do think the trend will continue, and it might even be a little easier to pick up talent right now from a law firm or from a corporation because some corporations haven’t been doing as well,” Audrey Rubin, president of Rubin Solutions and a senior adviser at BarkerGilmore LLC. told Law360.
Rubin told Law360 the trend might decrease in popularity temporarily as law departments zero in on tackling urgent matters and changes caused by the pandemic, such as how to safely reopen their businesses.
But soon, many companies and legal departments will likely take a closer look at and reevaluate their budgets.
“That’s another reason why you want to bring more work in-house if you can,” Rubin told Law360.
A former general counsel at General Electric Co. Alex Dimitrief told Law360, he doesn’t see the results of the survey as “a zero-sum game” between law firms and in-house departments. Instead, he sees the trend as an opportunity for firm leaders to hone in on specialized work.
“Law firms would be well-served by focusing on the right types of work where they can deliver great value to in-house departments in a way that isn’t cost-ineffective to a company,” he told Law360.
Around 140 companies of various sizes in 30 industries and 17 countries took part in the CLOC survey. About half of the participating companies in the survey kept the ratio of work between outside counsel and in house counsel the same, but it varied with the size of the business from 67% among large companies and 30% among small ones.
Legal departments have been able to take more work in house trough the automation of legal work, with 76% of companies using an e-billing system, 69% e-signature, and 60% document management, according to the survey.
CLOC also looked at corporate legal departments’ use of alternative legal service providers. Compared to 2018, 27% of companies said they increased the number of alternative legal service providers in 2019.