GCs Starting to Bring the Work Back Home

Leslie A. Gordon
GC California Magazine
December 18, 2008

Like many in-house lawyers, Shannon Dwyer, general counsel at St. Joseph Health System in the Southern California city of Orange, has been gearing up for the 2010 budgeting cycle. The $4 billion, nonprofit organization, which runs 14 hospitals in three states, has a “responsibility to be a good steward of the assets,” says Dwyer. But in the current economy, she’s finding that using seasoned attorneys at large law firms is quickly becoming “cost-prohibitive.”

As a result, she’s been looking to hire a new lawyer — bringing her legal department to nine attorneys — to help handle even more of St. Joseph’s legal work in house. “It’s a basic cost-benefit analysis,” says Dwyer. “Although there’s some convincing of management to be done whenever you increase [employee staffing] at the corporate level, it’s not difficult to make the business case” that adding in-house lawyers is cheaper in the long run than paying increasingly rising outside attorney fees.

Demonstrating a trend that has significant implications for law firms, a growing number of California companies are under pressure to control costs and handle more work in house, where they can come closer to paying wholesale rather than retail for legal services. According to a 2008 survey of chief legal officers, conducted by consulting firm Altman Weil, GCs like Dwyer are planning to decrease their use of outside firms, which typically constitute the largest expense of any corporate legal department. Correspondingly, chief legal officers plan to increase law department staffing over the next 12 months, according to the survey, which was conducted this past May and June.

Specifically, the survey reports that 49 percent of legal departments plan to hire additional lawyers in the next year, up from the 40 percent who said they planned on new hiring in the last survey. At the same time, 26 percent of law departments will decrease their outside counsel, up significantly from 16 percent in last year’s survey. Only eight percent of CLOs plan to increase their use of outside counsel, down from 18 percent. Not surprisingly, CLOs cited cost control as their top concern over the next three to five years.

Hildebrandt International, another legal consulting firm, conducted a similar survey, which supports the Altman Weil conclusions. Hildebrandt’s 2008 law department survey found that inside legal spending rose by five percent in the United States while spending on outside counsel increased by just two percent. Nearly a third — 29 percent — of the 223 responding companies anticipate a decrease in the number of law firms they will use.

For more see law.com.

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Will Tough Economy Push Companies to Outsource Legal Work? Some companies see big savings in ‘offshoring’ legal work – But how’s the quality?

David Hechler
Corporate Counsel
December 22, 2008

Martin Shively directs the worldwide IP operations of Microsoft Corp. But he doesn’t commute to the company’s campus in Redmond, Wash., every day. The associate GC works in a remote office in New Delhi, where he’s been based for 18 months overseeing not call centers, but outsourced patent work. And his operation is saving Microsoft millions on its legal bills.

Shively’s Indian experience dates back to 2004, when he took over budget responsibility for Microsoft’s patent group. There was a lot of buzz about outsourcing legal work to India; corporations like General Electric Co. were doing it, and slashing their legal bills. So Shively figured why not Microsoft? He started with the most basic task he could think of — proofreading patent applications. Instead of paying high-priced associates to do this work at a dozen U.S. law firms that drafted Microsoft’s filings, he hired one vendor in New Delhi to do them all. It was, he says, “a safe place to have a failure.” If it flopped “we just wouldn’t tell anyone,” he laughs.

But it didn’t flop. “We went there to save money,” he acknowledges. “We stayed and expanded because we liked the quality of the work.” It wasn’t just OK, it was better.

For more see law.com.