We’ve talked about (here and here) several reasons why small and mid-sized regional law firms are picking up corporate work that has traditionally been done by larger law firms. The reasons include:

  • Lower hourly rates,
  • Alternative fees,
  • Tighter in-house budgets,
  • BigLaw partners departing for smaller firms to retain clients,
  • Unsustainable associate salaries in large firms,

Now comes another reason I hadn’t thought about. According to a post by Rees Morrison, whose blog focuses on in-house legal departments, “it will cost less per hour for some companies to use outside lawyers than inside lawyers.” Again, more opportunities for smaller, more economical law firms to pick up work usually left to larger law firms.

The reasons, according to Morrison, include:

  1. Legal departments are shedding junior lawyers, just like large law firms, in favor of senior, more expensive lawyers;
  2. Switching to “smaller or less-expensive firms is gaining traction” as billing rates “are more modest”; and
  3. Routine discounts, fixed fees and other “techniques further reduce the effective billing rates.”

So, Morrison’s point is that “inside lawyer costs will sometimes match or exceed rates of outside lawyers. Thus, more opportunities would seem obvious for such firms that let in-house counsel know about their capabilities and talent – oh yeah, and their more reasonable fees also. 

 

Go for it.

  • Great post. In this recession it’s not surprising that it once again comes down to cost savings.