Legal Work's In-House Shift Shows No Sign Of Slowing

By Michele Gorman
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Law360 (July 8, 2020, 6:22 PM EDT) -- Before the pandemic, legal departments were moving more work in-house and relying less on outsourcing, and industry experts predict this trend will continue long after the crisis wanes because of cost savings and the increasing sophistication of corporate teams.

In 2019, 28% of respondents to a survey by the Corporate Legal Operations Consortium said they shifted more work in-house, compared with 20% who outsourced more legal work. The results, which followed up on a similar survey CLOC performed in 2018, illustrate the ongoing legal department trend toward relying less on outside counsel and more on internal resources like technology and legal operations, as well as on alternative legal services providers.

Legal industry experts told Law360 they think the trend will extend beyond the pandemic for most corporate teams because it's a significantly less expensive alternative to using outside counsel. They also cited legal departments' increasing comfort with taking on more sophisticated matters as a reason it will likely carry into the future.

"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," said Audrey Rubin, president of Rubin Solutions and a senior adviser at BarkerGilmore LLC.

She said the trend might slow down temporarily as law departments zero in on tackling new and urgent matters and changes stemming from the pandemic, such as how to safely reopen their businesses — on top of dealing with the ongoing issues they previously had before the crisis escalated in March.

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 said.

Alex Dimitrief, a former general counsel at General Electric Co. who is now a partner at legal consultancy Zeughauser Group, said he doesn't view the results of the survey as "a zero-sum game" between in-house departments and law firms. Instead, he said 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 said.

For the survey, CLOC questioned more than 140 companies of various sizes in 17 countries and 30 industries.

Overall, about half of the participating companies in the survey kept the ratio of work between in-house and outside counsel the same, but it differed with the size of the business, from 30% among small companies to 67% among large ones, the results showed.

One way legal departments have been able to take more work in-house is through the use of technology and the automation of legal work, with 76% of companies using an e-billing system, 69% e-signature, and 60% document management, the survey said.

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.

--Additional reporting by Aebra Coe. Editing by Amy Rowe.

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