For the past few years, there have been signs that certain practice areas are migrating away from large law firms. Twenty years ago, large law firms were pitching one stop shopping. But as times changed, certain practice groups found it increasingly difficult to keep up with increased billing rates. For example, while many of the larger law firms developed substantial employment law and trusts and estates practices during the 1980’s, since the mid-1990’s, there has been an exodus of these practice groups to smaller and more regional law firms.
There is some evidence that law firms have been adopting legal outsourcing at a slower pace than their own corporate clients. There are a variety of reasons for this; most obviously, lawyers are not eager to send billable work to another provider, even if the client will save money. As one partner articulated to me in a recent meeting, sending even commodity work to an offshore vendor is a win, win, lose proposition for a law firm (where the corporate client saves on legal fees, the vendor generates the fees the law firm used to generate and the law firm loses revenues but retains the risk associated with the engagement).
There are several interesting articles on the “in-house counsel/outside law firm” relationship in the latest newsletter of legal consulting firm Altman Weil (here and here.) Both consultants talk about ways for in-house counsel to achieve cost reduction by demanding it from outside counsel. They also offer some practical tips about how in-house counsel speak with about the subject with their outside providers. Read the rest of this entry »
While the Great Recession continues to send more U.S. lawyers packing, the job market in India offers some opportunities. As the LPO industry expands in India, the need for U.S. trained lawyers (who are able to manage and train Indian lawyers in some of the nuances of American practice and American lingo) is growing.
An article in the London Evening Standard suggests that many Magic Circle firms have already sent legal work to India and South Africa (e.g. Allen & Overy, Clifford Chance, Eversheds, Lovells and Simmons & Simmons.) The article reports that 1000 more legal jobs may be sent to India by the end of the year.
While the article does not provide a lot of concrete evidence that this is actually occurring (it mainly quotes various individuals in the legal and LPO industries), I am left with the impression that the U.K. is taking more quickly to outsourcing legal work to India. I cannot recall seeing an article which lists as many American law firms adopting the practice.
If it is really the case that U.K. firms are taking more quickly to offshoring legal work, perhaps this is because of the strong colonial history between England and India. There is a large population of Indian immigrants in the U.K., particularly in London, and I suspect that your average English solicitor or barrister has more contact with professional Indians than you average American lawyer.
I can’t fault lawyers for worrying about data security. Maintaining client confidences is not only a business necessity, it is an ethical imperative for attorneys. But I still scratch my head when I talk to lawyers about offshoring IP work and they raise concerns about preserving confidentiality. “How do I know my clients’ confidential information will be protected?”
As a matter of routine business practice, large multinationals have been sending sensitive information overseas for years. Any company that has chosen to outsource back office functions to India, the Philippines or China understands that data must be encrpted and that vendors need to be properly screened for compliance with appropriate security procedures. Read the rest of this entry »
Recently, I posted on the need for lawyers to think like attorneys but bill like consultants. The Great Recession has increased the pressure on law firms to come up with more predictable ways to bill and the consulting industry provides a good model.
The tie in with this blog is that many LPOs are able to offer fixed fees for certain services and this in turn can help law firms to get a better handle on what to charge (other than simply setting an hourly rate). That is why I continue to write about alternative billing in this space.
IPEngine, the sponsor of this blog, offers one example. In working with law firm and corporate clients, IPEngine develops an understanding of client expectations. IPEngine will then quote a client on a project basis (e.g. by the patent, by the prior art search, by the office action, by the freedom to operate study, etc.) and over time, the price for future projects will be adjusted based on actual experience with the client.
While the whole idea of project billing may seem mysterious to most lawyers (many will assert that law is different and that the practice of law is too unpredictable and too idiosyncratic to reduce to flat fees) a recent experience I had with a home contractor highlighted for me that the legal industry really has it wrong.
While patent filings may be down, appeals are up. Law.com offers an explanation:
According to the NLJ, patent challenges at the Patent and Trademark Office are up 70 percent this fiscal year, which began last October. The reason for the increase, say some IP lawyers, are stingier approval rates of patents at the PTO. This fiscal year only 44 percent of patents have been approved, compared to 66 percent five years ago. It’s no accident, according to lawyers who say that the agency’s inclination is to curtail the growth of patents.
The article also aserts that this appellate work offers a lucrative alternative alternative for patent lawyers and highlights an unusual alternative billing practice–charging by the page:
…appeals can run from $6,000 to $20,000. Craig Opperman of Reed Smith says that his firm charges $600 per page of an appeal brief.
This trend underscores the importance of being nimble in private practice. As work patterns change, it is important to take note and to adjust your marketing. In other words, instead of fighting for a slice of a shrinking pie, try some other desserts.
At the same time, it is not clear how charging by the page eliminates the uncertainty that comes with hourly billing or how it creates any incentives for counsel to be more efficient (two driving factors for in-house counsel who are looking for billing alternatives). True alternatives offer in-house counsel a fixed price (albeit with some contingencies built in).