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CCCA_V3No2_Closing-FIN.qxd:CCCA_V1No2_BackPg-V1.qxd 4/27/09 4:51 PM Page 46 Closing The Deal Spotlight on suppliers The old days are gone. It’s time to restructure the external counsel relationship. here is a new business global reality.The Organizations with higher annual revenues further review. Law firms may need to Teconomic climate around the world is report bringing more legal work in-house reduce and manage their internal cost to a putting intense pressure on all companies,and as well (over $300 million and $2 billion: higher degree than they have done before. all departments within companies, to review 73% and over $2 billion: 67%). I’m talking about more than staff reduc- their budgets and costs.To be competitive in tions. I’m talking about reducing financial the market,companies need to turn back and Billing arrangements expectations within law firms. Further, I look at our own internal processes. Secondly, and quite obviously, in–house know it may be controversial to say this, Every company, every department, no counsel are reviewing current billing but law firms need to look at what really matter its size, sector or geographic loca- arrangements with external counsel.Under adds value to in-house counsel. Chic con- tion, is turning the spotlight on its supply scrutiny are both the method and the ference rooms with original art on the chain. In-house law departments are no amount billed. walls may belong to yesterday. After all, exception.They are examining the role and It’s an undisputed fact: in-house law their cost is ultimately passed on to in- value of their suppliers. departments need outside counsel for specif- house law departments. Most law departments know right away, ic expertise; external counsel rely on in- without even having to crunch the num- house law departments for a significant por- Seize the moment bers, that their largest ticket supplier cost is tion of their revenue.The challenge today is Law firms are in the service industry. And the use of external counsel. These days, for both in-house law departments and exter- like any company in the service industry with the pressure on in-house law depart- nal law firms.How can we work together for they need to be proactive. It’s no longer ments to reduce costs, without sacrificing mutual benefit in the new business reality? good enough to wait for clients to tell the quality of legal services, law depart- This is no time to mince words. The law firms what they want. Law firms need ments are actively taking steps to review, relationship between in-house law depart- to ask, repeatedly, what their clients want and often, restructure their supply chain. ments and their law firms has to change.We and need. need to rethink the mindset and culture I believe the law firms who emerge as Increased insourcing surrounding the delivery of services. leaders in this new reality will be those Firstly, we’ve been seeing a trend among Most consultants work on a fixed fee who are proactive in managing their rela- in-house law departments toward more basis, based on an agreed mandate.This is tionships — forcefully and openly — with insourcing. Law departments have focused one of the new models. Law firms tradi- their customers. their efforts on the core of their business to tionally have worked on an hourly basis. These firms will initiate opening the internally provide the legal support for these This needs to change. door for discussions about the relationship. core activities. I don’t believe the trend toward moving They will not wait for the customer to According to the 2009 In-house Counsel away from the pure hourly rate, to capping knock on the door to ask for a review. Barometer Survey, as a cost saving measure, fees or other alternative billing arrangements, Law firms need to seize the moment. In legal departments continue to bring in more is transitory. Certainly, the issue has taken on fact,companies of all stripes who continue to in-house counsel (64%) and therefore require more prominence because of the economic rely on the status quo are missing the point. less service from outside counsel (62%). downturn.But I think this new trend is here The new business landscape will be more This trend appears right across the spec- to stay.There is no going back;the old model nimble. It will look and operate differently trum. Law departments more likely to have of hourly billing and no risk is gone. than in the past.This is not necessarily bad; brought more legal work in-house over the opportunity is often born of adversity. past two years in an effort to keep overall costs Reducing overhead down include: organizations that employ Law firms on a global basis are reducing Daniel Desjardins is Senior Vice President PIERRE CHARBONEAU between 11 and 20 lawyers (84%), govern- their overheads. But this may not be and General Counsel at Bombardier Inc. ment (70%) and public (68%) organizations. enough.To be competitive may mean even (danield@bombardier.com) 46 CCCA Canadian Corporate Counsel Association SUMMER 2009