Why This Chapter?

In this chapter, we are going to examine trends that affect the future of the legal market. Firstly, we shall focus on legal departments. We have developed four hypotheses that summarize what we think reflect the most relevant trends for legal departments.

3.1 The Consequences of Ongoing Economic Pressure

The “more-for-less”, or “more-for-the-same” challenge remains the basic principle with regard to the management of legal departments. Although our study on the “more-for-less” challenge indicated that “only” 60 % of the in-house counsel are directly confronted with this challenge, most GCs try to manage their department in a more efficient and effective way and thereby avoid waste and duplication. Nearly 80 % of in-house counsel who participated in our study try to handle the “more-for- less” challenge by improving efficiency within the department and, at the same time, cutting budgets for external counsel.

This has not always been the case. When GCs were confronted for the first time with the expectations of their CEOs or CFOs that they should reduce their budgets, they focused on “low-hanging fruits” and negotiated price reductions with law firms. Since, as a result of the financial crisis of 2007-2008, the M&A market collapsed and law firms, therefore, lost a significant part of their transaction-related business, GCs were in a good position to demand such price reductions. For the first time, companies were in the driving seat of their relationship with law firms. Altogether it seemed that GCs were successfully saving costs.

However, price reductions are only part of the first stage of change; a stage which Richard Susskind calls the “denial”, or “hoping for no real change” stage (see his book Tomorrow’s Lawyers, 2013). GCs realized that these short-term orientated measures were not sufficient to improve efficiency in the legal department and cut costs; rumour has it that in some cases, law firms apparently found ways to add more hours to their bills and therefore the cost of external counsel remained the same.

Another reaction to deal with the “more-for-less” challenge was to establish long-term relationships with law firms and alternative legal services providers. By establishing panels, or even alliances, with only a few law firms who would handle most of their work, GCs motivated their suppliers to look at their relationship on a long term basis and therefore invest more in the relationship. If law firms were promised a significant share of external counsel budgets, GCs assumed that there would be an alignment of incentives between legal departments and law firms.

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