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Survey Confirms: In-House Spending Up, Outside Spending Down

By Mark Wilson, Esq. on October 06, 2014 | Last updated on March 21, 2019

We've known for a long time that companies are just exhausted from paying $500 an hour for a BigLaw firm they don't need so that senior partners can spend the day golfing. Now there are some numbers to back this up.

Inside Counsel recently reported on an HBR Consulting survey showing that, even as legal spending in total increased 2 percent over last year, inside spending increased 5 percent while outside counsel spending decreased by 2 percent.

It's Better for Everyone -- Except Law Firms

That's a fairly big deal, and one that confirms an earlier study by BTI Consulting suggesting that corporations are bringing more routine legal tasks in-house. That's possibly because of more new lawyers deciding to bypass the traditional BigLaw associate route, which, these days, is fraught with problems -- if you're not being overworked, you're being slowly beaten to death by the tiny hammer of document review.

Michael Rynowecer, the head of BTI, told Law 360 last year that corporations wanted to get attorneys in-house straight away, rather than have them work at a firm for a few years first. For one thing, he said, getting lawyers in the door early will "add value to the organization by having more resources that will build institutional knowledge and relate to the business units on a continuous basis." In non-consultant-speak: They'll have more time to learn how the company works and establish relationships in the company. The longer they've had to do this, the more efficient the company will be over time.

Ratcheting Down

Basically everyone traces the proliferation in legal departments to the 2008 recession, which had two complementary effects: First, a lot of law firms dissolved. Second, when a lot of companies had to tighten their belts and scrutinize their bottom lines, they said, "Wait, we're paying how much for this?" Companies learned to live with in-house counsel performing the work they'd used to outsource, and at a fraction of the price. Now that the economy has "recovered," companies are loath to go back to the good old days.

So maybe it's time to scrutinize the legal budget and see what else can be brought in-house. A part of every dollar that goes to the law firm pays for the senior partner's tee time.

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