External spend is down as teams broaden in-house

GCs are focussing on increasing the capability of their legal team to tackle spending pressures.

External spend is down as teams broaden in-house
In-house legal teams are focussed on upskilling their legal teams as a result of spending pressures, according to the ACC benchmarking survey.

According to the survey, there was a five per cent increase in the number of legal teams under high to extreme pressure to lower spending from 2012.  Tanya Khan, ACC Australian and Asia Pacific vice president and managing director, said the small increase is in line with current business market conditions.

“What we are seeing from the 2015 Report is in-house departments significantly reducing their spend on external legal services by developing more sophisticated in-house legal teams, embracing lower cost alternate providers and negotiating harder for a better deal,” said Khan.  “All legal departments are being asked to do more with less and this is at odds with the at-times excessive hourly rates of private firms.  The trend of insourcing will continue as long as there is a price differential to be enjoyed.”

General Counsels are coming up with more ways to adapt to shrinking budgets; Khan said teams are working more closely with other parts of the business, reducing the workload of the legal team in the process.

“Many organisations have reduced their reliance on external firms with some electing to embrace lower cost alternatives such as direct briefing the bar and using legal process outsourcers.  While GCs are still looking to utilise firms for complex matters such as litigation and alternative dispute resolution, the more routine work in the contracts/commercial area is still very much kept in-house,” she said.  “And while GCs are increasingly taking on non-legal responsibilities, many are also using the opportunity to educate the business to handle routine matters reducing the workload for the legal department.”

While the teams face different challenges depending on industry and other factors like the size of the team, Khan said legal functions in the energy and resources sectors are facing the biggest budget pressure.  She said teams need to focus on how they can demonstrate the value they add to an organisation.

“What leading legal teams do well is they take the conversation away from cost, and their department being seen as a cost centre, and they focus instead on how their team can be measured by the value provided,” she concluded.

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