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ven in a buoyant economy, clients are seeking to drive down legal costs.

more than a third of leading UK companies now use a restricted panel of approved law firms for allocating their work.

Many clients are now seeking fixed or capped fees, but there is a focus on a number of other alternative pricing approaches as well including volume discount arrangements, discounts with a client-selected bonus at the conclusion of the matter, contingency fees, value billing and so on

To support this, technology is increasingly providing companies with greater ability to scrutinise law firm performance and billing so that they can monitor more effectively the exact composition of law firm bills, including measuring the hours recorded by every fee earner assigned to a particular matter. Technology is also being used by some companies to facilitate competitive bidding and, in turn, it is being used as a mechanism to push down prices. ‘E-auctions’ can allow participating law firms to see where they are ranked against other firms in terms of price and then subsequently allows them a chance to change their bids.

organisations such as banks, human resources consultancies, estate agents, retailers, insurers and other service companies offering legal services at potentially lower prices.

The ‘double whammy’ of lower volumes of work and softer prices naturally inclines law firms to focus on very careful cost control — the classic ‘battening down of the hatches’.

undertaking client research to gather ‘intelligence’ on clients’ expectations, needs and preferences; their perceptions of the firm’s performance against these, how the firm compares to competitors and where improvements can be made. In addition, undertaking interviews demonstrates a firm’s commitment to its clients and this in turn helps strengthen the relationship;

undertaking analysis of profitability and performance at a practice and client/work type level provides valuable information on the financial and operational performance of the firm

“General counsel would have put cost control at the top of their list two years ago, but then they would have talked about 'value' – now it's simply about reducing cost,” says Paul Gilbert, director of in-house management consultancy Lawbook Consulting and the former head of legal at Cheltenham & Gloucester. “I can't believe that there's a general counsel out there that hasn't been asked to reduce costs this year.”

Many general counsel also feel that their external advisers are not doing enough to help them

46% of respondents saying that law firm partners charge them more than £350 (€450) per hour for routine work

“The rise in fees has been fuelled by the profligacy of the financial services industry, profit-per partner league tables and the cost of keeping staff,” says in-house legal management consultant Mark Prebble of Lawyers in Business. “The backlash has been brewing for ages and the combination of disenchantment and the downturn will bring this to a head.”

unsurprising that legal departments are so focused on costs

Legal departments are increasingly being required to use professional procurement techniques when selecting law firms and their budgets subject to the same scrutiny as any other part of their companies.

“The focus on budgets is part of a longer term trend to look for value in legal services provision which is being exacerbated by the current economic climate,” says one head of legal.

more general counsel expect their bill for external legal advice to increase either significantly (15%) or slightly (26%) than expect it to fall, either significantly (11%) or slightly (22%).

46% of respondents saying that law firm partners charge them more than £350 (€450) per hour for routine work and 77% saying they are charged the same for transactional instructions, it is perhaps not surprising that 70% describe transactional fees as being too high and 63% saying the same about the cost of routine legal work.

Thirty-three percent of general counsel say they frequently or always challenge the bills they receive from their external advisers and 43% say this usually achieves a saving of between 11% and 20%.

many heads of legal are looking at alternative options to law firms, such as legal process outsourcers (LPOs)

Almost six in 10 general counsel estimate that a quarter of their workload is routine 'commoditisable' work and a further 27% put that proportion at closer to half of their caseload. Consequently, 41% would be happy to put some of this workload in the hands of an LPO in their home country, although notably fewer (28%) would be comfortable sending it to an LPO overseas.

new directories will enable instant evaluation of a lawyer’s legal experience and professional expertise.

Giving consumers the opportunity to weigh up individual lawyers by comparing experience and expertise, enables one to make an informed decision based on measurable criteria.

The advent of new legal directories for smaller-sized law firms will mean lowering expenses on advertising, and individual practitioners receiving only the type of work they are actually good at doing. Overall, such change can contribute significantly to the business success of individual practices.

Whereas, directories like the Legal 500 will undoubtedly remain a highly relevant component of the legal marketplace, it will be online directories for the legal ‘under-500’ whose relevance will significantly rise in the future.