Thursday, December 18, 2008

US LPO spending to be $2 bn in 2013

Ron Friedman on the basis of a survey, “The Change Agenda: Looking Ahead”, conducted by Rees Morrison and Aric Press has come to a deduction that U.S. LPO spending in 2013 will be almost $2bn.
Rees Morrison and Aric Press have in their analysis touched on various facets of changes seen in the legal spending departments of different firms. They surveyed in-house lawyers by a questionnaire posted on LegalOnRamp, a professional networking site. (The complete survey results can be found at 84 respondents were chosen who work in companies that have earnings of at least $1bn. The issues examined were varied in nature, such as hiring of new law firms, basis of law department’s spending on outside counsel, extent of law department’s spending on offshore service providers, location of internal headcount in lower cost geographies, spending on legal automation, e-discovery spending, extent of telecommuting and impact of social networking for selecting and communicating with outside lawyers and law firms. The survey though limited in its sample size did present ample evidence supporting that many clients are ready to make important shifts in their revenue allocation for various legal dealings.
Ron scrutinized the question “Between 2008 and 2013, __% of our law department’s spending will move to lower cost offshore service providers, whether directly or as a subcontractor to our in-country law firms” in detail. He calculated a weighted average by multiplying the spending shifted “by its weight”. The total of this average, 3.6% gives in the percentage of in-house counsel spending that will shift to legal outsourcing. After applying adjustment factor it was deduced that by 2013 2.9% of in-house counsel spending will shift to legal outsourcing.
To determine law department’s total spending, figures from AmmLaw 200 total revenue data were used. After adjustment, the revenue is $65bn and its 2.9% equals to $1.9bn. This deduction, thus, provides concrete facts to the ongoing discussion in the legal circles about the changes in the legal market.