AGENDA FOR ACTION 2011 - IICJ › subscribersonly › reports › inhousereport2011.pdf · PART...

International In-house Counsel Journal

ISSN 1754-0607 print/ISSN 1754-0607 online

Copyright International In-house Counsel Journal and PHC Legal 2010

AGENDA FOR ACTION 2011

An analysis based on a Survey of In-house Counsel

Conducted by the International In-house Counsel Journal

The IICJ Report – Contents

The Agenda for Action 2011 PART I The In-House Counsel Universe and Sample - Who has been surveyed

PART II Respondents analysed by size of legal team and external spend

PART III What legal services are respondents outsourcing?

PART IV Pricing and service level expectations

PART V How law firms are selected

PART VI

Decision makers in law firm selection

PART VII Managing the external legal function

PART VIII

Law Firm Ranking

PART IX In Summary

PART X Acknowledgements

About the International In-house Counsel Journal Note: Financial figures quoted are in US dollars

International In-house Counsel Journal – Annual Survey Report 2



Copyright International In-house Counsel Journal 2010

AGENDA FOR ACTION 2011 An analysis of a survey of international In-house Counsel

conducted by the International In-house Counsel Journal Autumn 2010 This is the third annual report conducted by the IICJ on the state of play in the global in-house counsel sector. It collates and extrapolates the results of an extensive survey carried out in the final quarter of 2010. Over 40,000 global counsel across all geographic regions and business sectors were invited to participate in the survey – 5,733 responded and their input forms the basis for this survey. Key issues covered include:

Management of internal and external resources Utilisation and selection of law forms Pricing and servicing issues Top law firms in each area of law as selected by in-house counsel Remuneration for in-house and external

The results are essential reading and offer current, informed intelligence for law firms and in-house counsel teams looking to review and validate their strategies . Law firms in particular have the opportunity to hear first hand from service purchasers how to drive competitive edge in an increasingly price sensitive and competitive marketplace. The IICJ Annual Survey Report - Agenda for Action 2011 – examines what many of the top in-house legal teams are doing, what they plan to do in terms of selection, pricing and service from their law firms and where they see the need for external legal support whether by country or discipline going forward. Bearing in mind that most in-house counsel teams are growing either by head count and/or by geographical spread, the need for tighter management systems is apparent. For the 2011 report the IICJ introduced a series of questions asking in-house teams how they manage their teams in terms of training, monitoring, spend and remuneration. The answers to these have revealed some interesting results and in 2012 there will be comparative data enabling further insight. Notably, for this the third consecutive survey the series of questions asking how external legal advisors are selected and managed has indicated a sharp increase in the frequency that external advisors are reviewed in terms of competencies and value for money. We expect a similar development in the management of in-house teams. There has been considerable increases in legal activity in Brazil, China and India, although a member of the BRIC countries, legal activity in Russia is considerably lower and reflects the fact that Russia may not be enjoying the benefits of inward investment and internal business expansion. The data collected over 3 years enables comparisons between the years thus providing the opportunity to identify trends. In-house team size growth, expanding markets and external legal service provision are just some of the areas which are examined, providing some unexpected results. When the report was compiled last year the recession was uppermost in peoples’ minds and how they were going to combat it in terms of external legal provision; would fees be put under pressure and indeed would law firms be able to survive the recession. The responses to the survey this year are “upbeat” and although there has been a shift towards cost saving this has not been at the expense of quality of delivery. In-house Counsel are becoming more vigilant in terms of how often they review their external legal services and what levels they retain in-house or outsource to law firms and legal service providers. Management of expenditure is key and this year for the first time we asked how in-house teams manage the billing from law firms. At this early stage 86% indicate that they currently do not have an e-billing system in place, and of those that do, a large proportion have been created internally. Development in this key area will undoubtedly take place as in-house counsel endeavour to contain costs and make comparisons between their external legal providers.





Areas to Watch in 2011

More commercial legal work to be carried out in 2011 than ever before, both by external law firms and internal in-house teams

In-house teams will grow substantially in 2011 to undertake more of the process legal work as opposed to outsourcing it to law firms

Law firms will undertake more high value legal work in 2011, litigation and M&A will be in higher demand

Management of in-house teams will be under greater scrutiny – proven management systems will be adopted to control cost

Law firms will be less inclined to give free advice as cost pressures continue to bite. Discretionary marketing budgets will be cut, thus the number of free-to-attend events offered by law firms will drop and access to law firm publications will also decrease

In-house teams will become bigger than many law firms and therefore will have to take on some of the training and staff development previously undertaken by law firms

The expansion of business will lead also to more legal work externally, but at a higher level, which will require greater due diligence to ensure the most appropriate law firms are engaged

Law firms will continue to be price competitive in 2011, but upward pressures will emerge towards the end of 2011 as the volume of work outstrips supply

Over 4000 new positions will be created in in-house teams globally in 2011

Remuneration will be unaffected in 2011, but rises are expected in 2012 as demand for lawyers both externally and in-house begins to outstrip supply.

Internationally European and Asian countries will continue to consume legal services at a faster pace than other regions

Areas of high growth include Singapore, China, India and Brasil

Growth in Russia is noticeably lower

UK and US firms will continue to dominate the legal sector benefiting from cost cutting and recent realignment to higher value legal work

More firms to be regulated by terms of business by their clients

Hourly rate will continue to underpin how the terms of contract are agreed

In-house team training budgets will grow





PART 1 - Who has been surveyed? Respondents to this Survey

The survey was conducted in Autumn 2010 and respondents represent in-house legal teams from companies with operations in 68 countries worldwide and are drawn from North America, Europe, Asia, Middle East, Africa, India and South America.

The collective profile of companies who responded represent;

Combined annual revenues of over $600 billion

5733 in-house lawyers in over 68 countries worldwide

Combined legal spend annually estimated at $2 billion

In-house legal teams ranging from 1-5 lawyers to up to 250+ lawyers

An estimated use in the region of 3500 law firms worldwide

The following diagram shows the geographic percentage split of respondents. Despite an increase in respondents for 2011 the split between the regions remains largely unchanged. However the Latin America and MEA regions have both shown increases over 2010.

Respondent company revenues Since 2009 there has been a sizeable reduction in respondent companies with revenues up to $50mn, which can be explained by the increase in companies in the $50-$100mn sector. The graph indicates that revenues of global companies have been increasing, which could be attributed to either increased M&A activity or most likely increased market share as companies continue to expand into new markets and grow with them. Companies with revenues of over $5bn still account for over a third of the total revenue and notably those with over $10bn have risen. This trend in global company revenue expansion will lead to more sophisticated methods in managing external legal resources.

ASIA15%

Europe37%

LATAM7%

MEA5%

North America36%

Where they Operate 2011





The following diagram illustrates the percentage split by revenue

Respondent companies business sectors The respondent companies represent a wide range of business sectors including

Telecommunications Energy Industrial Pharmaceuticals Finance and Insurance Support Services along with many others from the Aviation industry, Publishing, Retail etc.

The following diagram illustrates the percentage split of respondents by business sectors. Clearly the big users of legal services are companies in the Telecommunications, Pharmaceutical, Energy, Construction, Industrial and Financial Services sectors.

02468

1012141618

Company Revenues

Series1

Series2

2010

2011

IT10% Banking & Finance

12%

Industrial16%

Other18%

Government2%

Retail2%

Airlines3%

Service3%

Publishing3%

Insurance4%

Construction5%

Energy6%

Pharmaceutical7%

Telecommunications9%

Business Sectors 2011





Respondent companies' market capitalisation Company capitalisation is increasing, which explains the reduction in companies in the “up to $50mn” sector as the next category has increased, a trend that can be seen in the graph below. Market Capitalisation reflects the growth in revenues and profits of global companies and the rise in stock markets experienced over the last 12 months.

PART II –The size of the respondents’ legal teams and their external spend Since 2009 the larger legal teams have remained unchanged in size. However teams of 1-5 fell by 10% while those in the 6-10 segment grew by almost 50%. This growth bears out the perception that the volume of work done internally will increase and that teams will grow to ensure the additional volume of work is undertaken. 36% of those predicting an increased in-house workload anticipate their headcount will grow during the next 12 months. Based on the 5733 sample, the increase overall could see as many as 4000 in-house counsel recruited during the next 12 months across the world, a 4% increase of the total estimated in-house counsel population of 100,000. This expansion is a trend that will continue as Asian and Latin American teams in particular grow with their businesses. The larger teams of 50 plus will see the greatest growth as more staff are recruited to undertake work that has traditionally been outsourced. The volume of work can accommodate the additional headcount and the savings can be considerable, which will be covered later in the report. In terms of external legal spend, this is set to increase in line with global business growth in 2011. Law firms with the most to offer in terms of specialist expertise will be in high demand, process driven law firms will struggle as the drive to retain in-house continues. Paradoxically the hourly rate paid to law firms will increase as the nature of the work undertaken by them becomes more specialised and therefore it is most likely external legal spend will also increase as volumes increase in 2011

0

2

4

6

8

10

12

14

16

18

Market Capitalisation

Series1

Series2

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2010

2011





The data below suggests that there could be as many as 30,000 in-house counsel offices across the world servicing just over 100,000 in-house counsel The business sectors that have the most offices are drawn from the financial, banking and insurance sectors. There has been little or no change in the number of offices being operated by in-house counsel as most of these have been in place for a number of years. What will happen is the headcount occupying these offices will grow.

#

0

5

10

15

20

25

1-5 6-10 11-25 26-50 51-100 100+

In-house Counsel Team Size

Series1

Series2

2009

2010

2009

2010

2009

2010

2010

2011

0

5

10

15

20

25

30

35

40

45

50

1-5 6-10 11-25 26-50 51-100 100+

Number of In-house Counsel Offices

Series1

Series2

2010

2011





Annual External Legal Spend

How much do they spend on external legal advisors? In total the companies surveyed have an annual spend of $1.7bn. In terms of annual legal spend, 40 per cent had an external legal spend of up to $1 million unchanged from 2010. However, the trend is indicating an increase in external legal spend with law firms. This increase is attributed to higher value work being undertaken externally, for example litigation and M&A activity. It is predicted that hourly rates for these specialist areas will come under upward pressure towards the end of 2011. If rates can be fixed early, savings can be made in 2012. As law firms will want to do less process work to focus on more profitable activities, legal outsourcing companies will be competing hard for market share during 2011 resulting in a plateauing in the cost of process work.

Typically, how many law firms do they instruct? Over 3,500 law firms are retained by the respondents worldwide with over 25% instructing around 30 law firms at any one time around the world. Law firms will be selected for their specialist knowledge of an area of law, business sector or jurisdiction, less often will law firms be asked to undertake more process elements of legal work. As predicted last year a number of law firms have merged to enable concentration on delivery of high levels of service and reduction of costs at lower levels. The number of law firms will continue to shrink during 2011 as law firms continue to drive down costs. The reduction in law firms will inevitably reduce choice, but will lead to lower fees and higher and more uniform delivery of service.

How they divide their work – external vs. internal As well as the drive to increase legal work undertaken in-house, outsourced work is increasing too. This can be explained by the fact that companies are expanding their business activities globally and therefore the demand for legal advice is growing significantly. 2011 will see companies spending more on legal services, which will be in line with the expansion of their businesses. Law firms will become more profitable as they cut out less valuable elements of their practice areas in favour of the more lucrative areas, such as litigation and M&A. Increasingly more IP and Employment work will be retained in-house.

05

1015202530354045

External Legal Spend

Series1

Series2

2010

2011





PART III - What legal services are respondents outsourcing? The tables below illustrate that litigation is still predominately carried out by external law firms, which will continue to be the case, as this work is generally undertaken when the need arises. Noticeably more IP and M&A work is being conducted in-house. Additionally more general legal work, such as contract is being outsourced to legal outsourcing providers who can offer better rates than the traditional law firms.

External Legal Work undertaken by area of law

Percentage carried out externally

0% up to 20% 19-30% 29-50% 49-75% 74-99% 100%

Corporate 10.30% 49.20% 14.90% 14.90% 8.70% 2.10% 0.00%

Litigation 1.50% 14.10% 5.50% 10.60% 16.10% 27.10% 25.60%

Property 28.30% 29.50% 8.10% 9.20% 5.80% 8.70% 10.40%

M&A 10.90% 19.10% 8.20% 19.70% 15.30% 18.00% 9.30%

Intellectual Property 10.90% 28.80% 14.10% 12.50% 11.40% 12.00% 10.30%

Employment 12.10% 36.80% 10.40% 17.60% 11.00% 8.80% 3.80%

Contracts 32.00% 44.20% 10.50% 8.30% 2.80% 0.60% 1.70%

Distribution Agreements 61.70% 24.60% 4.20% 6.60% 1.80% 1.20% 0.60%

Internal Legal Work undertaken by area of law

Percentage carried out Internally

0% up to 20% 19-30% 29-50% 49-75% 74-99% 100%

Corporate 1.00% 8.50% 6.00% 16.60% 19.60% 39.70% 8.50%

Litigation 26.20% 35.90% 14.90% 10.30% 5.10% 6.70% 1.00%

Property 19.60% 18.50% 10.60% 7.40% 11.60% 18.50% 15.90%

M&A 13.80% 21.80% 17.60% 19.70% 12.20% 12.80% 2.70%

Intellectual Property 16.40% 20.50% 8.20% 13.80% 13.30% 21.00% 6.70%

Employment 8.80% 16.00% 9.80% 13.90% 20.60% 23.20% 8.20%

Contracts 3.00% 5.10% 3.00% 7.60% 13.10% 37.90% 30.30%

Distribution Agreements 19.10% 5.60% 1.70% 6.70% 3.90% 24.70% 38.20%

The cost of providing external legal services is as expected higher than that of providing legal advice from within. The majority of in-house teams budget for their time to be less than $199 per hour, whereas the cost of retaining a law firm costs typically $400-$699 per hour. Litigation and M&A external costs are the greatest with fees of $900-$1000 being charged in some cases. The cost of employing additional in-house counsel is attractive when considering that the hourly cost is less than half of a law firm, provided that there is sufficient volume of work to be carried out over a long period of time.





Estimated cost of certain types of legal work sourced externally, in $USD per hour

Up to $199

$200-$399 $400-$699 $700-$899 $900-$999 $1000 plus

Corporate 6.90% 36.00% 48.10% 8.50% 0.00% 0.50%

Litigation 9.60% 38.30% 41.50% 10.10% 0.00% 0.50%

Property 23.90% 49.70% 24.50% 0.60% 0.60% 0.60%

M&A 4.50% 18.80% 60.20% 13.10% 1.70% 1.70%

Intellectual Property 14.40% 40.30% 40.30% 4.40% 0.00% 0.60%

Employment 17.00% 59.10% 21.00% 2.30% 0.00% 0.60%

Contracts 19.90% 56.30% 20.50% 2.80% 0.60% 0.00%

Distribution Agreements

30.00% 51.40% 15.70% 2.90% 0.00% 0.00%

Estimated cost of certain types of legal work sourced internally, in $USD per hour

Up to $199

$200-$399 $400-$699 $700-$899 $900-$999 $1000 plus

Corporate 45.30% 34.70% 16.50% 3.50% 0.00% 0.00%

Litigation 46.70% 35.80% 14.50% 3.00% 0.00% 0.00%

Property 57.10% 31.80% 9.70% 1.30% 0.00% 0.00%

M&A 40.50% 33.50% 21.50% 3.80% 0.00% 0.60%

Intellectual Property

51.20% 30.90% 14.80% 3.10% 0.00% 0.00%

Employment 54.00% 32.90% 11.80% 1.20% 0.00% 0.00%

Contracts 55.50% 34.10% 7.90% 2.40% 0.00% 0.00%

Distribution Agreements

59.70% 31.30% 6.90% 2.10% 0.00% 0.00%

In-house Counsel Remuneration For the first time the question of remuneration was raised and largely confirms the data already in the public domain. The results next year will enable comparisons as to whether remuneration is increasing to cope with the predicated increase in demand for in-house counsel. It can be reported that although the average General Counsel has a remuneration package of just over $350,000 per annum some were taking over $1m per annum and others £70,000, these variations were taken out of the statistics to produce a more meaningful average.





The respondents’ collective legal spend is as follows:

As reported last year the US and UK dominate in terms of respondents’ legal spend, however their share has decreased from 62% to 55%, largely due to the USA falling from 42% to 34% due to of the emergence of Brazil, China and India all of which have risen considerably over the last 12 months.

.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00

General Counsel /

Chief Legal Counsel /

Overall Head of Legal

Head of Legal - in country

Corporate Secretary

and General Counsel

Vice President &

General Counsel

Associate General Counsel

Counsel -Intellectual

Property

Counsel -Human

Resources

Typical In-house RemunerationAverage $USD per annum

Asia21% (20%)

Europe27% (26%)N America

26% (31%)

Latin America12% (10%)

Middle East14% (13%)

2011 Share of Legal Spend by Region

(2009)





Of the $1.7bn spent on external legal services, $1.2bn was spent in the top ten countries. The USA and UK continue to have a large share due to the predominance of large international law firms based in these two countries.

Legal Spend by Country India and Singapore joined the top 10 countries for legal spend in 2011, which again reflects expansion in Asia. India has developed a sizeable legal outsourcing sector, which may account for its rise, whilst Singapore enjoys considerable growth as more companies relocate there.

USA34%

United Kingdom21%

China7%

Brasil7%

Gemany7%

Canada6%

France6%

Italy5%

India4%

Singapore3%

Top 10 Countries with most legal spend

0

50

100

150

200

250

300

350

400

450

Top 10 Countries Legal Spend

Series1

Series2

2011

2010





How external legal requirements will change in 2011 The largest increase in external legal spend in 2011 will be in Europe followed by North America and Asia. As recessionary pressures ease in the mature markets legal expenditure will increase as companies expand their businesses via M&A activity. The largest decrease in expenditure is also reported in European companies, in part due to an increased reliance on in-house teams to undertake the less sophisticated elements of legal work. The table clearly illustrates that external legal services will be in greater demand and that the higher value work will be outsourced to law firms during the next 12 months.

Will the level of work done in-house increase? Both external and in-house work will increase during 2011, the lower value work will increasingly be undertaken in-house and the higher value projects undertaken by highly specialised external legal providers. As noted in last year’s report, the strategy of in-house teams retaining lower value work may be questioned as it may be considered more cost effective to outsource this element and concentrate on retaining the higher value in-house. However, if there is sufficient volume of low value work that can be undertaken less expensively in-house then this would be an obvious move to cut costs. The higher value work such as litigation and M&A will inevitably require higher expertise from outside and this type of work is generally “one off”, which is better placed outside the company.

Continuing the trend from last year over 50% anticipate an increase in work undertaken in-house and just over 25% increase in work undertaken externally. Of those who anticipate an increase internally, 37% will be increasing their in-house legal team headcount, whilst 60% will undertake the additional work without expanding their teams.

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Asia Europe North America

South America

Middle East

Africa

Change in Legal Spend by Region

Series3

Series2

Series1

Unchanged

Decrease

Increase

0

50

100

Increase Decrease Unchanged

Legal Work In-house versus Externalpercentage change in 2011

In-House

External





PART IV - Pricing and service level expectations Last year in the midst of recession, 73% of companies reported that price was a key factor when engaging law firms. In 2011 this figure has fallen to 53%. The reasons for this are two-fold, firstly, law firms themselves have become more competitive and pricing has been brought into line as illustrated earlier. Secondly, the increase in legal work being or about to be undertaken means that engaging the right firm to act is more important than the price. Bearing in mind the shift to retaining the lower value work internally, in-house legal departments have already made substantial savings, which can now in part be allocated to retaining higher value external counsel. There is a legal risk in retaining less expensive and less experienced external counsel and there has been a shift towards quality in preference to price. Increased competition among law firms eager to retain market share has lead to a reduction in fees for higher value work as they also relinquish the lower value work either to the in-house teams or the new legal outsourcing providers. Head counts in law firms will inevitably continue to decline, whilst the value of the work will increase.

Fee structure preferences Since last year there has been a considerable change in how in-house teams manage the provision of external legal services. 42% have introduced new conditions on law firms, largely due to fee structures, which will be covered later in the report. This change has been brought about by several factors:

Pressure from within for companies to cut costs Law firms becoming increasingly competitive New entrants such as legal outsourcing providers Management of costs by in-house teams Shift of more work in-house

In 2010 46% of in-house teams regulated the use of external law firms by Terms of Business, in 2011 57% will be managing their external legal requirements by imposing such conditions on law firms. This trend is likely to continue to increase as in-house take control of their costs and put cost management systems in place.

Low3%

Medium44%High

46%

Very High7%

How important is Price?





Despite the move to fixed term contracts, the hourly rate continues to underpin how the terms of contract are agreed. 18% of work undertaken is on a fixed fee, the remainder continues to contain an element of hourly rates, with 29% exclusively based on hourly rates. The increase in the proportion of higher value work being retained by external counsel will most probably ensure that the hourly rate remains a dominant factor in calculating costs, as essentially the time and the value of the lawyer undertaking such work is one of the key cost factors. The following diagram illustrates the pricing models preferred by in-house legal teams.

Yes57%

(46%)

No43%

(54%)

Do you regulate the use of external law firms by Terms of Business ?

Hourly rates with agreed discount

29%

Hourly rates without agreed discounts

10%

Retainer plus hourly rates5%

Blended rates8%

Fixed fee18%

Conditional fee arrangements

7%

Combination23%

What is the typical fee structure





PART V – How law firms are selected

Criteria for choosing law firms Sector knowledge and reputation are the most important criteria in the selection of law firms . These factors became more important and will continue to do so largely at the expense of fees. The fact that fees are becoming less of a factor does not mean that they will increase, but that law firms for the time being are operating in a more competitive environment with each other with the introduction of other means of legal advice provision, either from within the in-house teams themselves or by other legal providers. Law firms that provide recognised high value advice with a sound reputation will be the first choice for an in-house team. Sector knowledge and locality will ensure that the firm is engaged, the price and size of law firm will play a role in making the final decision on selection.

How often law firms are reviewed More law firms are being reviewed more frequently than previously. The majority have been reviewed in the last 18 months and many are being reviewed on an ongoing basis. This process employed by in-house teams ensures that they are delivering the best legal advice to their companies and with the cost reductions that will ensue. Management systems employed by in-house teams enables them to monitor the performance of law firms with increased accuracy not just in terms of price, but also in terms of delivering within the pre agreed parameters.

Factors Considered when Selecting a Law Firm

Very High

High

Medium

Low





PART VI – Decision making in engaging a law firm Engaging a law firm to act involves identifying and short-listing the relevant law firms and then selecting from that group one or more to undertake the work. As indicated earlier, market reputation and personal recommendation play the biggest role in determining which law firms meet the competency standards to undertake the work.

Once the firms have been identified, largely by the in-house counsel team, a panel is created. The members of the panel are generally employed to advise and assist the in-house counsel in selecting the most efficient and cost effective law firm to act for the company. The in-house counsel relies on this advice to ensure that the selection process will indeed ensure that the legal requirements of the company are fulfilled by the selection process. Increasing cost pressures and corporate governance

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%

within last 12 months

within last 18 months

within last 2 years

within last 3 years

On going basis

How often do you review your legal advisors?

Series1

Series2

2010

2011

Personal recommendation

48%

By market reputation32%

Consult legal directory

9%

Read a press article4%

Law firm website7%

How do you Identify the right law firm to engage?





procedures require the company to select a law firm that will act for the company not just at a competitive rate, but also within the corporate governance standards of the company.

Each panel member lends their own expertise to the process. The purchasing officer will provide useful advice on how best to compare the offers and the directors will be able to determine which firms have the best sector knowledge. The in-house counsel still has the final decision based on the advice received from colleagues on the panel and crucially on whether the law firm has the ability to deliver, which can be partially based on reputation. The engagement of external advisors rests almost entirely with the in-house counsel who is responsible for purchasing in some cases over $50m annually of legal advice.

PART VII – Managing the external legal function

In-house Counsel

50%

Director16%

Managing Director

15%

Chairman9%

The main board

4%

Purchasing Officer

5%HR1%

A typical panel will comprise

The decision to engage a law firm rests predominately with the in-house counsel

In-house Counsel

Director

Managing Director

Chairman

The main board

Purchasing Officer

HR





As in-house teams grow along with the level of external legal requirements, in-house counsel are increasingly looking at ways to streamline how they manage their data and purchases and what systems are available to help them. Our results show that 20% use a Matter Management system; of that 20%, 30% use their own internally devised system as opposed to an off the shelf purpose designed software package. Cost is probably the biggest issue, but again this may change over time as the risk of storing legal documents without similar applications as those used by large law firms may prove costly.

Of the 14% who use an e-billing system to track legal work , 20% use their own internally designed system. 90% of in-house teams do not use a specialist e-billing software. Cost may be prohibitive and it maybe that their procurement systems are robust enough to manage the purchasing of legal services.

Training Budgets

Yes Yes20%

No No80%

How many in-house teams have their own Matter Management system

Yes 14%

No86%

How many in-house teams use a legal spend or e-billing system





When compared to major law firms, in-house team training budgets are particularly low – some as low as $1500. However in-house teams are realising that to attract and retain talent they need to ensure that the team receives training and development on an ongoing basis and some firms are committing over $250,000 to achieving this. It will be interesting to see how the graph evolves over the next 12 months as the pre-requisite for talented in-house counsel grows.

For continued professional development conferences are the preferred medium with 38% selecting training courses coupled with a CPD points scheme.

0

2

4

6

8

10

12

14

16

18

Attend Conferences

45%

Participate in a CPD Scheme

17%

Training Courses

38%

How in-house counsel keep up to date with the law





Directories are very rarely used by in-house counsel. In fact, only 20% of those who responded use one a regular basis. Chambers remains the most used directory with 35% using its services. This substantiates the finding that a law firm is selected by reputation and personal recommendation.

International In-house Counsel

Journal31%

ACC Journal14%

Corporate Counsel

13%

ABA11%

Inside Counsel9%

PLC8%

DE REBUS6%

Latin American Lawyer

4%

The Lawyer4%

What in-House Counsel read

Chambers33%

Legal 50022%

Martindale Hubbell26%

PLC10%

Westlaw3%

Who's Who in Legal6%

Legal Directories used by In-house Counsel





PART VIII – Law Firms For the first time this year the survey required in-house counsel to list the top 5 firms they recommend and use in the following categories:

Competition Intellectual Property Mergers & Acquisition Product Liability Litigation

Employment Taxation Corporate Governance & Compliance Directors Advisors Highest Legal Spend

580 firms were recommended, the total number of firms nominated in each category is indicated under the title. Not surprising litigation and M&A law firms are more numerous than the tax or employment law firms for the same reasons given earlier in this report. Each firm was given a score dependent on whether it was the first, second, third, fourth or fifth choice of the nominator. All the scores were then weighed to identify which firm is the most popular in a given sector. 68 firms are featured in the final rankings and Eversheds featured in 9 out of 10 possible rankings with Hogan Lovells 2

nd with 8 placings, Weil Gotshal & Manges came 3

rd with 6 placings.

Of those with the most votes the chart below illustrates that Hogan Lovells achieved the most votes followed closely by Cliffe Dekkar Hofmeyr. This series of charts indicates how in-house counsel rate the firms they spend nearly $2bn with each year, on average $4m per firm that was listed.

Overall Top Ten 580 Nominated Law Firms

Allen & Overy Baker & McKenzie Clearly Gottlieb Steen &

Hamilton Cliffe Dekkar Hofmeyr

Edward Nathan Sonnenberg Eversheds Freshfields Bruckhaus Deringer Hogan Lovells Weil Gotshal & Manges Wilson Sonsini Competition Law

140 Nominated Law Firms Clearly Gottlieb Steen & Hamilton Cliffe Dekkar Hofmeyr Eversheds Freshfields Bruckhaus Deringer Howrey Linklaters Machado, Meyer, Sendacz Ópice Sullivan & Comwell Weil Gotshal & Manges Wilson Sonsini





Intellectual Property 147 Nominated Law Firms

Adams & Adams Bird & Bird Eversheds Finnegan Henderson Fish & Richardson Haynes and Boone Hogan Lovells Husch Blackwell Jacobacci & Partners Jones Day Perkins Coie

Mergers & Acquisition

158 Nominated Law Firms Allen & Overy Cleary Gottlieb Steen & Hamilton Edward Nathan Sonnenberg Freshfields Hogan Lovells Latham & Watkins Manatt Phelps Wachtell Lipton Rosen and Katz Weil Gotshall Manges Wilmer Hale Wilson Sonsini

Product Liability

59 Nominated Law Firms ASDF Barlow Lyde & Gilbert Cleary Gottlieb Steen & Hamilton Eversheds Hogan Lovells Mannheimer Swartling Simmons & Simmons Taylor Wessing Thompson Coburn Webber Wentzel





Litigation 191 Nominated Law Firms

Alston & Bird Choate Hall and Stewart Cliffe Dekker Hofmeyr Duane Morris Eversheds Frost Brown & Todd Herbert Smith Hogan Lovells Mayer Brown NCTM Shearman & Sterling Sidley Austin Weil Gotshall Manges White & Case

Employment 128 Nominated Law Firms

Ballard Spahr Eversheds Filion Wakely Freshfields Jackson Lewis Littler Mendelson Morgan Lewis & Bockius NCTM Ogletree Deakins O'Melveney & Meyers

Taxation 83 Nominated Law Firms

ASDF Baker & McKenzie Cliffe Dekker Hofmeyr Edward Nathan Sonnenbergs Eversheds PWC Skadden Arps Slate Meagher & Flom Studio Cagnazzo White & Case Xavier Bernardes e Bragança





Corporate Governance & Compliance 103 Nominated Law Firms

Allen & Overy Baker Botts Clifford Chance Edward Nathan Sonnenberg Latham & Watkins Mannheimer Swartling Skadden Arps Studio Martelli Weil Gotshall Manges Wilmer Hale Wilson Sonsini

Directors Legal Advisors 83 Nominated Law Firms

Allen & Overy Eversheds Hogan Lovells Kirkland & Ellis Reed Smith Ropes and Gray Sidley Austin Studio Romano Weil Gotshall Manges Wilson Sonsini Winston & Strawn

Amount Spent with each Law Firm 320 Nominated Law Firms Allen & Overy

Baker & McKenzie Cliffe Dekker Hofmeyer Clifford Chance Dechert Duane Morris Edward Nathan Sonnenberg Eversheds Hogan Lovells Sullivan & Cromwell





Part IX - Summary When the report was compiled last year, banking failures were still high on the agenda and the outcome was not clear. What was apparent was that many organisations had to take urgent action to analyse costs and how best to manage them through a difficult time. The In-house teams had to review their external legal costs more rigorously than ever before and to impose stringent fee structures on law firms to meet the wider financial cost cuttings demanded of their companies. This cost cutting exercise highlighted inconsistencies in the level of service being provided by law firms and the cost at which these services were provided. In 2011 in-house teams are reporting greater control of their external legal providers by reviewing them more frequently and with greater scrutiny than in previous years. In-house teams are growing as it is more cost effective to employ a lawyer internally to undertake lower value work than employ a law firm to manage the work, provided there is sufficient volume of work. As in-house teams increase, law firms are managing their own costs, which has led to reductions in headcount in many law firms. The higher value work will be most important for law firms to secure, which will help them to increase profitability during 2011. Law firms are under pressure by their clients to deliver legal services at a lower cost, in a timely manner and at a higher quality. This has required law firms not only to analyse their internal headcount, but also the cost of their marketing and training. Training which has often been provided to in-house counsel free may not be so readily available from cost constrained law firms, which will see the increase of training within in-house teams. Training budgets in in-house teams will grow towards the end of 2011 for several reasons:

Head counts will increase Access to training from law firms will decline Training is expected as part of the development of the employee Larger teams will be able to achieve the cost benefits derived from more bespoke training in-house

The IICJ has introduced questions about training in 2011 and will expand on this theme in 2012 along with the management questions which are new this year. Management of cost and service has been high on the agenda for all and in-house teams with large budgets to manage spread over a number of jurisdictions have been able to identify cost savings very quickly. As time passes the quick “wins” in terms of cost cutting will not be so easily identified and the introduction of robust cost management systems will be required to continue the process of delivering the cuts required. The cost of employing these systems is not cheap, but the savings can still outweigh the costs and deliver greater efficiencies. Vigilance will be required by in-house teams to ensure that they identify the need and the solution that will meet the need. 2011 will be a good year for in-house counsel as teams become larger providing greater opportunity within existing in-house teams and beyond. Teams will be become more focused and management systems will come to the fore as in-house teams demand more from their own teams and external advisors.

PART X - Acknowledgment The IICJ wish to thank all the in-house lawyers of the respondent companies and the considerable time and effort taken to complete the original survey, the results of which have enabled the IICJ to produce this report.





About the International In-house Counsel Journal

The International In-house Counsel Journal (IICJ) is the only publication dedicated to providing the world’s in-house counsel with a voice. The IICJ enjoys an enviable reputation amongst the in-house legal community affording them the opportunity to write and exchange opinions and ideas, issues and information amongst themselves.

Each year the IICJ seeks the views of in-house counsel selected from the IICJ data base comprising over 40,000 in-house counsel worldwide.

Since 2007 when the IICJ first started, over 500 papers have been published making the IICJ truly a global product and uniquely in touch with the in-house world. Papers published cover a range of topics including case studies, new laws and their impact, managing an in-house team and their approach to the use and selection of law firms.

The IICJ has a main editorial board consisting of over 25 top General Counsel (refer to www.iicj.net for more details) and currently the IICJ is establishing both regional and national editorial boards around the world to create a global General Counsel 'Thought Leadership Forum'. This forum will discuss, share and implement ideas and best practice in the management of in-house teams and their external law firms, criteria for their selection of panel law firms and their expectations on price and value services as well as new legal developments and legal issues arising out of doing business internationally. Disclaimer The contents of this report are based on a survey conducted by the International In-house Counsel Journal (IICJ) in October 2010. Whilst every effort is made to ensure the accuracy of the information in this publication, the IICJ make no warranty, express or implied concerning the content of this publication, products or services offered herein, all of which are provided “as is”. The IICJ expressly disclaim all liability for reliance upon the information contained herein. In no event will the IICJ, their affiliates or other suppliers be liable for direct, special, incidental, or consequential damages (including, without limitation, damages for loss of business profits, business interruption, loss of business information or other pecuniary loss) arising directly or indirectly from the use of (failure to use) or reliance on the information contained herein.

AGENDA FOR ACTION 2011 - IICJ › subscribersonly › reports › inhousereport2011.pdf · PART...

Documents

Transcript of AGENDA FOR ACTION 2011 - IICJ › subscribersonly › reports › inhousereport2011.pdf · PART...