In the backdrop of rather promising financial projections for most law firms in 2023,
a significant shift is anticipated in structural dynamics
between law firms and their clients. Major corporate clients are revealing intentions to redirect more legal work in-house.
The Association of Corporate Counsel and Everlaw recently released a report titled
“The State of Collaboration in Corporate Legal Departments” examining the perspectives of 370 in-house counsel and legal operations professionals from U.S. corporate law departments.
A surprising takeaway from this report is the increasing trend among these respondents to transition legal work in-house and away from larger law firms, popularly known as ‘Biglaw’. While a percentage of legal departments toy with the idea of in-house transition before they consider the financial implications, this year the trend is more pronounced, with 66% of legal department respondents looking to cut back on outside counsel.
Technology, particularly the growing influence of artificial intelligence (AI), is playing a profound role in this shifting trend. AI acceptance has almost tripled in the past year, according to a
survey conducted following the mainstream breakthrough of AI delivered by ChatGPT. Given it’s current trajectory, this can be a factor for law firms to pay attention to as they strategize for 2024 and beyond.
Firms, however, need to evaluate these findings with a degree of skepticism. Corporate clients always juggle with the threat of in-house legal prowess potential to negotiate better rates with firms. This constant competition can sometimes resemble an overzealous home improvement enthusiast who is inspired by TV shows but lacks consistent follow-through.
To conclude, despite the intimated surge in legal departments taking on more work in-house, law firms should pay heed but not panic. The dynamics between law firms and their clients is a complex maze that extends beyond just cost-cutting measures.