A new report from Wolters Kluwer’s ELM Solutions concludes that 2020 saw the biggest shake up in the outside legal services market since the 2008 crisis: 90% of corporate legal teams reduced their active providers, and around 16% of attorney-client relationships were put on hold – although Am Law firms doubled down on strong relationships.
Compiled by director of legal operations and industry insights Nathan Cemenska, the inaugural LegalVIEW Insights report focuses on corporate legal department (CLD) law firm vendor usage, applying insights garnered from its eBilling data.
Cemenska told Legal IT Insider: “Almost all CLDs reduced their total supplier relationships in 2020, and a substantial number reduced their supplier count dramatically. Ninety percent reduced their suppliers in 2020, but 20% of them reduced those suppliers by 30% or more.”
He adds in a statement out today (31 March): “Last year, a significant number of relationships between law firms and their clients went dark—not a single legal invoice was sent in these cases. With the economy coming back, those gaps are going to be filled, but it won’t always be by the firms that lost the business,” said Cemenska. “Alternative legal service providers, the Big Four and competing law firms are hungry for that business as are in-house legal teams, which continue to get better at doing the work themselves.”
The data shows that Am Law 150-200 firms were those most likely to have clients go on hiatus, followed by firms outside the top 200.
It also shows that a great number of corporate teams are sending all of their work to ‘bet the company’ top 100 global law firms. In the last six years, approximately 32% of CLDs sent half or more of their work, in dollar volume, to the top 100 global law firms. Some CLDs consistently send 75 percent of their work to those top firms. That number has varied little over the last six years.
On the plus side, Wolters Kluwer finds that most CLDs send 80% of their work to 20% or less suppliers: a recognised best practice that reduces overheads and increases the likelihood of better rates.
LegalVIEW Insights report is the first of four quarterly reports in 2021, analyzing emerging legal industry issues using data from its LegalVIEW Data warehouse.