Claimed in-sourcing of legal work to cope with cost pressure needs support from benchmark metrics

“As the cost of outside counsel has risen, businesses have brought an increasing amount of work in-house.” With that declaration, Mark Roellig, the General Counsel of Massachusetts Mutual Life Insurance Company, kicks off a thoughtful article in the Am. Lawyer, Jan. 2011 at 39. The article makes excellent points even if is start is perhaps more rhetorical than empirical.

If benchmark metrics from a similar set of law departments shows that the long-standing ratio of 40 percent inside and 60 percent outside legal spend has shifted significantly toward inside, then we have evidence of work migrating in-house.

There is no published data on same-company changes in internal spending as a percentage of revenue, but one survey does show that for about 150 law departments the median did not change at all from 2008 to 2009; it increased barely one percent from 2009 to 2010. Even if the companies were similar year over year in that benchmark study – which they were not because of significant turnover – the increase of a percent hardly supports Roellig’s broad claim.

It makes sense from the perspective of an economist to shift from higher cost to lower cost labor, but the benchmark metrics for law departments, such as they are, do not yet bear out that logic.