These ideas are not new, but I like being able to cite specific law departments and their actions.
An April 6, 2009 posting by the ABA Journal reports that PetSmart is asking its law firms to discount their hourly fees by 30 percent. General counsel Scott Crozier told the National Law Journal that law firms will be axed if they don’t make concessions. “We expect a lot more value,” he said.
Two aspects of 30 percent discounts surprise me. One is that a 30 percent cut digs much deeper than I have ever heard. The second is that PetSmart, a company with revenue near $5 billion, may spend something like $8-12 million a year on outside counsel (at 0.4% of revenue for total legal spend and 60% of that $20 million for outside counsel). Much of its spend may be real estate, with more than a 1,000 stores, but my point is that its spending on many of its law firms might be modest, nowhere near what would normally command such a slashing discount.
Matthew Fawcett, general counsel at JDS Uniphase Corp., shared with the Recorder three other steps to shave costs. First, he is asking law firms to freeze rates. That technique has short-term effects (See my post of Feb. 9, 2009: rate freezes with 8 references.). Second, Fawcett is doing his own shopping for e-discovery help and other outside services, rather than letting law firms choose the vendors. Unbundling and direct negotiations are good steps (See my post of April 11, 2009: unbundled opportunities.). And, third, he has outsourced work to India, including due diligence work on mergers and acquisitions.