When you think of a food chain, it’s “eat or be eaten.” Something like this:
This came to mind this week as I was attending a short seminar on law firm business development and client-side services procurement. A managing partner of a major regional law firm spoke, and said that a key strategy was to go after clients of Am Law 100 firms, and highlight potential cost savings. He would also emphasize his firm’s lawyers who had the required expertise for most matters.
So if the large fish is a national or international law firm, who is eating whom these days?
A short time later, this same managing partner acknowledged that his firm’s rates were high by the standards of the city where his firm was based, and they were probably losing some business was to lower-priced, local firms.
An in-house attorney on the panel echoed this phenomenon, noting that companies taking hedge fund investments are often guided to the same large New York firms that handled the “money in.” However, when those same hedge funds are examining the financial performance of their new portfolio company, in-house counsel have leverage to move much ongoing legal work to less costly regional firms.
Or more work can be brought in-house, of course.
One interesting side note. In a total of two hours (presentations and Q&A), I never once heard the word value. There was a mention that a company in an industrial market has exhibits thin margins (which describes almost every supplier in a global marketplace these days) simply can’t pay high rates for most legal work. It’s a discipline that permeates all procurement, not just that of the legal variety.
However you dress up the terminology, costs matter, and high embedded costs of operation of a service provider have to be passed along to service consumer. One way or another.
When I look at the legal food chain, I wonder whether the Big Fish is really BigLaw anymore. Or is it something else coming along that also has a big appetite?