The Australian Corporate Lawyers Association most recent legal department benchmark report, which surveyed 125 in house legal participants in Australia and New Zealand who spend more than A$1bn in legal fees found that 40% of respondents expected to give more work to specialists and boutique firms by 2010. With Australian corporations looking to cut costs by announcing redundancies, reducing perks and even moving off-shore in some cases, corporations will be seeking better value for money from their external legal providers, creating the opportunity for boutique firms to win work from their top-tier rivals.
Both sides of the fence
With lower overheads, flexible billing options, and personalised services, some boutique firms - particularly those with a broad range of service offerings - are well positioned to provide better value for money than their larger competitors during this period of corporate cut-backs, especially when it comes to lower risk and routine legal services. Having gone from in-house counsel elsewhere to Managing Solicitor Director of Kreisson Legal, Ilona Teremi has experienced life on both sides of the fence. "When I was working in house, I have briefed a range of law firms from boutique to top tier...[and] where in-house is looking for an immediate cost cut, they should be able to achieve that just by simply switching law firms," she says. "Just making the switch gives them an automatic cost saving."
Range of services
However, Swaab Attorney CEO Bronwyn Potts warns that not all boutique law firms are in a position to benefit from the current market conditions. "It depends on whether you are a balanced boutique or a specialist one. If you are a specialist one and your speciality is something not really needed right now you wouldn't be very happy at the moment, but if you are an insolvency boutique for example, you would be very happy," she says. Additionally, Potts states, it depends on which end of the boutique market corporations are looking at. "There are some boutique law firms that have top-tier lawyers who charge top-tier rates, and there are others who have come from top-tier firms who have taken the opportunity to give their clients a bit of a break by dropping their charges back a bit," she adds.
Boutique v top tier
Not surprisingly, while many of those in the top tier are announcing redundancies, boutiques firms, will be on the look out for top talent as they win more work from the top tier. Indeed, while clients have historically enjoyed the benefits of choosing 'top-tier' firms, all the things that go to make a firm 'top tier' can add up in costs. As Potts points out, some of the larger firms have some 50 people employed in their marketing departments alone.
On the other hand, boutique firms, with lower overheads, and significantly fewer costs, are almost entirely reliant on the quality and reputation of their people. This may help to explain Potts's scepticism about the move on the part of top-tier firms to lay off droves of talented lawyers, even in a shrinking market. "We have all spent the last three or four years hitting each other over the head trying to get the best teams around us, and to me it seems a bit crazy to toss them all out now, particularly if we have to hire them back in the next two years," she says. "Although she acknowledges that talented lawyers may not be interested in getting paid to do nothing, she notes that there are bigger issues at stake. "All law firms have to offer is its people and their relationships with clients. The rest is not worth anything at all if you don't have the people. Off course no one ever goes to the larger firms expecting to be paid less, but surely you could trim partner drawings in the short term in order to keep people there," she continues. "It depends on whether your firm is structured on a meritocracy, and whether you have a firm that can hold together during the tough times - or whether folks are just out to make a buck," she adds.
Nevertheless, current market conditions has provided an opportunity for some boutiques not only to attract top-tier lawyers who have been made redundant but to acquire top-tier clients who are on the hunt for better value for money in an attempt to cut costs. In addition to private sector cost-cuts, it has been announced that the federal government will begin a review of its procurement of legal services in a bid to slash the A$510m spent on lawyers by commonwealth agencies in the previous financial year.
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