Why does consolidation stop with your law firms?

Corporate law departments and insurance claims organizations continue to consolidate their outside law firms in order to control spending, streamline processes and improve performance. But why do these organizations often restrict their consolidation effort to the law firms?

Why do they not consolidate more of their litigation service providers and achieve similar efficiencies across the entire litigation ecosystem?

LexisNexis’ CounselLink Enterprise Legal Management Trends Report (PDF), released in February, tracks the legal firm consolidation trend. Sixty-two percent of companies in the study have 10 firms or fewer accounting for at least 80 percent of their outside counsel fees. Overall, corporations with high levels of law firm consolidation have increased significantly (from 57 percent to 62 percent) since the Trends Report released in 2016.

“I think the trend will likely plateau at some point, but I don’t see it reversing,” Kris Satkunas, director of strategic consulting at LexisNexis CounselLink, told Corporate Counsel. “Once a law department has reached the level of operational maturity where they’ve done the work to establish a preferred set of law firms, they’re unlikely to go back.”

The 2015 National Litigation Management Study from CLM Advisors reported a similar trend in the insurance defense arena. “We have seen firm consolidation for some time now, as claims organizations become more sophisticated about how to compare firm performance and outcomes,” says CLM Advisors President Taylor Smith “While there is often some year-to-year nominal expansion, the new reality in my view is a smaller number of firms on each payer’s approved panel.”

Some feel that firm consolidation is just one part of the efficiency equation. The benefits that inure to a more leveraged relationship with fewer firms extends to other areas of the litigation ecosystem as well.

Let’s say you’re a general counsel who has whittled your outside firm roster down to 12 firms from 20, or that you’re a chief claims officer who has reduced your panel to 75 from 400 firms. If you’re letting these firms choose their own litigation support providers – (eDiscovery vendors, jury consultants, trial consultants and deposition service providers) – you are likely continuing to pay hundreds of service providers you’ve never met. You are almost certainly leaving value on the table.

There are several critical and good reasons for a corporate law department or claims organization to extend consolidation beyond law firms and to litigation support providers:

Cost reduction. Standardization on one or several vendors per service segment gives you more leverage over unnecessary spending, more economies of scale, and more transparency into what you’re paying for.

Streamlined processes. One primary benefit of consolidating outside law firms is that you’re limiting points of contact. You’re deliberately dealing with trusted legal partners who are familiar with your people, culture, decision-makers, reporting processes and service expectations.

Security. Fewer service providers mean fewer avenues for damaging third-party data breaches.

Insight. Data is increasingly driving decisions in every facet of business. And as all heads of litigation know, having data about service provider performance is critical. By consolidating service providers, you have a better chance of getting hard information about their work.

But what data could you use? From a deposition service provider perspective, for instance, consolidation enables the retrieval of data points such as:

• Number of depositions/firm
• Number of depositions/lawyer
• Deposition locations
• In-person/remote balance
• Video or standard capture
• Type of deponent, e.g., plaintiff, defendant, expert,30(b)(6)
• Standard or expedited transcript
• Duration per deposition

Deposition data reveals a surprising array of information about litigation in general. If, say, one firm is outperforming the others in winning summary judgments, wouldn’t it be nice to have hard data on which types of witnesses they’re deposing and when? Data like this can reveal success patterns you might want to replicate.

Conversely, if one of your outside firms is continually ordering costly expedited deposition transcripts, does that suggest that the firm is having difficulty staying on top of the litigation?

It’s about outcomes

Cost reduction, streamlined processes, security and insights all lead to better performance. These are things corporate legal and claims departments want. They’re also the bread-and-butter concerns of professionals in the emerging legal operations role.

Our research, however, shows that firms tend to choose litigation service providers on the basis of friendly relationships. Firms hire providers they like. That’s human nature, and it won’t change completely. But corporate counsel today have the opportunity to bring order to their service provider ecosystem and make decisions based on more concrete business principles. Your outcomes depend on it.