Controlling Outside Legal Spend Surpasses Compliance Requirements as Top Concern for in-House Counsel

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Ninth Annual ACC/Serengeti `Managing Outside Counsel Survey` Reveals In-House
Counsel are Looking for Innovative, Value-Driven Solutions
BOSTON & WASHINGTON--(Business Wire)--
For the first time in three years, controlling spending on outside counsel has
returned as the top priority for in-house counsel, topping compliance concerns,
according to the results of the 2009 ACC/Serengeti Managing Outside
CounselSurvey, a collaboration between the Association of Corporate Counsel
(ACC) and Serengeti Law, released at ACC`s Annual Meeting, October 19 in Boston,
MA. While compliance issues had reigned for three years, economic factors from
the past year have altered the key focus for in-house counsel. The need to drive
efficiency is leading to more value-based policies to reduce overall legal
spend. Such policies include requiring minimum levels of associate experience,
discounts for early payment of bills, engaging in RFPs, and reducing the number
of law firms representing the company. For those firms they retain, clients are
looking to negotiate more flexible value-based fee and service models.

Responsiveness is the key deliverable now expected of outside counsel. With new
data this year related to the ACC Value Challenge, an initiative to reconnect
the cost of legal services with value, it is important to note that the majority
of in-house counsel (69.9%) provided specific suggestions to their outside
counsel to increase the value of their services. While hourly rates are still
the norm, use of alternative fee structures rose to 61% of in-house counsel. In
particular, fixed fees (38.0% of in-house counsel), project retainers (15.4%)
and contingency fees (10.5%) are increasingly popular alternatives. Furthermore,
for next year, in-house counsel predict no increase in hourly rates - a first
ever in the nine years of the survey.

"The tough economic times have added urgency to the continuing client push for
better value from their firms," says ACC President Frederick J. Krebs. He adds,
"In-house counsel and law firms must communicate about how to improve service
and explore new ways to efficiently managing legal costs."

A final trend worth highlighting this year is the continued movement to
Internet-based systems to help clients manage and predict costs more accurately.
More than half (51.3%) of in-house counsel this year report they are planning to
adopt Internet-based systems to work directly with their outside counsel. These
systems, which are hosted by vendors and run by law departments, are quickly
replacing the previous movement towards law firm extranets (down to 8.7% of
in-house counsel having used any extranets this year, compared to 10.4% last
year).

"In-house counsel want a single online system where they can manage all of their
legal work directly with all of their outside counsel worldwide, not a maze of
different law firm extranets or internal systems that don`t connect with outside
counsel," says Serengeti`s Rob Thomas, the author of the survey report. Thomas
adds, "The latest online matter management/e-billing systems give in-house
counsel a practical way not only to track their spending and results, but also
to evaluate the relative value provided by their outside counsel. With this new
information, in-house counsel are assigning more work to outside counsel who are
offering the most value. They are also creating alternative fee arrangements
that align the interests of both in-house and outside counsel by rewarding more
efficient, more effective performance."

Since its inception nine years ago, more than 2,000 law departments have
completed the ACC/Serengeti survey, describing their experiences working with
outside counsel. Each year, hundreds of law departments provide new information,
making the survey report a true living document. Although new information comes
from different law departments each year, in-house counsel have generally been
very consistent across different time periods, with clear trends over multiple
years. This year, a series of questions was added related to the ACC Value
Challenge. The following general conclusions represent some of the more
significant areas of change, as well as some of the constants, since 2000.

Controlling outside counsel spending moved back into the position as the top
concern of in-house counsel for the first time in three years, topping concerns
over legal compliance.

When asked the top five most pressing issues facing their law departments,
"reducing outside legal spending" was the top concern, cited by 80.5% of this
year`s respondents. Sarbanes-Oxley and other legal compliance requirements fell
to a close second (78.2%), while concerns about reduced legal budgets/having too
much work for fewer resources came in third (60.3%). Rounding out the top five
were "keeping management apprised of legal developments" (60.0%) and "staying
apprised of changes in the law" (54.1%).

In-house counsel have shown unprecedented success in containing increases in
outside legal spending, as well as increases to hourly rates.They predict even
more success during the coming year.

With the focus on reducing outside counsel spending, the median change in
aggregate outside legal spending this past year was no change, the smallest in
the history of the survey. Similarly, the actual increase in hourly rates this
past year was for the first time lower than had been predicted the prior year
(an increase of 4.76% after a prediction of 5.02%). This is also the smallest
annual increase in the history of the survey. For both aggregate outside counsel
spending and hourly rates, in-house counsel predict that there will be no change
during the coming year.This is also an historic shift compared with increases
predicted in all previous years.

A larger percentage of the legal budget is going to law departments, less to
outside counsel.

During the first five years of this survey, spending on outside counsel was
generally double the spending on law departments. The past four years, the ratio
of legal spending has shifted in favor of law departments, reflecting the
increasing recognition of the value of in-house counsel and the relatively lower
cost of legal work that is done in-house due to process and staffing
efficiencies. Specifically, the ratio of spending on outside counsel to spending
on company law departments has declined from 2.0 in 2004 to 1.29 in 2007, up a
bit to 1.6 in 2008.

Given this budgetary climate, in-house counsel are becoming bolder each year,
requiring more from their outside counsel. This was a breakout year in which
record numbers of in-house counsel took new actions to improve management of
outside counsel and to reduce their legal spending.

Record numbers of in-house counsel reported that they engaged in more activities
to get better control over outside legal spending. Examples of high and
unprecedented levels of cost containment methods include:

-- Requiring Minimum Levels of Associate Experience 62.0 %*
-- Implementing Convergence (reducing the number of outside firms engaged) 32.8 %*
-- Receiving Discounts for Early Payment of Legal Bills 18.7 %*
-- Competitive Bidding and RFPs 20.0 %
-- Value-Based Suggestions for Law Firms 69.9 %
-- Termination of Outside Counsel 50.3 %
-- Use of Alternative Fee Structures 61.0 %
-- No resistance within Companies to Alternative fees 62.3 %

*a record high

One aspect the survey addressed was the ACC Value Challenge, an initiative that
seeks to reconnect the cost of legal service with value and better align the
interests of clients and the firms that represent them. Overall, many
respondents who sought value and responsiveness from their law firm
relationships were disappointed this year.

This year, the survey for the first time collected data relating the ACC Value
Challenge. Responses indicate that a majority (57.0%) of in-house counsel
believe that the value of the work performed by at least some of their outside
counsel, taking into account the cost of their services, declined during the
past year. More than two-thirds of in-house counsel (69.9%) provided specific
suggestions to their outside counsel for increasing the value of their services.
Response from outside counsel was mixed: approximately 37.5% of in-house counsel
said that 10% or fewer of their firms implemented their suggestions, and 22.9%
reported that 76-100% of their outside counsel implemented their suggestions.

Value-based suggestions to outside counsel included the use of case plans,
tracking budgets, periodic status updates, more efficient staffing levels,
better training of associates, more use of technology, and improved management
of other vendors.

As part of this movement to deliver value, in-house counsel are using more
sophisticated technology to track the activities of outside counsel, and have
plans to do more.

Although many in-house counsel reported this year that they still use home-grown
spreadsheets or other internal management software (40.0%), a growing number are
moving toward Internet-based systems that help them collaborate directly with
outside counsel. Such systems collect and process not only bills and budgets,
but also documents, deadlines, status updates, and other key information
(exposure estimates, opposing counsel, settlement amounts, etc.) directly from
outside counsel who are working in the same system. This year, 51.3% of in-house
counsel reported they are planning to adopt Internet-based systems on a regular
basis with their outside counsel, while at the same time, the use of law firm
extranets has significantly declined in recent years (with only 8.7% of in-house
counsel now using them, compared to 10.4% in 2007). Types of Internet-based
systems in-house counsel reported using this year include:

-- Combined Matter Management/E-billing 13.6%
-- Separate E-billing 5.9%
-- Separate Matter Management 2.3%

Even with these advances in collaborative technologies, most law firms are still
neglecting to implement client-centric, value-based solutions and
suggestions.Therefore, in-house counsel are setting more rules governing their
relationships with outside counsel.

Over the past nine years, more in-house counsel have required specific terms of
retention that dictate what they expect from their outside counsel. The most
common terms required of outside counsel are:

-- Required Monthly/Periodic Bills 95.6%
-- Billing Formats/Details 66.2%
-- Discounts from Standard Hourly Rates 66.2%
-- Preparation of Budgets 61.3%
-- No Change of Hourly Rates Without Approval 58.0%
-- Preparation of Early Case Assessment (Risks and Resolution Strategies) 54.6%
-- Periodic Written Matter Updates 53.3%
-- Limits on Internal Charges (e.g. copies, faxes, phone, online research) 52.3%
-- No Change of Assigned Attorneys Without Approval 51.5%

Across the board, the use of each retention requirement has generally increased
over time. It is likely that this trend will continue, as many in-house counsel
state that they are planning to require even more of their firms in the future.

Survey Methodology & Respondent Demographics:

The survey was conducted online in two parts: one survey to collect hourly rate
data, and another for the rest of the survey questions. The responses to the
non-hourly rate survey were provided during May and June, and the responses to
the hourly rate survey were provided in July and August.

* There were 390 law departments that completed the non-hourly rate portion of
the survey; hourly rate tables were provided by 189 law departments.
* Respondents who are General Counsel constitute 66% of the respondents, and
"assistant general counsel/staff attorney" constitute 19%. The remaining
respondents include law department administrators and other in-house counsel
titles.
* The breakdown of respondents by company size is: "small" companies (less than
$100 million in annual revenues)-34.6%; "medium" companies ($100 million to $1
billion in annual revenues)-32.3%; and "large" companies (over $1 billion in
annual revenues)-33.1%.
* The breakdown of respondents by law department size is: "small" (one attorney
or no attorneys)-- 29.2%; "medium" (two to ten attorneys)--54.4%; and "large"
(more than ten attorneys)--16.4%.
* It is important to note that although large law departments capture much of
the media attention, small law departments make up the majority of the in-house
profession, with over 83% of the respondents coming from law departments having
one to ten lawyers.

About ACC

The Association of Corporate Counsel (ACC) is the world`s largest organization
serving the professional and business interests of attorneys who practice in the
legal departments of corporations, associations and other private-sector
organizations around the globe. ACC promotes the common interests of its
members, provides resources to help save, time money and effort, contributes to
their continuing education and provides a voice on issues of global importance.
With more than 25,000 members in over 70 countries, employed by over 10,000
organizations, ACC's community connects its members to the people and resources
necessary for both personal and professional growth. By in-house counsel, for
in-house counsel.®

About Serengeti Law

With more than 100,000 users in 160 countries worldwide, Serengeti is the most
widely used system for legal project management and electronic billing. In
recent surveys of both law departments and law firms it is also the highest
rated system for the collaborative management of legal work. Serengeti includes
online bill review/auditing, legal project collaboration (including documents,
contacts, deadlines, and status updates), automated budget management, and
contract management. In-house counsel also use Serengeti to generate reports
which analyze trends in project inventory, monitor spending, track budgets,
assess developing areas of exposure, and compare results across similar
projects. With only an Internet connection and an hour of training, hundreds of
law departments (from the Fortune 100 to companies with solo GC`s) save both
time and money by working online with all of their outside counsel worldwide.
More information is available at: www.serengetilaw.com.

EDITOR`S NOTE:

For more information or to interview ACC President Fred Krebs or ACC Deputy
General Counsel and Vice President - Legal Resources James Merklinger, please
contact Robin Scullin on-site at the ACC 2009 Annual Meeting at scullin@acc.com
or 202.374.1169 or Marthea Davis at davis@acc.com or 202.290.5699; copies of the
Executive Summary are available upon request to members of the press.To speak
with the report`s author, please contact Rob Thomas at
rob.thomas@serengetilaw.com;425-732-5518. The full Survey Report is available on
CD from Serengeti (order form available at: www.serengetilaw.com).

ACC
Robin Scullin, 202-349-1509
Cell: 202-374-1169
scullin@acc.com
or
Marthea Davis, 202-349-1519
Cell: 202-290-5699
davis@acc.com
or
Serengeti Law
Rob Thomas, 425-748-5518
Cell: 206-817-2430
rob.thomas@serengetilaw.com
or
Bernadette Bulacan, 425-732-5546
Cell: 206-779-2376
bernadette.bulacan@serengetilaw.com

Copyright Business Wire 2009