Corporate General Counsels (GCs) have reached a tipping point in their frustration over rising legal fees, with many starting to ask, "How much is too much?" A recent article in The Wall Street Journal highlights this growing dissatisfaction, pointing out that many companies now view the rise in legal fees as "unsustainable." As law firm profits continue to soar, GCs are changing their approach to legal services, especially in response to superstar attorneys at top firms earning between $15-20 million annually and associates billing at rates approaching $1,000 per hour.
This shift in sentiment opens a significant opportunity for mid-size and specialized law firms to capture a larger share of the market.
Why the Big Firms Are Losing Favor
One of the most notable signs of this shift is companies like Heineken moving some of their legal work to smaller boutiques. As Ernst van de Weert, GC at Heineken, said in the WSJ article, "You can get the same kind of quality for half the rate." GCs at companies such as Shell are also seeking more predictable and transparent legal spend through Alternative Fee Arrangements (AFAs) rather than relying on the billable hour.
The legal industry is experiencing a sharp rise in rates, which many GCs see as excessive. While large firms command top-tier talent, they also come with a hefty price tag, prompting many companies to reevaluate whether they need to pay premium rates for all legal matters.
Mid-Size Firms Have a Competitive Edge
As larger firms continue to raise rates, mid-size firms have an opportunity to position themselves as more cost-effective alternatives. This is particularly appealing to GCs who are now exploring capped fees and AFAs to control their legal budgets. Mid-size and boutique firms can offer high-quality service at lower rates, and many GCs are beginning to notice.
In fact, according to a Leopard Solutions survey, many GCs expressed frustration in locating legal talent in smaller markets or finding specialized firms that offer better value. This gap in the market presents a clear opportunity for firms outside of the Top 50 to market themselves as cost-effective and efficient alternatives.
Addressing the Search for Specialized Legal Talent
While larger firms may dominate the headlines, many GCs struggle to find the right law firm for their needs in far-flung markets or for specific legal expertise. Traditionally, GCs have relied on referrals or even Google searches to find legal counsel, making it difficult to stay updated on new firms that could offer more value.
Why the Billable Hour Remains a Challenge
Despite widespread frustration with the billable hour, it remains a stubborn fixture in the legal world. The billable hour can cause burnout among associates and partners alike, and it is frequently cited as a key factor in both retention and recruitment challenges at law firms. Clients, too, dislike the uncertainty it creates in legal bills.
The promise of AI-driven cost reductions remains limited. While AI might streamline tasks like document review, its impact is minimal when top attorneys are charging $2,000 per hour. The core issue remains clients want more predictable costs, and law firms currently have little incentive to drive those costs down.
Midsize Firms Can Offer the Value GCs Seek
According to Leopard Solutions' 2024 Corporate Counsel survey, value was cited as the most important factor when choosing outside counsel, surpassing even longstanding relationships. Value, in this context, includes both cost-effectiveness and the quality of the services rendered. Midsize and boutique firms are well-positioned to capitalize on this demand by demonstrating that they can deliver excellent legal work at a fraction of the cost.
By adopting innovative pricing models—such as flat fees, subscription services, or success-based fees—smaller firms can offer GCs a more attractive alternative to the traditional billable hour. These alternative pricing models provide more cost predictability and can help mid-size firms stand out from larger competitors.
The Path Forward
The legal marketplace is ripe for disruption, with GCs increasingly seeking new ways to manage legal spend without sacrificing quality. Mid-size and specialized law firms, equipped with the right tools and a clear value proposition, can seize this moment to capture more business.
As GCs continue to ask, "how much is too much," firms that can offer high-quality legal work at a reasonable cost—while providing transparent, predictable pricing—will stand out. For mid-size and boutique firms, now is the time to emphasize value, innovate with pricing models, and take advantage of technology to help legal departments better select and manage their outside counsel.
By focusing on both the quality of service and cost efficiency, these firms have a golden opportunity to gain a larger foothold in the legal marketplace.
