Australian corporates have been busy re-evaluating their external legal work in the past 12 months according to the 2011 Mahlab Survey. One third of respondents advised that they changed external legal providers in 2010–2011 while 29% of respondents said that their company had negotiated new terms with existing external legal providers.

Law firms are facing a double whammy; in addition to being pressed for better rates, they are also receiving less work according to the report: more than 50% of survey respondents said that the volume of work briefed to external legal providers has decreased in the past year.  However, according to Mallesons Stephen Jaques chief executive partner Robert Milliner, there has been some growth, albeit small, in the market in the past 12 months.

Offshore providers is one factor affecting the amount of work going to local firms. 25% of respondents reported that their companies are now sending legal work to offshore providers. This number is set to increase, with almost one third of those surveyed advising that they intend to outsource legal work to offshore providers in the next 12- 18 months. “We certainly know from a number of clients that they have asked us to work with them, to do things in a way that is most effective. We have looked at whether that would include any degree of outsourcing or offshoring or other arrangements; but it hasn’t been as prevalent as the percentages in the survey report seem to present,” said Milliner.

Mallesons has worked with one of its clients to manage the work done by a third party provider. “I think there are still a number of things that need to be worked out,” said Milliner. “This is an area that is evolving and I think the market generally is experimenting with this to see if it is a better way of doing things or whether there are true efficiencies.”

Milliner added that while the firm understood clients are very driven about value for money, they are also driven about getting reliable work that helps them manage their risks. “Some will use contract lawyers, increase in-house legal departments, some will look to offshore and outsourcing they are all just evolutions, which we see as being part an partial of the future of the legal industry,” he said.