Quit Overspending on Legal Research

By the end of 2022, overall demand for legal services had contracted by 0.1% and clients started pulling more work in-house — putting even more strain on law firm financials that were already under pressure from a 24-month-long war for talent that resulted in the highest associate pay increases on record and a related record increase in overhead expenses.

Unsurprisingly, associate and staff layoffs marked the end of 2022 and beginning of 2023: Cooley, Strook, Goodwin and Gunderson are just a few of the big names that have been transparent about their associate layoffs. 

It is no surprise that library services are one of the areas hardest hit by staff cuts. While firms grew their staff capacities in other areas, staff was reduced in library and research by 2.5%. These reductions are likely in response to the declining cost recovery of legal research as well as growing overhead expenses: In 2022, legal research was the third largest area of increase in overhead and direct expenses.

Clients are simply less willing to pay for firms’ legal research expenses, while legal research costs are on the rise. What can law firms do — outside of laying off staff — to reign in the expenses of this vital cost center of the firm?

MOST LAW FIRMS ARE OVERPAYING FOR LEGAL RESEARCH

Here’s the thing — most law firms are overpaying for the cost of their legal research platform.

Firms are challenged to make informed decisions to control the costs of their legal research contracts because of the lack of transparency in the pricing and bundling practices of leading products that increase the complexity of procuring just the right content. As a result, duplicative content, significantly overpaying market rate and underutilized resources are just a few of the common problems library services face when it comes to legal research. 

“What many firms do not know is just how much they’re paying for this lack of transparency — often in the range of six figures or more. When jobs and services are on the line, this is simply unacceptable.”

Legal research vendors are not responding with discounts, but rather with uncommonly high increases in renewal offers to existing clients.

What many firms do not know is just how much they’re paying for this lack of transparency — often in the range of six figures or more. When jobs and services are on the line, this is simply unacceptable.

Is inflation driving double-digit increases? What happens when the inflation rate drops as it has in the first quarter of 2023? Will increases be reduced to reflect the lower rate? 

Not likely. Because of the secretive nature of the pricing practices by legal research vendors, firms already have the near impossible challenge of understanding if their base rate is fair. These new aggressive increases will only compound and accelerate the negative financial effects of unfavorable base contract rates.

HOW FIRMS CAN WIN SIGNIFICANT SAVINGS

Here is what firms can do to combat aggressive pricing tactics of their research providers and start saving the money they’ve been overspending:

• Be aware. One of the biggest challenges that firms have at the negotiation table is simply being aware of the possibility that they are paying significantly more for legal research services than their peer firms.
• Do your due diligence. Lack of due diligence comes with a price — not just in cost, but also by missing resources potentially helpful to your attorneys. At a minimum, firms need to engage the competing vendor in a meaningful way. 
• Fact-check scare tactics. Vendors are going to use scare tactics to plant the seed of doubt about their competitors. If it’s a fact, the vendor’s marketing department most likely gave the sales force supporting materials to illustrate the point.  
• Drive the agenda, process and timing of negotiations. The firm must set a timetable for negotiations that allows time to not only assess vendor proposals, but also provides for a structured transition if the firm chooses to change vendors.
• Analyze usage under your current contract. You must understand what content is, and is not, being used in your current contract before you can negotiate a new one. Skipping this step — or not knowing how to do it — means your firm will likely have contracts that include costly content that is never used and not needed. 

While 2023 comes with a challenging economic outlook, the biggest takeaway for firms is to do more due diligence with their service providers. Applying the above tactics to combat aggressive vendor negotiations should put most firms in a position to significantly cut back costs — even potentially saving enough to keep your staff intact.