Last night I was asked why a company would want to switch from outside counsel to in-house lawyers. I've been in-house at Research in Motion (AKA BlackBerry), worked at a large Bay St. law firm and am now practising independently. Although I'm not a grizzled veteran, I have seen both sides of the practise of law.
I think there are two key advantages of in-house:
1) Cost
2) Domain knowledge
Cost
It's much cheaper to pay a lawyer's salary than to pay a law firm by the hour. I think the key reason for this is that law firms have very high margins. Numbers for Canada are hard to come by but a PWC survey of UK law firms last year found that top 10 firms have approximately 37% margins. This is in-line with the rules of thumb that I've heard.
Furthermore, in-house counsel often have fewer support staff and less tony offices. When you eliminate the extra overhead & margins, there's plenty of opportunity for a win-win by moving lawyers in-house.
Domain Knowledge
In-house counsel become experts at the company's business. They acquire a huge amount of industry knowledge that helps them be better lawyers.
In-house lawyers also become experts at navigating the internal bureaucracy of the corporation they work for in a way that outside counsel can't match. They know who the right players are to rope in when a deal is being considered.
Further Reading
-Deloitte report about the expanding role of in-house counsel at Canadian companies: deloitte.com/...
-"The role of an in-house law department is a relatively new phenomenon. Twenty-five years ago, it would have been highly unlikely to find a major corporation with more than a few of its own staff lawyers." -ZSA blog post
-Harvard Business Review article about the expanding role of general counsel: blogs.hbr.org/...