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May 23, 2007

GC Mike Dillon of Sun MicroSystems, Inc. Seeks Out Small Firms

(UPDATE:  See blue highlights.)

Coincidentally, one day after my recent article "Revolting Against the Billable Hour," (Connecticut Law Tribune, May 21, 2007), Mike Dillon, GC of Sun MicroSystems, Inc. wrote this at his blog "The Legal Thing":

My point is that the epoch of the current law firm model - which derives its profitability from growing scale and raising hourly rates - will soon be over. The firms that will survive and thrive are those that recognize this change and focus on how to maintain margins by focusing on efficiency. In the future, I'll describe some the things we are doing in this area, but I'll point out that we recently selected a small number of law firms to support us as "preferred partners" during the next fiscal year. We believe that these firms "get it" and are receptive to looking at new ways to drive down their (and our) cost structure. Hopefully, more firms will embrace this change. If they don't, I fear they will go the way of the Mastodon.

And on May 23rd, this WSJ Thread called "The Traditional Law Firm: Going the Way of the Mastodon" took up the discussion started by Mike Dillon.   I especially liked this comments by "Counsel."

Whether Dillion is right or wrong has more to do with why large firms exist at all than what the future holds for their survival. I think most attorneys (at least from the smaller and solo firms) would agree that the ability and expertise of the retained attorney or firm has more to do with the “added value” of the engagement than how many names are on the firm’s letterhead. Where a large “one stop” firm (think Wal Mart) can assemble a team from its bench to handle a particular transaction or litigation, a small firm or solo practitioner with the needed expertise (think Orvis) is just as likely if not more so, to achieve the desired result (”value”) for a reasonable fee (”efficiency”). While it is true that you can shop at Wal Mart for the fishing gear, clothing and supplies needed for a fishing trip, if you are are fishing for trout, you might want the right flies, line and other gear from Orvis to maximize your chances of catching trout (value).

Probably the only time a GC would actually need to shop at a Wal Mart law firm is when he needs lots of bodies. But realistically, how often is that? In litigation, one experienced, capable hard working attorney usually has no trouble dealing with a hoard of billing units running off in all directions. In a large transaction, capable, experienced paralegal and secretarial support is often of greater value and lower cost, than a herd of over-paid associates charging several hundred dollars an hour each to learn how to correctly structure a deal.

The reality is that good legal services, those which are worth what you pay, are available from good attorneys with the expertise, experience and ability needed by the client for the particular legal problem. Such attorneys are found practicing solo, in small firms and at large firms. There might be some intangible benefit from buying “brand name” law, whether it’s the ability to CYA if questioned later or your ego makes you feel that you need “Big Law” because you are a “Big, Important, Legal, Klient” (”BILK”).

The bottom line however is this: Biggest rarely equates with best. The relevant question for GC is: “Best for what?” The idea that Wal Mart, Sears, Pennys, etc., will “always be best,” is at best, simplistic.

Comment by Counsel - May 24, 2007 at 1:20 pm

Counsel, your comments are truly informed and well received by this reader and I hope by others reading this thread.

Comment by Anonymous, Too - May 24, 2007 at 1:49 pm

And on the same day Larry Bodine posted on an emerging trend amongst large law firms attempting to shift from the billable hour in order to attract more business, at least in New York.

Most importantly for solos, Mike Dillon indicates (in the body of his post) he seeks out highly speciailized 'very' small firms for matters.  This has been an issue for solos believing they are relegated to lower paying clients or less prestigious clients if, in fact, they are looking to work for these clients and/or large corporations but have been unable to penetrate the Big Law barrier.  Well, this comes right from the GC's mouth, "We do want you."  But it is about positioning yourself and creative pricing strategies.

I personally know solos representing Fortune 100 companies, of course, in specialized areas.  But as large corporations look to creativity in billing and reducing their costs while maintaining efficiency, they are reaching out to talented solo practitioners and small firms.  And in a backlash against these outrageous salaries being offered (I'll talk more about this in another post) it will be happening more.

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