Corporate counsel are trying to find cost savings in a market full of rising law firm billing rates by rebalancing their portfolio of outside counsel and looking to alternative providers with more predictable cost structures
It should come as no shock that the top strategic priority for corporate general counsel (GCs) in the United States, the United Kingdom, and Canada is cost control, according to the recently released 2025 State of the Corporate Law Department Report from the Thomson Reuters Institute (TRI). In fact, cost control is among the Top 5 priorities cited by GCs in every region around the world. This is not surprising — large swaths of corporate C-Suite officers cite higher corporate profits as a key component of their definition of success and reducing costs as a key strategic priority to achieve that goal. It is only natural for GCs to follow suit with those priorities.
Yet it is an inescapable reality that GCs, generally speaking, must rely to a large degree on outside law firms to meet all the needs of their organizations, which carries a significant cost. In fact, the cost of outside law firms is not only high, but continues to rise, and quickly. According to TRI’s recent Q1 2025 Law Firm Financial Index, law firm worked rates grew by 7.3% in the first quarter of 2025, the fastest pace of growth for this figure in nearly 20 years.
We should pause for a quick note: this growth in billing rates is not occurring without input from GCs as clients. Indeed, we are talking about growth in worked rates, also known as agreed-upon rates, or the rates clients agree to pay to engage new matters.
So how can clients that are so concerned about cutting costs agree to such large billing rate increases?
Moving work to save money
We should begin with an observation that agreeing to pay a certain price for something is not the same as agreeing to buy a certain number of units of that thing at that price. Put another way, simply because GCs are agreeing to pay increased rates for law firm billable hours does not imply any guarantee as to how many hours GCs will actually hire their traditional law firms at those rates.
We have observed a years-long trend of demand for law firm services shifting away from the top-tier, most expensive law firms, while demand for hours from Midsize and Am Law Second Hundred law firms has continued to grow. Indeed, we have dubbed this pattern demand mobility. In addition to shift work to lower-cost law firms, other GCs are looking to reduce their spend on outside counsel as a whole by bringing more of their legal work in-house.
In fact, among all corporate GCs interviewed for the State of the Corporate Law Department Report, 42% said they anticipate increasing the percentage of their overall legal spend that they dedicate to their internal team.
As the chart also demonstrates, 22% of GCs said they predict a decrease in their spending with outside counsel. Interestingly, however, a plurality of GCs also anticipate increasing their spend with alternative legal service providers (ALSPs), including those affiliated with law firms. This may indicate that it is not necessarily the idea of working with law firms against which clients are potentially pushing back, but rather, clients may be looking toward the more predictable cost structures typically associated with ALSPs.
A push toward ALSPs?
In fact, the report also provides some indications that GCs are looking more favorably toward ALSPs. According to the above chart, roughly 15% of GCs overall said they intend to increase their spending with ALSPs; but among GCs who are current users of ALSPs (whether independent or affiliated with a law firm), that number is closer to 25%. This suggests that GCs that are already clients of ALSPs appreciate the services they are receiving and intend to use these providers even more.
It is likely no coincidence then that those GCs using ALSPs were also more likely to be looking to reduce their use of outside law firms. In fact, 33% of GCs that are currently using an ALSP, even one affiliated with a law firm, said they were looking to decrease their spend on outside law firms — an 11-percentage-point increase over the overall population of GCs surveyed.
This provides a fairly strong indication that there is something about ALSPs that GCs find favorable. Indeed, TRI’s 2025 Alternative Legal Service Providers Report provides plenty of evidence for myriad reasons why GCs like ALSPs. In the context of costs, however, a likely favorability driver is the predictability of ALSPs’ cost structures.
ALSPs tend to work off of fixed fees or other pricing models that provide alternatives to the traditional billable hour much more frequently than do law firms. GCs likely view this as an advantage. In fact, it’s a practice GCs are encouraging their outside law firms to pursue more aggressively. Fully 61% of GCs say shifting toward value-based billing or alternative fee arrangements is a medium-to-high priority — and they are placing the onus for that shift on their outside law firms.
Implications for cost structures in 2025 and beyond
Law firm standard hourly billing rates for 2025 are already locked in place and unlikely to change. However, there will undoubtedly be room for GCs to use increased leverage in agreed-rate negotiations or to push for increased use of value-based billing practices going forward. Indeed, many GCs already are making their desire for more predictable billing models well known, appearing ready to push work toward those law firms that can provide alternatives to traditional billable hour arrangements or even to ALSPs that can provide more predictable billing structures.
Regardless of what mix of strategies GCs pursue in their search for cost savings, the top-down nature of the push coming from corporate C-Suite officers is clear, and GCs will be feeling the pressure to deliver results.
You can download a full copy of the recently released 2025 State of the Corporate Law Department Report from the Thomson Reuters Institute here
