The legal industry's new look

Watch the video here.

The business of running a law firm may have changed for good with the current recession. A growing number of companies are trying to cut costs by outsourcing or bringing legal work in-house, which could mean fewer billable hours for Chicago's law firms.

Hi, I'm Danny Ecker. In Chicago Business Today: A new day for the legal industry.

The recession has changed the legal world in a big way. And it's forcing law firms to adjust, or ship out.

Chicago's law firms shrank last year by nearly 10 percent-- or more than 600 jobs-- according to a Crain's survey. Legal consultant Joel Henning says that in some ways, the legal industry has changed for good.

Today, law firms are being much more selective... the’yre hiring top quality men and women from top schools and paying them top dollar. But they’re also hiring mid and lower level grads and telling them they aren’t expected to make partner....I now think that some changes in the delivery of legal services that we have seen in this recession will remain and it won’t be the way it was.

And one of those changes is foregoing billable hours-- a trend that's picking up among businesses looking to run leaner.

People like Jim Sheehan are leading the charge. Sheehan is the general counsel for Naperville-based telecommunications company Tellabs. His primary task is finding ways to trim fat from the company's legal costs by doing what can be done in-house. And the result-- Tellabs reduced its legal expenses between 5 and 6 percent last year, and is aiming for nearly twice that in 2010.
With outside resources, its much harder to control the cost, and we think with internal resources, we can control that.

And if companies aren’t scrutinizing legal bills in-house, they’re farming them out on the cheap.

Chicago-based Mindcrest is an oursourcing specialist employing about 700 lawyers in India. They readily take on tasks like electronic discovery and other work that typically takes up extensive-- and expensive-- billable hours from law firms. With the recession, Mindcrest's business has nearly doubled, and CEO Ganesh Natarajan says they're a logical cog in the system.

Ultimately, we provide services with very high quality but at a much lower cost. And that helps across the chain--law firms benefit because they can focus on higher level work at perhaps even charge a higher rate because they offer more value.

Natarajan says, despite the struggling job market, many low-level legal associates don't want to spend months with virtual busy work, whereas the jobs are highly coveted in India.

And that's all for this edition of Chicago Business Today. For breaking news throughout the day, check back with ChicagoBusiness.com or follow us on Twitter. Thanks for watching, we'll see you tomorrow.