From Bloomberg Big Law Business:

Microsoft has quietly unveiled new parameters for its outside counsel, and, in an effort to step away from the billable hour, announced it hopes to shift 90 percent of its legal work into alternative fee arrangements within two years.

David Howard, a corporate vice president and deputy general counsel at the company, wrote online Friday that Microsoft wants to establish a “new type of relationship” with the law firms handling its most important work.

During the past year, Microsoft has been re-evaluating how it works with law firms, Howard wrote. It made several key decisions in the process, including to hire more law firms on a retainer basis and to work more closely with them on their diversity. He also said the company is rapidly moving away from the billable hour, and named a dozen law firms that have embraced alternative fee arrangements, such as fixed fees, that Microsoft views as its strategic partners.

“We’ve learned that simply comparing the billing rates of different firms doesn’t tell us very much,” Howard wrote. “Firms which work less efficiently usually cost us more, even if their billing rates are lower. Competing on the basis of a fixed fee or similar alternative fee permits a true apples-to-apples comparison.”

He added that Microsoft will have a “competition” among firms for its most important matters, and the law firms most closely aligned with its goals — though not necessarily the lowest bidders — will be retained.

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