Microsoft let go some of its in-house counsel and cut outside counsel earlier this year to meet a 15% cut to its legal budget over the last 18 months.

The cuts come from a budget that was $900 million, Legal Week reported.

Microsoft also asked their outside law firms -- Cadwalader, Orrick, Sidley Austin and Weil are four of the ten hundreds of firms Microsoft uses around the world -- to cut their budget by 10% and evaluate billing methods other than the billable hour.

Brad Smith, general counsel for Microsoft, told the National Law Journal that firms dealing with the lagging economy either cut their rates or held on and lost smaller clients.

But some firms have lost a lot of business from Microsoft, clearly not a small client. Arnold & Porter, K&L Gates (named for Bill Gates's father) and Sullivan & Cromwell were pulled from Microsoft's preferred legal providers list, although the company is still doing some business with them.

There has been so much talk about moving away from the billable hour, but an announcement like Microsoft's make it seem like it is actually happening.

The question, though, is what exactly the billing deals are. Are they working under some sort of reverse contingency in litigation defense cases? Are they charging Microsoft flat rates? Are they actually operating under billable hour plans with a promise to come up with something new soon?

We've called Microsoft to try to get some detail.

*UPDATE: Microsoft has notified us that our original post contained some factual errors. We have addressed them in the post above.