As today’s digitized and remote-enabled legal marketplace evolves, legal service delivery and the roles supporting in-house and outside legal teams have assumed greater importance in meeting the challenges and opportunities of this new reality
Legal procurement, operations and business optimization specialists are, more than ever before, the professionals to whom many organizations turn for help in achieving greater cost savings, containment and control measures in the new legal marketplace. How these professionals interact with in-house counsel, clients and outside law firms will have a direct impact on existing and new relationships as well as the level
of success those relationships enjoy.
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Within many large companies, the management of outside counsel and internal legal spend resides either with the legal ops professionals within the corporate law department or within the company’s procurement group. Regardless of which party manages the procurement of legal services, companies and their sourcing specialists have embraced strategies that are specific to the legal market. They recognize that money spent on outside counsel will not manage itself, and indeed, requires dedicated attention. (Not surprisingly, in-house legal ops as well as procurement professionals are increasingly interacting directly with their law firm counterparts, who in turn, have grown to be increasingly important to their law firms.)
It’s also not surprising that over the last decade, legal ops and procurement specialists have become the go-to experts for business optimization, project management and relationship building. This same group of professionals – more so than other professionals in the legal industry – are dedicated and laser focused on managing the compliance, risk and financial aspects of business relationships with outside counsel.
Legal ops vs. procurement
Unlike their procurement counterparts and generalists, legal ops professionals within corporate law departments tend to focus on the individual strengths of each law firm and the overall value each firm brings to the client relationship. Firms are treated like business partners and in some cases are of significant strategic importance to a company because of the firm’s legal expertise, experience and ability to deliver value for the client. Companies that have adopted a legal ops strategic approach have enjoyed greater success in terms of building relationships, maintaining costs and creating long-term savings than alternative, generic-based, procurement-type models.
However, not all companies may want or have need for a legal ops model, opting instead for a procurement model that is easier to deploy, less costly and more suitable to managing simplified, transactional legal matters that may only require a small constituency of law firms. In such scenarios, the management of outside counsel by procurement groups may be just as good and effective as a legal ops model.
The procurement model also is less complicated, more generic in methodology and almost always primarily focused on pricing as the principal component of the business arrangement with outside counsel. Very little effort is dedicated to creating unique arrangements and growing distinct relationships as law firms are treated more like commoditized vendors in a transactional process than if they were part of a more formalized panel under a legal ops model.
Adopting change and innovation is no longer just an option for many clients and their outside law firms, it is an absolute necessity.
Since the onset of the pandemic, the procurement model has increasingly gained traction as many clients increasingly focused on tactical convergence practices, competitive bids and renegotiating pricing arrangements to control their legal costs. As we move beyond the pandemic, however, many large institutional clients will increasingly grow attracted to the strategic and long-term benefits found in the legal ops model.
Legal ops as change agent
Both legal ops and procurement professionals have been challenged by the rapidity and scale of change that has taken place in the legal marketplace over the past year. Adopting change and innovation is no longer just an option for many clients and their outside law firms, it is an absolute necessity.
The pandemic has been a monumental catalyst for change, driving adoption of technological transformation, digitization, remote working, information security, innovation, business optimization and more, all of which have relied to some degree on legal ops and procurement specialists for their successful implementation.
Clients that have embraced the legal ops model of managing service delivery are expecting much more in the new hyper-competitive marketplace. If an outside law firm is viewed as a strategic partner, in-house legal ops professionals are increasingly demanding transparency around pricing, innovative approaches to solving legal problems, and processes on work delivery aligned to predictable costs and showing clients how to save money.
Far from being an “extra,” this focus on best practices is a value-added service that many clients have come to expect from their outside law firms.
The economics of legal ops
Increasingly, economic factors are also having a significant impact on relationships and the business transactions that legal procurement professionals face. As a result, in-house procurement professionals need to be cognizant of the pressure they are placing on law firms, especially those that deliver little in the way of value. In some of these cases, legal ops professionals have to calculate whether the return on investment, profitability or cost savings of these relationships is worthwhile. If they cannot, these professionals may have to make difficult decisions regarding with which outside law firms they want to continue to do business.
In-house procurement professionals are also having to make tough calls with regard to rationalizing existing legal panels in order to leverage better pricing concessions or to transfer large swaths of transactional work to fewer (and cheaper) legal service providers.
The reality of these economic forces is present in the data that has become the basis upon which many legal ops and procurement professionals make their recommendations. In-house ops teams are swimming in a plethora of billing data and analytics; and, as they move into a post-pandemic period, clients will be looking for outside law firms that can not only demonstrate excellent legal work, but can understand the client’s business and risk appetite, as well as leverage data to demonstrate the firm’s value.
As the role of in-house legal ops and procurement professionals continues to grow, their ability to help manage the business side of their companies’ relationships, while serving as stewards of the relationships with their companies’ outside law firms, will increase in value.
These in-house professionals have such a wide, encompassing and important mandate to ensure the right information and decisions are made to guarantee quality, innovation and delivery of legal services.
