Legal procurement, operations and business optimization specialists are, more than ever, the professionals many organizations turn to for help in achieving cost savings, containment measures and greater control in the new legal market. How these professionals interact with internal legal advisors, clients and external law firms will have a direct impact on existing and new relationships as well as the level of success of those relationships.
In many large companies, the management of external advice and internal legal expenses is the responsibility of either the legal operations professionals within the corporate law department or within the corporate procurement group. Regardless of which party manages the procurement of legal services, companies and their sourcing specialists have adopted strategies specific to the legal market. They recognize that the money spent on outside advice will not manage itself and, in fact, needs special attention. (It is not surprising that in-house legal departments as well as procurement professionals interact more and more directly with their counterparts in law firms, which in turn have become increasingly important to their law firms. ‘avocados.)
It’s also no surprise that over the past decade, legal operations and purchasing specialists have become the go-to experts in business optimization, project management and relationship building. This same group of professionals – more than other professionals in the legal industry – are dedicated and focused on managing compliance, risk and financial aspects of business relationships with outside advisors.
Legal transactions vs. supply
Unlike their counterparts and procurement generalists, legal operations 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 relationship. customer. Firms are treated as business partners and in some cases are of considerable strategic importance to a business because of their legal expertise, experience and ability to deliver value to the client. Companies that have taken a strategic approach to legal operations have experienced greater success in building relationships, maintaining costs, and creating long-term savings than alternative, generic, sourcing-type models.
However, not all businesses want or need a legal operations model, opting instead for a procurement model that is easier to deploy, less costly, and more suited to handling simplified transactional legal issues that may not be available. require only a small group of law firms. In such scenarios, the management of external advice by procurement groups can be just as good and efficient as a legal operations model.
The procurement model is also less complicated, more generic in its methodology, and almost always focuses primarily on pricing as the main element of the business deal with an outside lawyer. Very little effort is put into creating unique arrangements and building distinct relationships, as law firms are treated more as commoditized suppliers in a transactional process than if they were part of a panel more formalized as part of a legal operations model.
Since the start of the pandemic, the procurement model has gained more and more ground as many customers have increasingly focused on tactical convergence practices, competitive offers and renegotiation of tariff agreements to control their legal fees. As we emerge from the pandemic, however, many large institutional clients will increasingly be drawn to the strategic and long-term benefits of the legal operations model.
Legal operations as an agent of change
Both legal operations and procurement professionals have been challenged by the speed and scale of changes in the legal market over the past year. Embracing change and innovation is no longer just an option for many clients and their external law firms, it is an absolute necessity.
The pandemic has been a monumental catalyst for change, driving the adoption of technological transformation, digitization, remote working, information security, innovation, business optimization and more , all of whom have relied to some extent on legal operations and procurement specialists for their successful implementation.
Customers who have adopted the service delivery management legal operations model expect much more in the new hyper-competitive marketplace. While an external law firm is seen as a strategic partner, internal legal operations professionals increasingly demand transparency around pricing, innovative approaches to resolving legal issues, and work delivery processes aligned with standards. predictable costs and showing customers how to save money.
Far from being a “plus”, this focus on best practices is a value-added service that many clients expect from their external law firms.
The economics of legal operations
Increasingly, economic factors are also having a significant impact on the relationships and business transactions faced by legal procurement professionals. As a result, in-house procurement professionals need to be aware of the pressure they place on law firms, especially those that offer low value. In some of these cases, legal operations professionals need to calculate whether the ROI, profitability, or cost savings of these relationships are worth it. If they cannot, these professionals may have to make difficult decisions about which outside law firms they wish to continue doing business with.
In-house procurement professionals also have to make tough calls when it comes to streamlining existing legal panels to take advantage of better tariff concessions or to shift large swathes of transactional work to fewer legal service providers ( and cheaper).
The reality of these economic forces is present in the data that has become the basis upon which many legal and procurement professionals formulate their recommendations. Internal operational teams are immersed in a plethora of billing data and analyzes; and, as they enter a post-pandemic period, clients will seek out outside law firms that can not only demonstrate excellent legal work, but can also understand the client’s business and risk appetite, as well as leveraging data to demonstrate the value of the firm.
As the role of legal operations and procurement professionals continues to grow, their ability to help manage the business side of their businesses’ relationships, while serving as gatekeepers to the relationships with external law firms. their businesses, will increase in value.
These in-house professionals have such a broad, holistic and important mandate to ensure that the right information and the right decisions are made to ensure the quality, innovation and delivery of legal services.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the principles of trust, is committed to respecting integrity, independence and freedom from bias. Thomson Reuters Institute is owned by Thomson Reuters and operates independently of Reuters News.