Last week, Buying Legal Council held a terrific conference,”Professional Sourcing and Management of Legal Services,” at Proskauer’s Times Square New York City office. (See, Above The Law: “Lawyer-Client Relationships: Healthy or Tinder?”)

Today, BLC released its “2016 Legal Procurement Survey.” (See, Bloomberg Big Law Business: “Survey Reveals Role of Procurement in ‘High-End’ Legal Services Market.”)

Both address some of the dramatic changes in the dynamics between corporate counsel at top companies and their lawyers. Make no mistake, much of the change has been triggered by the increasing use of analytics and technologies, so this is an arena that our CodeX community should monitor for more startup opportunities!

Said BLC’s executive director, Silvia Hodges Silverstein, in the survey report introduction, “The recent financial crisis and slow recovery acted as a catalyst and sped up the process for the adoption of Legal Procurement among many Fortune 500 companies and their international equivalents. Publicity about billing practices, big ticket spending, increased transparency and profit pressure is at the root of this seismic shift.”

In the survey’s Executive Report, Silverstein sums up key takeaways. Among them:

• “It is a buyer’s market:” Clients are flexing their muscles and bringing in procurement professionals who are commercial negotiators, trained to get better value for their employers.
• “Say good-bye to the ‘good old boys network’ of hiring lawyers:” While the first step often is a request for proposal (RFP)  process, an increasing percentage of companies are using professional, institutionalized procurement management.
• “Almost no one pays sticker price for legal services today: Discounts of 10 to 20 percent or more are expected.”
• “Procurement is not out to destroy trusted relationships, wreak havoc, and put the organization at risk to save a few pennies. Its top management mandate is to ensure that suppliers were selected for the right reasons and deliver what is needed for the right price in the right manner.”
• Senior management’s views about the utility of legal procurement— and procurement professionals’ expertise and proficiency re: sourcing legal service—have changed. Increasingly, companies and procurement teams are working with legal to develop a more sophisticated approach to sourcing legal services that goes beyond mere cost savings.

EXTRACTING SAVINGS

The survey also addresses how companies can take “a proven pathway to extracting saving from law firms,” that includes:

• • Get a grip on legal spending: “Who buys what in the organization, how much do they spend, where do they spend it, and how is it procured?”
  •  Increase purchasing power: “Reduce the number of firms you work with, establish panels of preferred firms, possibly have firms compete against each other for individual matters, and apply and enforce billing guidelines.”
  • Measure legal services and get an overview of how firms provide legal services. “Look for efficiency and effectiveness. High price doesn’t always guarantee high quality, lower price doesn’t need to mean low quality.”
  • Competition: “Make firms compete for your business.  Run several rounds of negotiations, learn from each interaction and set up expectations for efficiency and a downward trajectory in rates.”

REACTION

“The survey results point to a trend that has picked up steam over the last few years,” observed Mark Cohen, CEO of Legal Mosaic. “The buy/sell dynamic has shifted from lawyer- to-lawyer (GC and law firm) to multiple parties on both the buy and sell sides,”said Cohen, who was a speaker at the March 15 conference (“TED-style Talks: Managing (Supplier) Relationships”.) “These are large companies we are talking about. Legal buying is no longer an outlier among other outsourced categories.”

Said a New York-based sourcing manager who asked not to be identified, “I think the survey results would be of greatest use to organizations which are at the stage of obtaining business line and senior legal management approval to begin to work with legal operations / procurement.”

The survey is accessible for BLC members; an abridged version will be available to the public. Also available to all is the 2015 “Legal Procurement Handbook.” For information visit buyinglegal.com

Monica Bay is a Fellow at CodeX: The Stanford Center for Legal Informatics, a freelance journalist and a member of the California bar. Email: mbay@codex.stanford.edu. Twitter: @MonicaBay 

Cover image: Clipart.com