New players driving value for legal departments

New players driving value for legal departments was written by Mark Cohen and Liam Brown and originally appeared in Canadian Corporate Counsel Association magazine. As I read it, the key point Mark and Liam make is that the NewLaw players, while still tiny in market share, are teaching clients new tricks. And this spells big opportunity – or trouble if they’re asleep at the wheel – for BigLaw incumbents.  

Lawyers are about precedent—stare decisis—not innovation. They are trained to identify issues (read: problems), not create solutions. And they have historically played the role of client defender, not business partner. Their law school training was reinforced upon entry to practice. That was legal culture.

But it’s changing thanks to consumers. Legal consumers and a handful of managed legal service providers have separated legal practice—core tasks that require differentiated legal expertise and skills—from the delivery of legal services—the business of law and the integration of practice and delivery.

Corporate legal departments have grown in size, importance, responsibility, compensation, and impact on legal delivery. This has occurred for several reasons, notably the fallout from the global financial crisis of 2007, globalization and the growing complexity and regulatory challenges of multinational businesses, and breathtaking advances in technology. Legal delivery—the business of law—has become a three-legged stool supported by legal expertise, technology, and process. Most law firms have lagged in technology and process integration, failing to seize the opportunity to get out in front of a changing delivery model and a new set of consumer expectations.

In response to law firm stasis, several in-house departments and legal service providers have become the standard bearers for the delivery of legal services—the business of law. According to ALM Intelligence’s recent“General Counsel Up-at-Night” report, 73% of legal work is performed in-house, 2% outsourced to legal providers (non-law firms), and the balance by firms. Corporate legal departments, once legal buyers, are now also its principal providers. Law firms have ceded market share to in-house departments and to tech and process-enabled service providers. The 2% service provider share would be substantially higher if corporate legal operations (“legal ops”) work and services were included.

Legal delivery is morphing from labour-intensive legal practice delivered exclusively by lawyers/law firms to a tech-and process-enabled model that combines legal, technological, and process and project management expertise.

Law is not simply about lawyers anymore. Technologists, process experts, and other service professionals and paraprofessionals, assisted by technology, leverage legal expertise. Law is tracking the medical profession’s decades-ago metamorphosis from “medical practice” to the delivery of healthcare services. The business of law is leveraging differentiated legal expertise and skills the same way that healthcare delivery has leveraged differentiated physician skill sets, leaving others to conduct and deliver the “business” of the profession.

It is against this rapidly changing backdrop that corporate counsel are challenged to identify ways to contain spend, mitigate risk, take on ever-increasing responsibility, manage a legal supply chain, defend the enterprise and simultaneously advance its business agenda within established risk parameters and the bounds of the law, and proactively identify — and defuse — problems before they result in legal exposure. This is not what they learned at law school or during practice. How do they meet these challenges?

Unprecedented challenge – and opportunity

In-house legal departments operate in an environment of unprecedented challenge and opportunity. The challenges are to do more with less and keep pace with the rapacious growth, geographical imprint and complexity of the enterprise. They also contend with budget pressure even as their portfolios expand in size and complexity. But that’s only part of the story.

In-house counsel are expected to serve a dual role: they are defenders of the company as well as business partners advancing its interests. These at times conflicting roles have created a divergence between in-house and law firm lawyers, placing corporate counsel in the vanguard of the profession.  They must identify ways to mitigate an increasing array of risks while curbing spend and promoting efficiency. At the same time, they must become integrated with their business clients and actively pursue corporate opportunities. This means that in-house counsel play offense and defense. It is the essence of the corporate legal challenge.

The opportunity is that corporate legal departments now operate in a buyer’s market, affording them sourcing strategies that were unavailable when law firms had a virtual monopoly on the delivery of legal services. These options include teaming up with non-law firm legal service providers to:

• Design improved processes and workflows.
• Apply legal technology.
• Assign work to people with the right expertise, experience, and cost.

Legal service providers work with corporate legal departments—and law firms—to deliver business impact by stream-lining the business of law. These new players offer holistic, integrated, multi-disciplinary managed services to legal ops and the business of legal delivery to enable legal departments to meet and exceed their goals. Their contributions extend well beyond budget control—the predictable outcome of a process that legal departments seek. They also identify the optimal processes, resources (people and technologies) and providers (the legal supply chain) to perform discrete matters and portfolios in an efficient, process- and metric-driven, secure, and customer- and business-aligned fashion.

Baxter case study

When the legal department at Baxter, a healthcare product and service provider, needed to review up to 100,000 contracts in multiple countries as part of its separation into two companies in 2015, they turned to a legal service provider, Elevate, to work with the in-house Baxter legal team and outside counsel, Baker McKenzie.

Elevate designed a workflow and process to split the contracts into categories—customer contracts, strategic contracts and everything else—and develop different business and legal resolution paths for each category. This process avoided the exponentially higher cost of outside counsel manually reviewing and categorizing each contract while substantially compressing delivery time and promoting accuracy. An AI review technology was then used to analyze and identify relevant contracts from this specific corpus. This reduced the number of relevant documents from 100,000 to approximately 11,000. Next, Elevate lawyers familiar with these types of contracts and the relevant foreign languages ran training cycles of contract batches, improving the AI tool’s ability to identify and pull out specific clauses in those contracts to over 90% accuracy. Finally, the contracts were categorized and efficiently routed for resolution with the counterparties:  either to Elevate lawyers for the high volume of non-business critical contracts or to outside counsel and Baxter lawyers for the smaller number of customer or business-critical contracts.

This integrated approach, combining process design, legal technology, and legal services, saved Baxter more than US$500,000 over traditional methods. Even more importantly, using a legal service provider enabled the customer’s legal department to meet the de-merger timetable.

Conclusion: New players driving value for legal departments

The practice of law—core tasks that require specialized legal expertise, training, and skills—is shrinking, and the delivery of legal services—the business of providing integrated legal services—is expanding rapidly. This distinction informs a critically important decision for general counsel specifically and legal consumers generally: engaging the right resource for the right task.

Law firms, long the default provider, remain go-to sources for that narrow band of high-value, so-called “bet the company” litigation, transactional or regulatory matters that are price insensitive and require specialized skills. But for everything else—approximately 85% of total legal spend—legal consumers have viable options that previously did not exist. Those choices, notably non-law firm legal service providers, are cost-effective, tech- and process-savvy, and expert in integrated legal delivery. These new players have emerged in response to a marketplace need for integrated legal delivery expertise. They are a powerful resource that legal departments should consider when they distinguish between legal practice and legal delivery functions. They will give general counsel an edge in achieving more with less in their challenging new roles.