Who Do I Sell To? The Legal Service Providers’ Dilemma

The sales process in law used to be so simple: partner at law firm has a relationship with the General Counsel or a subordinate in-house attorney. Company has a legal matter and ships the matter over to the firm who handles it start-to-finish. An invoice is presented. It reads: “For legal services rendered,” followed by a large and arbitrarily conceived number. Repeat cycle.

But that was then and this is now.

Law firm rainmakers can no longer rely solely on “relationships” to secure work. Competition is fierce among law firms, both domestic and foreign-based. Institutionally backed legal service companies offering products and services now vie for pieces of matters — sometimes portfolios — once handled exclusively by law firms. Example: Axiom recently signed an eight-figure deal with a major financial institution involving regulatory work.

Then there are contemporary “beauty pageants,” called Request for Proposal (RFP) that require legal service providers to jump through hoops just to be considered for work, either existing or prospective.  And let’s not forget company IT Departments who routinely vet providers for their level of security, compatibility, etc.

But that’s not all that has changed.

The Business of Law Encounters Business Standards

In-house legal departments have grown in size and stature and are handling a greater volume and complexity of work, much of which was once outsourced to law firms. Many in-house departments now take a business approach to legal delivery that includes utilizing business, IT, and procurement professionals to vet outside legal service providers.

An org chart of large in-house departments often has a dizzying array of titles, many with “General”  “Chief,” and “Senior.” Some in-house departments have their own Chief Financial Officers — not to be confused with the C-suite variety — who manage the financial side of legal operations, both inside out.  An increasing number of companies engage Procurement to vet legal providers and to serve as gatekeepers. Final selection of law firms generally remains with the GC or senior designees, but Procurement is frequently the decision maker when it comes to legal service companies (e-Discovery, staffing, IT products, etc.).

Knowing which portal to enter has become key to being in the hunt for securing legal business. And it’s not always easy to know which door to knock on because companies rarely provide sellers with lineup cards. Sound like a contemporary legal version of “Let’s Make A Deal?” It does to me, too.

How and Why Did Things Get So Complicated?

It is difficult to assign a precise date to when selling legal services became so complicated.  Disaggregation—“unbundling”—began about 15 years ago when Tom Friedman taught us “The World is Flat.” Legal process outsourcing, a fancy term for offshore rather than domestic labor arbitrage, took hold as did the rise of legal staffing companies.  Not long after, “alternative law firms” that eschewed the traditional partner model and service providers offering legal services but not “engaged in the practice of law emerged.

And, though it was in its infancy, technology emerged as an integral part of the legal delivery process as paper discovery exploded into e-Discovery. This gave rise to “legal tech” companies that provided everything from software solutions to integrated platforms from which to provide legal services on a remote (“virtual”) basis.

Meanwhile, in-house legal departments bulked up to provide a less expensive, more client knowledgeable alternative to the skyrocketing cost of law firms. And in the process, many developed performance metrics, adopted a business approach to legal delivery, and began to pose a serious challenge to outside law firms and, to a lesser extent, service providers.

All this was prelude to the global financial crisis of 2008 and its aftermath when legal service providers were no longer “sacred cows” exempt from delivering value — quality and efficiency at low risk and reasonable cost. To promote this result, in-house departments increasingly turned to “business types” to assume a more prominent role in procuring legal services as well as to run the business side of internal resources.

Law had long been a business for providers. Now, consumers were taking a business approach to the procurement of legal services. Turnabout is fair play.

Enter:  Procurement

 Procurement Departments have played a key role in corporations for decades, overseeing acquisition of goods and services from paper clips to professional services. Their recent emergence in purchasing legal services came as an unwelcome surprise to many lawyers who questioned their ability to understand the “special” services that lawyers provide.

Procurement’s seat at the legal vertical table began at the lower end of the supply chain but has since migrated to “the fat middle” and, in the case of Glaxo-Smith Kline and a few other avant garde in-house departments, all the way up to “bet the company” matters. But for most corporate legal departments, there remain limits on the scope of Procurement’s dominion over the purchase of legal services.

Silvia Hodges Silverstein, a guru of legal procurement as well as a friend, describes procurement’s role in purchasing legal services this way: “They are ‘buyers’ in the classic sense: they are responsible for the engagement letter/retainer or framework agreement and negotiations. Procurement professionals are influencers; they try to affect the outcome of decisions with their opinion….(they) also act as gatekeepers….and direct the flow of information between the service provider and client.”

Procurement’s growing influence in buying legal services is emblematic of more sweeping changes in the legal vertical. Some key elements include: legal services are now held to similar business standards as clients; the relationship element persists in buying decisions, but metrics are replacing subjectivity; and it’s a buyers’ market, one where business professionals — not lawyers alone — are involved in acquiring legal services.

Conclusion

The legal vertical is becoming increasingly competitive and clients are flexing their buying power. IT and business are now enmeshed in legal delivery to the point that they have become  part of the buying process. Translation: legal service providers must conform to objective scrutiny, demands, and heightened, value-driven expectations.

Those selling legal services must become conversant in legal, business and IT-speak. Selling legal services is a new ball game, one where lawyers no longer control both the supply and buy sides.