Buying legal services and legal tech: When will YOU conquer the legal category?

Spend Matters welcomes this guest post from Dr. Silvia Hodges Silverstein, CEO of Buying Legal Council.

If you had the chance to save your company 17%, you would jump on this opportunity, wouldn’t you?

There are few opportunities left where procurement can have such an impact and achieve both quick and sustainable wins than in the legal category. It clearly pays to involve procurement for buying corporate legal services and legal technology.

Procurement’s savings through cost reductions and cost avoidances translate into significant savings per share for public companies. To put this in perspective, for a company spending $250 million on outside legal services, 17% translates into $42.5 million saved. That 17% of the total legal spend is what legal procurement professionals were able to save on average, according to the findings of the 2020 Legal Procurement Survey of the international trade organization Buying Legal Council. We also found that the most successful legal procurement professionals saved their employers even more, 25% on average. (In the above case, this would mean $62.5 million saved.)

In 2019, the global market for legal services crossed the $900 billion mark for the first time. Some organizations spend hundreds of millions on legal services. It borders on negligence for companies today not to organize a formal procurement effort to manage and get ahead of legal spend.

The COVID-19 pandemic will almost certainly accelerate the “buy smart, buy better, buy more efficient” movement in the legal market. As during the Great Recession of 2008-09, mergers-and-acquisition work is already (at least temporarily) drying up. We will see in the next months if litigation will pick up instead, as it often does during economic downturns. Some other legal practice areas, such as transactional property, have been severely negatively impacted, while activity has picked up in others, such as employment, commercial, finance and insolvency/restructuring.

Colleagues in the legal department may not yet have started to make many or any requests for discounts or other price cuts — possibly because they were too busy with new legal matters, but that is something procurement could help them with now. Organizations that suffered a business crisis cannot wait too long and ask their law firms for rate relief or increase their payment terms.

Again, we urge procurement professionals to wait no longer to get involved in the legal category. You have the skills, knowledge and experiences to drive down costs. After a brief period of learning about the legal category, you will know which questions to ask, what data to collect and how to get more for less. Your legal department may not welcome your forays immediately, but your executive leadership surely will.

Actually, general counsel are often quite relieved about the idea of having procurement involved in buying legal services and legal technology. Having you run the RFP process and negotiate prices as well as T&Cs means they get the benefit without the emotions of dealing with long relationship suppliers. Law firms have also gotten quite used to working with procurement, so no one will be “offended” by your presence. Many larger firms have even brought in pricing professionals and legal project managers to work with procurement and to answer your questions and requests.

Legal services used to be largely exempt from the intense cost scrutiny other business units and functions had been facing for years. The Great Recession acted as a catalyst and accelerated the process for the adoption of legal procurement, particularly in large corporations. Among the first industries to embrace legal procurement were highly regulated industries such as pharmaceutical companies and financial services institutions, banks, insurance, energy companies and utilities that spent hundreds of millions of dollars on legal services. Publicity about billing practices, big-ticket spending and profit pressure was at the root of this seismic shift. The current crisis will accelerate efforts in all forms of retail, healthcare and regulated industries.

Today, legal departments around the world have to exercise cost control, “do (even) more with less,” and are expected to save money and reduce risk. They need to closely monitor and analyze their spending, re-engineer processes, build or rebuild work teams, hire law companies, alternative legal services providers (ALSPs) or legal process outsourcing companies (LPOs) for specific projects or tasks and create tools that drive standardization, reduce risks, speed up cycle times and increase efficiency.

As part of our 2020 Legal Procurement Survey, we asked legal procurement professionals about their priorities for the year: “(Better) Capture and Analyze Spend Data” topped the list of priorities for legal procurement. It is a reflection of procurement’s increasing maturity and advancement in this category. With more and more accurate spend data available, internal base-lining and external benchmarking, procurement applies its data-driven approach to decision-making to legal. Your organization could (and should) be part of this movement.

In the survey, “Reduce Legal Spend” was the second most important goal for legal procurement professionals. The approach to reducing legal spend is becoming more strategic and sophisticated. Given that we conducted the research before the COVID-19 outbreak and the following economic downturn, it is extremely likely that the spend reduction goal would now top the “Capturing and Analyzing Spend Data” goal if we were to ask the same question about priorities again. In fact, a brief informal poll among legal procurement professionals confirms that “cutting cost” is on everybody’s mind and likely to be addressed in the coming weeks and months.

“Better Managing Legal Work” followed in third place of most important legal procurement goals. Clients now routinely pay close attention to how legal work gets done, how their work is scoped, staffed and delivered. They ensure that outside counsel guidelines and agreed-to budgets are adhered to and benchmarks reached. Sophisticated procurement professionals know that managing the delivery process offers the biggest lever to drive continuous improvement.

Some industries — likely the one with larger legal spend — will go into cost-control mode fast. They will redefine what is “bet-the-company” work and think hard about unbundling legal work. They will decide which tasks could be done by lower-rate firms in less costly locations or just as easily be done by other providers.

What will YOU be doing? It’s fitting to cite the famous quote “If not me, who? If not now, when?”

We invite you to speak with your CPO or financial director and arrange a conference call with your in-house counsel. You have so much to offer that your organization can benefit from. Do not pass by this opportunity. Your competitors may already be working on this. And your company should too. Join the movement, or you will be watching it from the sidelines. The Buying Legal Council stands ready to help.

Dr. Silvia Hodges Silverstein is the chief executive officer of the Buying Legal Council, the international trade organization for legal procurement, and is an adjunct professor at Columbia Law School in New York. She earned her PhD at Nottingham Law School and also studied management sciences at Warwick University.

She can be reached at silvia@buyinglegal.com. Website: www.buyinglegal.com. Twitter: @silviahodges and @buyinglegal