The last decade and a half saw the world's largest accounting and consulting firms offer litigation services. They competed with traditional Law firms and succeeded by providing alternative fee arrangements and flexible account management styles.
A recent survey revealed that over eighty percent of Chief Legal and General Counsel Officers said they would like to increase the percentage of their budgets spent on alternative fees.
For procurement professionals penetrating the Legal category is often a familiar story laced with challenge. In an industry that is propelled by relationships, influencing and driving change by switching suppliers or just process improvement can be more than just a little challenging.
The gamut of services being offered by service providers in the Litigation, Forensic and eDiscovery areas has vastly increased in the last 10 years. From trial services to intellectual property consulting and eDiscovery services, this industry has a highly evolving environment and growing supply base. Consequently Legal organizations are facing challenges in deciding which firm to hire as a service provider and business partner.
With the internet and social media becoming gigantic platforms of communication, companies are having to monitor closely information that is shared with the world. This is creating the need for Legal to be involved more than ever and use eDiscovery and Intellectual Property services.
While all of these challenges represent great opportunities for Procurement to present savvy buying strategies for Legal Organizations, collaborating with Legal still seems to be an uphill battle in many companies
The struggle within most organizations is universal. Legal departments often believe that Procurement comes with one goal - to set targets and achieve those diminishing dollars, and so Procurement often lends itself to vulnerability with Legal trying to decipher whether there might be more than this one objective.
Despite also having massive spend amounts to manage effectively. The challenge in sourcing Legal stems from a deeply rooted belief that traditional procurement strategies do not apply to them. While it may be true that a certain degree of knowledge and specialized procurement strategy needs to be applied while sourcing the category, Legal organizations could hugely benefit from spend and supplier relationship management strategies.
Value Propositions to Drive Savvier Buying of Legal Services:
1. Identify Partners that are a Comfortable Fit Culturally – while the market may have more than one supplier who could cater to your business needs, an assessment of cultural fit is often neglected by busy internal counsel teams trying to find a vendor they want to start working with, and on a timeframe that is usually behind schedule. Networking matters in this industry and finding partners who are willing to go that extra mile to understand your goals and visions and deliver results accordingly can be a true win. Category managers that are capable of identifying such service providers could be adding tremendous value
2. Ascertain Alternate Fee Arrangements – as the rules of the Legal Service providers are redefined by market trends, technological advances and niche firms providing unique services, integration between Legal and Procurement could be critical. While billing clients by the hour might still exist, clients are increasingly demanding alternative fee structures. A Procurement professional's expertise with Alternative Fee Arrangements (AFA) could be immensely valuable to the Legal team. Some common AFAs that could work for firms providing services in eDiscovery, Intellectual Property investigations, and other Litigation services are:
Phase and volume based pricing: negotiating a set fee by phase, milestone or volume of work.
Flat Fee Pricing: negotiate a set fee for the entire project at the outset. This is based on known factors such as amount of data, complexity and timeline
Incentive Based Pricing (Hybrid arrangement): based on a fixed amount of data or work, the provider states a dollar amount fee or number of hours. If they get through the data more efficiently and save hours or come under budget, then they receive a percentage bonus for it. If they work more hours than specified, they would have agreed to do so at a specified rate
End to End Pricing: This could be a fixed price which is arrived at based on the volume (e.g.: number of documents or volume of gigabytes)
3. Demonstrate your value - As a Legal procurement professional you have access to benchmarks, market trends, networking connections and more. This could in itself bring in knowledge and information that Legal teams don't have the bandwidth or resources to gather. Also, drive the process for your Legal stakeholder. It's an arduous task and often Legal professionals are consumed with trials, litigation work and many other things that hinder them from facilitating a search for a new business partner.
The goal is to convince the stakeholder that they cannot do their job without you. Procurement should bring to the table ‘left-brained' skill sets, influencing and keeping the team's goals on track and expectations realistic.
The Legal industry may be evolving, but is still driven by relationships. A solid working relationship between legal and procurement will only enhance your ability to connect with these consumers. Procurement managers must also learn the strategies and intricacies of the Alternative Fee arrangements and other Legal practices to be viewed as a trusted partner in the Legal organization. Align your goals, build trust, and work as a cohesive team to deliver results that create the maximum value for your organization.