Changing the legal services equation

The Great Recession jolted an industry that had been supplier driven for decades. Prior to 2008, law firms set billing rates, raised charges annually, and billed primarily by the hour. This was enabled in part because corporate legal departments had largely been cost centres without a need to produce granular financial data.

The downward cost pressure experienced after the financial crisis meant in-house teams needed to be more accountable to overall corporate goals. General counsel were asked to do more with the same or fewer resources, to scrutinise and strategise the use of outside advice, and to better leverage technology. The environment ignited a ripple of changes that has dramatically altered the traditional equation for engaging legal services.

In truth, the financial crisis only calcified issues that had already been accruing beneath the surface for some time. In-house departments needed their outside counsel to behave less like service providers and more like business partners. US-based associations such as the Corporate Legal Operations Consortium and the Association of Corporate Counsel offered forums for corporate lawyers to discuss operational challenges and share best practices. Increasingly, law departments demanded that outside counsel not only understand their operational objectives but also help them meet those goals.

Following this trend, legal operations – the practice of making legal departments function more like a business – has become a rapidly evolving concept, and a number of alternative service providers have started to emerge to meet this demand. There is now a proliferation of technology vendors, e-discovery providers, decentralised freelancers, and online lawyers. Whether their offerings are aiding corporate teams, or simply further fracturing the industry, is yet to be determined. There are, however, some examples that definitely deserve a closer look.

When an insurance company needed to understand why a particular asbestos portfolio was a huge cost outlier, they called BCXponent, a division of Bryan Cave. The BCXponent team analysed the insurer’s e-billing data and conducted intensive process mapping. Using text analytics from the time entry narratives, they used the e-billing data to quantify the effort and frequency of the tasks in the process maps and identify how closely true billing practices followed described processes. The project outcome was a reduction in legal fees by 30 per cent.

BCXponent is a legal consultancy that began as an outgrowth of two internal teams at Bryan Cave that are nearly two decades old. The firm invested in cultivating innovative data analytics and technology that would help its legal teams strengthen their practices. Alternative pricing strategies were gaining momentum as cost pressures gripped the industry. Using the volumes of historical data amassed in the data collectors, the pricing analysts could forecast duration, staffing, and complexity estimates with precision.

In time, there was sufficient external market demand to reorganise the teams into a consulting division offering legal services bundled with advisory and technical solutions. Examples of the latter include reporting frameworks to reduce the amount of time and effort required to provide regular reporting back to the company, or database solutions that enable legal departments to track various pieces of information, like licenses or political campaign contributions.

In the UK, law firms tend to be more sophisticated in the use of technology, though that has not necessarily been widely propagated to in-house legal departments. UK-based Tyco is one example of an early adopter of legal operations principles. It engaged in strategically assessing and deploying outside counsel, in-sourcing, and leveraging technology to oversee the financial and logistical management of its activities.

Although there have been other companies in the UK that have followed Tyco’s lead, many struggle to determine their way forward and lack expertise inside their organisations that could help. As a result, there is significant growth potential for UK-based multi-national corporations, especially in the use of technology platforms that enable them to better execute their legal delivery model.

Such technology knits together the global network of panel and local counsel firms to ensure seamless communication, consistent matter handling, and uniform enforcement of outside counsel guidelines. It is therefore unlikely that the spread of this technology will be slowed down by geography. While BCXponent is American by birth, there is significant potential for it to be global in life, since once these solutions are implemented, they do not require significant back-office capability on the ground. Europe is thus a ripe growth market.

Historically, operational issues were the province of the client while the outside legal adviser handled the legal advice. Nowadays, these traditional roles do not reflect the nature and demand of modern counsel and opportunities for partnership with law departments. It is no longer acceptable for firms to dissociate themselves from larger operational issues that are impacting a client’s risk profile or balance sheet. Successful future partnership calls for reimagining a new standard for legal service delivery.

Kathryn DeBord is a partner and chief innovation officer and Chris Emerson, pictured, is chief practice economics officer at Bryan Cave

@BryanCaveLLP www.bryancave.com