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“Co-sourcing” – a Much Needed Lifeline for BigLaw?

May 21, 2014

The legal world becomes a far better place when you take deep breaths and surrender to the BetterLaw mantra:

Right people.  Right skills.  Right place.  Right price.

Those four very short sentences are your path to legal enlightenment, i.e., getting the most bang for your legal buck.  Better yet, and a sign that the universe is vibrating in oneness, the mantra works equally well for BigClient AND BigLaw – when done right.  When done wrong, or out of balance, your legal experience will be similar to to that of an inexperienced yogi pulling a hamstring on a poorly-executed Downward Facing Dog.

 

Lifeline

 

But sensei, the new legal world is so confusing, what path should we follow:  BigLaw, MidLaw, NewLaw, Outsourcing, Insourcing, Offshore, Onshore, Captive, etc., etc.?  And if we go with Offshore, do we choose India, South Africa, Ireland, Argentina, or Timbuktu?  How is this in any way better, or more simple?!?!  Sounds more like a recipe to add new layers of cost to an already incredibly expensive system.  Patience, grasshoppers, let’s not get too ahead of ourselves on our search for nirvana.  The answer for most BigClients and BigLaw, at least in the near-term, is the emergence of “co-sourcing.”

Co-sourcing relies on [outside] service providers creating dedicated teams within their own organisation to undertake the work for each specific client, working as an extension of the firm’s remaining office function, rather than as a completely outsourced substitute, with little or no contact.

Firms considering adopting this innovative approach, will often have accepted the benefits of outsourcing business processes, but may worry the quality and level of service delivered will not match that of the in-house support services, despite the potentially significant cost savings.

- Maxine Park, “Co-sourcing and the quest for greater profitability,” in The Global Legal Post

Ms. Park was specifically talking about back-office functions, but the same concept can, and is, being implemented on front-of-the-house legal work.  Successful co-sourcing is based on developing long-term relationships and emphasizes values traditionally associated with “partnering” rather than with “vending.”  Co-sourcing mixes internal and external sources to deliver services more efficiently, effectively, and at a lower price to the client, while at the same time allowing everyone to make a profit. Win-Win-Win.

Of course, for BigLaw, this means facing the new normal reality.  The days of wine and roses are over. The glory years decades of pillaging and plundering BigClients’ coffers are over.  You can no longer have teams of associates running amok on mundane tasks at whatever spine tingling price you deem sufficient to support your grotesque AmLaw PPP numbers.  You’ll now have to compete on the open market with hungry NewLaw players.  You’ll now have to deliver quality outcomes at a fair price.  No more blank checks.  Sit down, because this one will really be a gut punch, but you’ll actually have to put your clients’ interests first.  No, really.  No more lip service.

Now, I realize that most of you won’t be able to do this because of greed, arrogance, selfishness, inability to adapt, short-sightedness, infirmity, panic, etc.  You know who you are – all those firms in real decline, but who are desperately “cooking the books” to keep those falling profits appear the same.  But, de-equitizing partners, cutting support staff, raising rack rates to counter discounts, and freezing summer associate programs do nothing to address the underlying problem that the old legal model is in it’s final death throes.

All is not lost, however, and instead of going down with the ship, a few BigLaw firms are grasping the co-sourcing lifeline as a way to transition from the old model to the brave new legal world.  These intrepid and innovative few realize that co-sourcing allows them to utilize one of BigLaw’s core strengths, providing an end-to-end solution to BigClients’ legal needs, but now doing so at a fair market price.  Of course, to deliver at this competitive price, they have no choice but to partner with one or more NewLaw providers.  Done right, that co-sourcing, or strategic partnership, can, take a deep breath, and repeat after me, provide the right people, with the right skills, in the right place, at the right price. BigLaw wins, NewLaw wins, Client wins.  Namaste.  Heck, now that I’ve essentially solved the legal industry’s biggest problem, maybe it’s time to move on to global warming or bringing about world peace.

While I’m off doing research on climate change and communes, some of you may want to take a deeper look at some of the following real-world examples of legal co-sourcing, including:

Please feel free to add more examples of co-sourcing in the comments below.

 

My earlier post in the “21st Century Law Series” is:

Welcome to the Future – the BetterLaw Mantra.”

 

 

 

 

 

 

Welcome to the Future – the BetterLaw Mantra

May 6, 2014

Mantra ImageIt’s a brave new legal world out there in 2014.  The massive comet called the Great Recession wreaked grievous harm on the traditional legal model.  Sure, you can still find a few Tyrannosaurus Rex firms feasting on a couple of ostrich-head-in-the-sand clients, but you’ll soon find more petrified dinosaur bones than living, breathing, traditional firms billing by the hour.  This is all incredibly good news for ye battered clients, because once this new legal ecosystem shakes out, the focus will be back where it was always supposed to be, on you, the paying client.

All of this crazy change, however, tends to be very confusing and stressful to clients.  Pre-recession, you had one flavor – vanilla – and you only had to decide which brand to choose.  Expensive, or super-expensive.  Now, there’s a whole cornucopia of flavors, many of them exotic and untested.  BigLaw, NewLaw, MicroLaw, TinyLaw, VirtualLaw, Onshore LPO, Offshore LPO, LPM, etc., etc.  For most clients, these 31 flavors of new choices are overwhelming, and perhaps helps explain the slower than expected demise of traditional BigLaw.  Clients know BigLaw has BigProblems, but at least they know what they are going to get, albeit at a really BigPrice.

Enough already.  It’s the 21st Century, for pete’s sake.  There’s a better way, and it doesn’t take a rocket scientist, or a Harvard Law grad, to figure this new legal ecosystem out.  You just need to take a few deep breaths, channel your inner Dalai Lama, and repeat the following mantra over and over…

Right people.  Right skills.  Right place.  Right Price.

Done.  Just solved all your legal problems and saved you anywhere from 30-50% on your next year’s legal bills. Time to order one of those cocktails with an umbrella in it and mosey on over to the nearest hammock.

Okay, I can’t take full credit for my shockingly insightful mantra. I might have heard something similar from Liam Brown of Elevate Services here.  No wonder he named his company Elevate.  I can just see him in the lotus position, levitating in enlightenment, as he chants this mantra to needy clients.  Hey, who wouldn’t willingly follow this yogi to India and become one with the legal universe.

Maybe this is all too touchy-feely for the majority of buttoned-down GC’s, so let me translate the mantra into “business-speak”:

The key to the new legal ecosystem will be the disaggregation of steps in the legal system and it’s frictionless reintegration.

Does that help?  That’s the kind of language you can take to the C-suite.  Just make sure you give me credit for the big words.  Wait, what? Liam said that too, in the same book?  Who is this guy?  Professor by day, yogi by night?

Yeah, but don’t BigClients need really BigLaw to handle really BigProblems?  Aren’t all these upstarts are too small and green to handle this type of work?  Not according to Mark Harris, the founder of the dinosaur-eating Axiom Law, who has this to say about handling end-to-end sophisticated legal work:

The work [Axiom does] covers a spectrum of sophistication: at the high-end, we are displacing the use of law firms in a given area; at the mid-high/medium point on the spectrum, we are doing work that used to be done by senior company lawyers; and we will also handle the lower-end work if it is a part of the same value chain.  The bigger picture here is that we control and deliver on the ‘end-to-end’ value chain…

The sophistication of what we take on is limited only by a client’s willingness to outsource, rather than by our capabilities.

There you go, your roadmap to 21st Century BetterLaw from a couple of the NewLaw mystics.  Every night before bed, be sure to chant the BetterLaw mantra:  Right people.  Right skills.  Right place.  Right price. Repeat.  Sweet dreams.

 

*** The book that both Liam Brown and Mark Harris (and many others) are quoted in is “The Rise of Legal Services Outsourcing, Risk and Opportunity,” by Mary Lacity, Andrew Burgess & Leslie Willcocks.

 

 

 

 

 

The Myth of BigLaw Quality

February 27, 2014

3 vulturesBigLaw has a Big Problem.  Really Big.  Big Big. Pull the plug Big. End of an era Big.  Okay, enough already, we get it. Just tell us what the problem is.  Sure.  It’s simple really, but oh-so-unsolvable. Ready? BigLaw can’t compete on price.  A five word death sentence.

The Golden Era of BigLaw is el finito.  The cat is out of the bag. Informed clients now know (and this news is spreading exponentially) that the lion’s share of BigLaw work can be, and currently is, being competently done by NewLaw for $60 an hour or less.  There’s no amount of secretary buy-outs, back office outsourcing, summer associate program cutting, or partner de-equitizing that will get BigLaw’s billing rate anywhere near that “new normal” market rate.

Start building the gallows and find me some rope, because if you can’t compete on price, the party is over, right?  One would think, but let’s not forget who we are dealing with.  Burying BigLaw is harder than trying to get my wife’s cat into the crate for her annual vet visit.  The old coots just won’t give up!  Heck, I wouldn’t either if I had a bunch of Fortune 50′s writing me open-ended blank checks to keep my armies of associates churning away.  Who’s gonna willingly walk away from that money tree?

So, if you can’t compete on price, you’re left with your old tried-and-true trump card (trumpets blaring) QUALITY! (voice-over by James Earl Jones).  The standard pitch invariably goes like this:

  • The best we can do is a blended rate of $650 per hour (after discounting our inflated rack rates to make you feel like we care), but our work is of clearly of superior QUALITY compared to that of our competition, who use a bunch of non-Ivy League lawyers, or worse yet <wink-wink>,  foreigners for their work.  Heck, some of these law factories might even be using non-lawyers (!) on some of their projects.  What else can we say, you get what you pay for.

Dang. Maybe we all got a little overexcited with this New Normal Coronation Ball.  Maybe Law is different than the rest of the world, maybe only BigLaw can do all this important stuff, and we’ll just have to suck it up when we get those sphincter-puckering bills.  Sure, we can keep the C-suite off our back by handing out some non-essential work to a couple of these cheap shops, but we better keep the important stuff with the guys who provide QUALITY, no matter what the cost.

Deal.  But before we hand over the keys to the company coffers, it couldn’t hurt to take a look at the objective proof BigLaw has for substantiating their QUALITY claim.  No problem, this should be a piece of cake.

Great!  Let’s start with the AmLaw 100 rankings?  What better way to prove QUALITY than key metrics like gross revenue, revenue per lawyer, and profits per partner.  Wait, I’m a little confused here.  How do metrics focused on law firms’ bottom lines, rather than any outcome or value provided to clients, have any reflection on quality?  It seems that these metrics actually measure how successful firms are at maximizing hourly billing, rather than meeting their clients’ needs.  I get it.  The firms that turn the screws the hardest on billable hours deliver the best QUALITY to the client?  Big means best?  Under this theory, Walmart would clearly be the highest quality retailer.  Tough luck, Nordstrom’s and Bloomingdale’s.

Perhaps then, it’s that BigLaw attracts and develops only the “best of the best” talent?  Yet, there is almost universal agreement that the first few years of BigLaw lawyering is occupied by incredibly long hours on the most mundane and mind-numbing of tasks.  Very few young BigLaw associates ever get near meaningful work or a plum assignment.  Most leave from exhaustion before ever gaining any real lawyering experience.  Do we really need summa cum laude Harvard Law grads on due diligence and document review? Does mundane work magically become QUALITY work when billed out at $300-800 per hour.  Even if you buy into this elitist blather, how then does BigLaw differentiate itself from many of the New Law providers that are run by, and staffed with, those same Harvard Law and Stanford Law grads? Must be that those newbies had poor GPA’s and graduated near the bottom of their class?  Or maybe they could only get into lower-ranked law schools, like Michigan State or UCLA.  Slackers.  We all know that Ivy League credentials and high GPA are prerequisites to QUALITY; how else can you explain the genius of Steve Jobs, Bill Gates, Richard Branson, and my personal favorite, Abe Lincoln.  Oops, the first two never graduated and the latter two never went to college.  If these four went into law, they couldn’t sniff a BigLaw job.  The rest are screwed.  Book a ticket to India and hope for the best.  Maybe Gates, having Harvard on his resume, could get a job at a regional firm back in Boston.  So much for the “best of the best.”

But . . . then . . . uh . . . what objective proof is there to back BigLaw’s boast that only it can deliver QUALITY?

There isn’t any.  Zip.  Nada.  Zero.  Or as Daniel Katz, professor at MSU and co-founder of ReInvent Law, summed it up here:

To say that our ability to assess the quality of a lawyer is noisy is the understatement of the century.  We have very fuzzy notions of who’s good and who’s bad.  If you can’t choose on that point, other factors become your point of differentiation, and a lot of times they’re much easier to detect.

Those other factors include better technology and well-designed processes.  Hmmm, who does those better, NewLaw or BigLaw?

Let’s see.  BigLaw gets smoked on technology and process.  It gets blown away on cost. It has no objective proof that it provides better quality.  For exactly how much longer can BigLaw count on BigClient to keep paying a huge premium for it’s “fuzzy notion” that it does higher quality work than NewLaw?

My answer.  Not much longer. The bread and butter of their dizzying success – hordes of leveraged associates grinding away on grunt work at premium prices – is a thing of the past.  Their last bastion – truly high level work  - keeps getting chipped away at with every success racked up by the NewLaw providers.

Yep, BigLaw, those buzzards eyeing you and your clients aren’t mirages, they’re your real NewLaw competition, and more and more of them are on the way.

Quality or Value? If You Can’t Beat ‘Em . . .

November 25, 2013

Lil-WayneMany have heard the old adage, “If you can’t beat them, join ‘em.”  Makes sense.  If your adversaries are stronger than you, it’s probably better to join ‘em.  But that kind of rational response isn’t something that Big, Bad, BigLaw is going to swallow anytime soon.  BigLaw marches to its own macho beat, much like Lil Wayne in “A Milli” (paraphrased very loosely because of the incredibly explicit lyrics):

If you can’t beat them, then you aren’t fighting dirty enough!

So, instead of accepting the inevitable rise of NewLaw (or BetterLaw as suggested by Ken Grady), Adam Smith, Esq. channels his inner rapper, with a spoken word stanza in his recent post/rap “How much how fast?“:

Nowadays, when I observe client behavior, I see two thoroughly opposed, but quite consistent, trends: A flight to quality and a flight to value. No single law firm can durably respond to both sets of client demand, which means many who aren’t already at one pole or the other will need to choose, and to change.

A little less explicit than Lil Wayne, but equally incendiary when you think about it.  Quality OR Value. BigLaw equals quality.  NewLaw is the thrift store.  Sure you can get a deal and save some money, but you do realize, BigClient, that you-get-what-you-pay-for, i.e., allegedly lower-quality services from these bargain-basement providers.  But not so fast, MackleMacEwen, what your rap lacks in rhyme, it also lacks in truth.  Your little “Quality OR Value” riff, which I’m sure is a big hit on the BigLaw Oldies station, is what logicians call a false dilemma, or black-or-white thinking, or an either-or fallacy, or the fallacy of the excluded middle.  Whatever you want to call it, a false dilemma is:

A type of informal fallacy that involves a situation in which limited alternatives are considered, when in fact there is at least one additional option.

The presentation of a “false choice” often reflects a deliberate attempt to eliminate the middle ground on an issue.

Uh, Big Boi Bruce, there’s a HUGE middle ground here that you are slyly trying to hip hop past:  how about Quality AND Value.  Think Tesla.  Or my Neuhaus Labs T-1 integrated tube amp.  For $495, it makes my iPhone sound better than most esoteric hi-fi systems (priced 10 to 20 times as much) and it can do it wirelessly.  I’ll take Novus Law for document review over any of your Tier 1 first-year associates at $800 an hour.  So would you:

The founder and head of one of these firms, which is in the business of applying Six Sigma processes to document review, and which has demonstrated consistently and convincingly that their quality is immensely superior to that produced by BigLaw associates working on the same document sets, remarked fairly casually to me not long ago that “for every dollar of revenue we gain, BigLaw loses three.

Before you tell me that Novus can’t do the sophisticated, high-level work that is needed, I’d recommend you read a couple of the recent profiles (here and here) that highlight how clients now are now requiring that their BigLaw firms use Novus, or Axiom, or Clearspire, for all their meat-and-potatoes work.  Sounds like a whole lotta BigLaw firms are actually having to join ‘em, rather than fight ‘em. Need more examples?  How about Riverview Law and DMH Stallard doing M & A deals together at 30% less than traditional BigLaw.  Or the new deals between LeClair Ryan and UnitedLex, and Seyfarth Shaw and Neota Logic.  Quality AND Value.  Win AND Win.  BetterLaw.

Or, as the real Macklemore sings:

We press play, don’t press pause.  Progress, march on!

The good ol’ days are over, Bruce.  It’s a new century.  BigClient finally got their groove back, and they’re increasingly marching on to the BetterLaw beat of quality and value.

Client’s Guide to Legal Spend Management: First Steps

October 22, 2013

Lao TzuJust in case you missed it, there is a no-holds-barred cage fight going on over in the “comments” section to Dr. George Beaton’s lightning-rod of a post, “The rise and rise of the New Law business model.”  A veritable “who’s who” of legal thought leaders have taken sides in the “Great BigLaw vs. NewLaw Debate.”  In my own recent post, I argue that regardless of who ultimately wins the war — BigLaw, NewLaw, or a combination of the two — the real winners are clients, who because of the fierce competition, now have more and better options to meet their legal needs.

But with a multitude of options comes uncertainty, and if we know one thing about BigClients, its that they loathe uncertainty.  Combine this with the power of the status quo, and far too many BigClients continue to fall back on the “tried and true,” rather than bravely forging ahead into the New Normal of 21st Century Law.

The BIG problem, however, with that “tried and true” method, i.e., continuing to blindly use the same ol’ BigLaw firms and their best friend, the billable hour, is that clients are likely overpaying by at least 30% to 60%.  Now, if you are okay with that, no need to read any further; instead you may want to skip to my post discussing the “Battered Client Syndrome.”  For the brave clients still reading, I realize that you have many pressures making change difficult, so I will offer a few “baby steps” that can be accomplished at little or no cost, and that carry very little risk.  For, as the ancient Chinese Taoist philosopher Lao Tzu famously said:

A journey of a thousand miles must begin with a single step.

Step One – Educate Yourself

Here are three quick steps that will get you up to speed in the least amount of time.

  1. Read “Tomorrow’s Lawyers” by Richard Susskind and “The Lawyer Bubble” by Steven J. Harper.  You’ll see the future and understand “the horror, the horror,” of the BigLaw world.
  2. Get acquainted with a couple of key blogs/sites:
  3. Get on twitter.  Follow @ronfriedmann.  Great curator of timely information.  If Ron’s not tweeting it, it’s likely not important.

Step Two – Kick Your Old Habits

Repeat after me.  I will not blindly hand over any new legal matter without requiring proper scoping, legal project management, and legal process management.  Say it over and over until you have broken this highly addictive, dangerous and expensive habit.  If you need liquor and cigarettes to help you conquer these demons, just remember that you are temporarily accepting the lesser of two evils.  A little bender on booze and the tar sticks will hurt you far less than continuing to write blank checks to your outside counsel.  Besides, you’ll have saved a ton of money by kicking your BigLaw habit, so you’ll have plenty of cash for a quick stint at the Betty Ford Center.

Step Three – Take Action, Any Action

Okay grasshopper, take a couple of deep breaths, and channel your inner Lao Tzu, because you are about to leave your comfort zone. I know it’s going to feel sketchy at first, so we we’ll start with some easy lifting and slowly work our way up from there.

a.  Choose a progressive BigLaw firm for your next new matter
  • This is a BigClient’s “safest” choice as you get the CYA of BigLaw with the not-so-BigLaw-like use of LPM and LPO.
  • The problem here, of course, is that trying to find a progressive BigLaw firm is about as hard as getting to see a wild Kiwi in the New Zealand rainforest.  I’ve been looking hard for a while now and can count the contenders on one hand.
  • My first choice here is Seyfarth Lean.  They’re way ahead of the competition (program started in 2005) and by using their substantial tools and experience, they can deliver a great outcome at a better price than the majority of their BigLaw competitors.  Once you see what LPM and process optimization can do, you’ll be far less likely to relapse into your prior bad habits discussed above.
  • Chief downside:  You’re likely to pay a premium for all those fancy downtown offices and highly-paid lawyers, who still have big billable hour quotas to hit, but at least your in the game.  Go ahead, pat yourself on the back, you’ve just taken your first step to legal enlightenment.
b.  Rethink your current firm selection process for new matters
  • Prior to engaging a firm for any matter, sit down and determine what you value and develop a simple and straightforward Request for Proposal.  This doesn’t have to be complicated rocket science, just a common sense, client-based, value determination.
  • Invite 3 to 5 firms to bid, including at least one new firm offering upfront fixed fee pricing, like Valorem Law.
  • Any firm that does not offer hard budgets and LPM/LPO should be immediately eliminated.
  • Once a firm is selected, write a win-win fee agreement, including success bonuses and/or holdbacks.  Better yet, make it an upfront fixed fee (which you would get from Valorem).
  • Other options:
    • Consider AdvanceLaw, which helps its client GCs match their matters to select firms that it has vetted for quality, client service and efficiency.
    • Another “safe” option with big returns would be to require any of your current firms to use Novus Law for all the document discovery and management work, as discussed here.
c.  Tweak your panels
  • Most larger companies have favored firms/panels they work with.  Many times the 80/20 rule applies.  If you have 5 firms doing 80% of your work/spend, it’s likely that 1 firm is great, 3 are good, and 1 is lagging somewhat behind.  Slowly move work from the bottom to the top.  Just concentrating on these top five firms is manageable and can deliver a major return on investment.
  • Other option:
    • Or you can call Elevate Services, who are successfully providing these types of services (and many others) as discussed here.
d.  Stay in-house
  • One of the best ways to optimize legal spend is to keep as much work as possible in-house.  This option has become much easier with the emergence of new firms that provide any type of specialized expertise on an “as needed” and/or secondment basis.  Examples include, Axiom Law, Conduit Law, Bliss Lawyers, Lawyers on Demand, etc.  Almost all of these  (if not all) offer fixed pricing, without BigLaw overhead and/or company overhead.
e.  Hire a legal spend strategist (or team, depending on the size of your legal spend)
  • The four action plans outlined above are just the tip of the iceberg of ways clients can bring about better outcomes at the right price.  Changes in the legal field are moving incredibly fast, and no legal department can be expected to keep up with this change while simultaneously doing their “day jobs.” Simply put, legal spend management is a full-time job.  Further, every dollar wisely-spent on LSM will be rewarded with a large return on investment.  As a general rule of thumb, spending 1% of the total legal spend budget on LSM should deliver at least 10% of total savings.  Thus, a company with an annual legal spend of $100 million, who invested at least a $1 million in legal spend management, should be able to lower overall spend by $10 million.  $10,000 spent on a $1 million case should save at least $100,000.  If anything these numbers are conservative at present, because of BigLaw’s almost pathological refusal to adapt to the post Great Recession environment.

There is simply no excuse not to take action to capitalize on the current client-friendly changes sweeping the legal industry.  Each of the actionable steps outlined above can be implemented by any client, at very little cost and with little risk.  All of them will deliver a substantial return on investment and will result in better outcomes at a far better price.  Time’s a-wastin’, grasshopper, take at least one of the above steps today.

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