{"id":1698,"date":"2012-12-27T15:23:03","date_gmt":"2012-12-27T15:23:03","guid":{"rendered":"http:\/\/bignondekeyser.siteadwin.fr\/nl\/innovative-solutions-around-corporate-legal-spending\/"},"modified":"2016-09-21T13:15:10","modified_gmt":"2016-09-21T13:15:10","slug":"innovative-solutions-around-corporate-legal-spending","status":"publish","type":"post","link":"https:\/\/www.bignondekeyser.fr\/nl\/innovative-solutions-around-corporate-legal-spending\/","title":{"rendered":"INNOVATIVE SOLUTIONS AROUND CORPORATE LEGAL SPENDING\u00a0\u00a0"},"content":{"rendered":"

We participated as panel speaker at a conference for\u00a0general\u00a0counsel organized by Laurence Simons and Nixon\u00a0Peabody in\u00a0Paris. The central theme of the conference\u00a0focused on\u00a0innovative solutions around corporate legal\u00a0spending. The\u00a0panel was also attended by eminent speakers\u00a0from Pfizer,\u00a0General Electric, Atos and Nixon Peabody.\u00a0<\/span><\/p>\n

As one could\u00a0expect, one of the key topics discussed was\u00a0the current\u00a0pressure on law firms to cut their rates and\u00a0accept alternative\u00a0billing arrangements. However, the\u00a0panel arrived at a few very\u00a0interesting conclusions in this\u00a0context which we want to share\u00a0with you.\u00a0<\/span><\/p>\n

First, it was felt that this pressure on fee rates and\u00a0accepting\u00a0alternative billing arrangements will be very beneficial\u00a0in the short term. It will force law firms to improve\u00a0efficiency.\u00a0Indeed many of the attendants felt that a number\u00a0of law firms\u00a0have become a bit relaxed, simply charging\u00a0to their clients\u00a0yearly increasing hourly rates multiplied\u00a0by hours recorded. This\u00a0needs to change and the pressure\u00a0will help achieving that. It will\u00a0in a nutshell, happen in two\u00a0distinct ways. First, law firms will\u00a0manage their knowledge\u00a0much better and share it more\u00a0efficiently so that they\u00a0need less time to do more. This will make\u00a0them a better\u00a0buy for their clients. The second route will be the\u00a0fixed fee\u00a0budgets. This will push senior lawyers in law firms to\u00a0work\u00a0with their best lawyers on the job. Rather than\u00a0accumulating\u00a0hours and billing them, they will now want to\u00a0accumulate\u00a0less hours performed by better lawyers, so that the\u00a0\u201ccost of production\u201d to the law firm becomes lower allowing\u00a0them to realize a higher profit margin on the fixed\u00a0fees. The\u00a0latter can generate a substantial win-win situation\u00a0for the\u00a0corporate client and the law firms willing to\u00a0move along this path\u00a0of efficiency and performance.\u00a0<\/span><\/p>\n

While these efficiency trends will\u00a0no doubt make the\u00a0\u201cvalue for money\u201d dimension of the legal\u00a0counsel – law\u00a0firm relationship better, it also has its limits.\u00a0Indeed, if\u00a0pushed over the limit it will force law firms to\u00a0potentially\u00a0take shortcuts or lower their standards, leading to\u00a0suboptimal\u00a0results. This is where we felt that solving the budget\u00a0pressure beyond the efficiency improvement levels as\u00a0outlined\u00a0above, may sometimes harm both legal counsel\u00a0and law firms\u00a0in the medium to longer term.\u00a0<\/span><\/p>\n

Hence our idea to seek further\u00a0win-win approaches for\u00a0both law firms and general counsel.\u00a0<\/span><\/p>\n

Let\u2019s consider the following reflection in this context.\u00a0<\/span><\/p>\n

Once the\u00a0efficiency progress has been achieved \u2013 and\u00a0there is still some\u00a0way to go for many law firms -, we recommend\u00a0that law firms\u00a0decide to focus on what they\u00a0should be best at. If you ask\u00a0general counsel what this\u00a0should be, they will still mention in\u00a0many instances : top\u00a0quality advice and timely delivery in\u00a0complicated matters.\u00a0<\/span><\/p>\n

This would mean that a vast area of legal\u00a0work that is\u00a0more commoditized or less specialized is probably\u00a0no\u00a0longer core business for many law firms. These are services\u00a0that general counsel will want to outsource, increasingly\u00a0to\u00a0more cost efficient providers of these services\u00a0such as LPO\u00a0providers or contract lawyers.\u00a0<\/span><\/p>\n

We think this more commoditized\u00a0part of legal services\u00a0may account for up to 30 to 50 % of what\u00a0general counsel\u00a0currently outsource to law firms. By\u00a0outsourcing less of it\u00a0to law firms, but more to those alternative\u00a0providers, general\u00a0counsel could be in a position to realize cost\u00a0savings\u00a0between 15 to 20 % compared to their current budgets,\u00a0and this without taking additional personnel on their payroll.\u00a0<\/span><\/p>\n

This saving will come in addition to the 10 to 15 % that can\u00a0be\u00a0realized through the increased efficiency pressure on\u00a0the law\u00a0firms. Combined this can result in realistic cost\u00a0savings between\u00a020 to 30 % without affecting the quality\u00a0of what legal\u00a0departments get provided.\u00a0<\/span><\/p>\n

For law firms that have managed the\u00a0efficiency hurdle and\u00a0that have reviewed their business model\u00a0to better respond\u00a0to their client needs it may mean less volume\u00a0being sent to\u00a0them in global, but most likely not to law firms\u00a0individually.\u00a0That is how the reduction in volume will most likely\u00a0be absorbed.\u00a0The law firms that have transformed their\u00a0business\u00a0model \u2013 the successful ones \u2013 will be able to maintain\u00a0or\u00a0even grow their business while maintaining a very healthy\u00a0margin.\u00a0<\/span><\/p>\n

The lower value added work will be pushed to\u00a0alternative\u00a0legal service providers. These will be dynamized\u00a0through,\u00a0amongst others, the Legal Services Act in the UK. The\u00a0latter\u00a0will allow capital investment and professional\u00a0management\u00a0for those providers. They will choose operating\u00a0models\u00a0different from the current partnerships at law firms.\u00a0While capable of achieving margins of up to 30 %, they will\u00a0allow for a cost of service to their clients of 25 to 35 %\u00a0below\u00a0that of law firms. No doubt the alternative legal service\u00a0providers are already today one of the fastest growing\u00a0players\u00a0in the legal services market.\u00a0<\/span><\/p>\n

In conclusion, we feel that the\u00a0budget constraints may lead\u00a0to a healthier relationship between\u00a0general counsel and\u00a0efficient law firms, allowing the latter to\u00a0remain very specialized\u00a0and as good and focused as general\u00a0counsel really\u00a0want them to be. In return, we will not see the\u00a0long term\u00a0budget savings exclusively realized on their back.\u00a0While the\u00a0overall volume of business available to law firms will\u00a0shrink, they will be able to maintain roughly their profit\u00a0margin\u00a0assuming that they become more efficient. The\u00a0growing trend\u00a0and longer term further budget savings to\u00a0general counsel will\u00a0come from the alternative service providers\u00a0who can offer the\u00a0less premium legal services at a\u00a0substantially lower cost\u00a0compered to law firms and generate\u00a0room for substantial\u00a0savings. In this way the trend may\u00a0ultimately be win-win for all\u00a0involved. It will only require\u00a0general counsel to source slightly\u00a0differently, law firms to\u00a0be open to changing their business\u00a0model, while the alternative\u00a0providers of legal services will need\u00a0to find ways of\u00a0really breaking through across all borders.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

We participated as panel speaker at a conference for\u00a0general\u00a0counsel organized by Laurence Simons and Nixon\u00a0Peabody in\u00a0Paris. The central theme of the conference\u00a0focused on\u00a0innovative solutions around corporate legal\u00a0spending. The\u00a0panel was also attended by eminent speakers\u00a0from Pfizer,\u00a0General Electric, Atos and Nixon Peabody.\u00a0 As one could\u00a0expect, one of the key topics discussed was\u00a0the current\u00a0pressure on law firms to\u2026<\/p>\n","protected":false},"author":1,"featured_media":559,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[38],"tags":[],"class_list":["post-1698","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-chroniques-nl"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/posts\/1698","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/comments?post=1698"}],"version-history":[{"count":2,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/posts\/1698\/revisions"}],"predecessor-version":[{"id":2045,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/posts\/1698\/revisions\/2045"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/media\/559"}],"wp:attachment":[{"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/media?parent=1698"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/categories?post=1698"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bignondekeyser.fr\/nl\/wp-json\/wp\/v2\/tags?post=1698"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}