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ACC 2013 Value Champions Suggest Bright Future for Law Firm Alternatives

The ACC recently announced the winners of its 2013 Value Challenge in its article More Corporate Law Departments Turn to Legal Support Services to Reduce Excessive Fees.

Winners have several common elements:

  • Move more work inhouse
  • Reduce the number of outside law firms (“convergence”)
  • Deploy technology to manage internal and external legal work
  • Increase the amount of outside work done under alternative fee arrangements, especially fixed fees
  • Work with alternative service providers for efficiencies and analystics firms typically lack

One-quarter of the winners were supported by legal service providers that are not traditional large law firms. I summarize these below and close with some thoughts:

NetApp, Inc.

NetApp won for a

“”focus on analytics and metrics, and a shift to managed services outsourcing…. It developed “a four-point plan:
- Developing a technology roadmap;
- Integrating dashboards and analytics;
- Developing a managed service provider; and
- Implementing value-based fee arrangements with outside firms.”

“NetApp’s partnerships with a new managed service provider (Elevate) and a new technology provider (Sky Analytics) have been a game changer. As willing beta testers, NetApp Legal is on weekly strategy calls with these cutting-edge professionals, developing new, real-time reports to track and analyze everything from what a ‘right rate’ should be for a particular lawyer in a particular field, to what the ‘right’ number of resources should be on a matter, to billing accuracy…. The data allows NetApp to modify the way it does business based on objective criteria; outside counsel use the data to apply process improvements across their entire client base.”

One win was in contract management and administration. With e-signing, the company “decreased cycle times by 350 percent, returning to the company more than 500 days of productivity in the first year.” Also, “the department has already adopted a contract management platform and identified and decommissioned redundant or underutilized tools.”

An Elevate press release indicates that “Elevate also provided managed support services in the areas of contract management, e-billing, and administrative support.”

British Telecommunications PLC

“BT’s value initiative aimed to optimize legal value by implementing ‘best-sourcing’ initiatives to track what legal services are requested and deliver the right blend (and cost) of off-shore, in-house, and external resources appropriate to the task… “a detailed time-motion study that revealed that a significant proportion of the team’s work was low-level and repeatable”

To do that work,

“BT took a captive organization in India and flipped it into a legal process outsourcing partner, United Lex, to implement the value initiative… Now, all requests for legal work .. come in through a web-based system and go directly to UnitedLex, which evaluates the request based on complexity; more complex tasks are passed to the in-house legal team in the UK while low-value, high-volume, repeatable tasks stay with UnitedLex.”

The wins include doubling the number of tasks to about 75 handled offshore.

“In 2012, approximately 30 percent of all work requests were handled exclusively by the LPO…. The outsourcing arrangement allowed the team to manage a consistent workload with fewer people, resulting in a decrease in headcount from 78 to 40.”

Mondelez International, Inc. & Axiom

When Kraft spun-off part of its business to Mondelez, it affected 20k patents; 40k contract documents; and 80k trademarks. Mondelez partnered with Axiom, which

“conducted a time and motion study on a sample of the agreements to create a resourcing plan and a precise budget” to manage changes to those agreements.

An “Axiom team of more than 60 attorneys and five project managers [assessed the agreements] in fewer than 35 days [and then] drafted a 90-page project playbook that detailed the roles and responsibilities of all of the professionals involved; provided guidelines for negotiating with counterparties; and included processes and templates for eight separate workflows. A team of more than 50 Axiom attorneys drafted and delivered the consents and duplicate agreements to counterparties.”

Nike, Inc. & Seyfarth Shaw LLP

Nike sought to “develop a solution for the high-volume, largely routine transactional work that previously absorbed a significant amount of their time.” Working with SeyfarthLean Consulting, Inc, the company developed Transaction Solutions Center,

“a process model that reallocates legal services across a shared services platform for cost efficiency, while centralized oversight and management ensures consistent quality. It combines that shared-services aspect with a proprietary web-based workflow platform into an innovative whole.”

Seyfarth lawyers assess

“the overall risk profile of the request, sources the right provider, and quickly moves the request to the next stage of the workflow—all usually in less than five minutes”. Then, baased on jointly developed risk matrix, Seyfarth assigns work to itself or to “or one of its trusted third-party providers, who include a solo practitioner in Washington State, a boutique firm in suburban Georgia, and a legal process outsourcer in India.”

“Nike has seen turnaround time drop [on contracts] from more than two weeks to 2.6 days, an increase in efficiency of 83 percent. In year one, 34 percent of projects were completed within 24 hours, and 90 percent of low- and mid-level projects came in at under $1,000 in legal spend.”

[Updated of 18 Nov 2013: I just came across this Bloomberg Law article with additional detail about Nike-Seyfarth work: Q&A with ACC Value Champions 2013: Seyfarth Shaw, undated.]

 

Concluding Thoughts

One conclusion is that winners turned to alternative service providers do a better job of improving value than their law firm competitors. (I place SeyfarthLean in that category because it is a subsidiary of a law firm and because Seyfarth Lean is virtually in its own category.) The articles about other winner, situations where law firms were involved, do not, however, explore if and how those firms changed their processes and operations to service the winners.

It would be interesting to learn if some of the firms fundamentally changed how they operate or practice, at least with respect to the winner. Perhaps not today but certainly long term, without fundamental change, BigLaw will lose share to the alternatives. That is the message I take away.