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Hanging on the telephone
The in-house legal function at a leading European business-to-business telecommunications company has been thoroughly re-engineered. Jonathan Ames speaks to the lawyer responsible for the shake-up
Telecommunications companies are in the middle of a firestorm over privacy, with BT and TalkTalk recently being told by England’s Appeal Court that they will have to identify and warn customers they suspect of on-line copyright breaches.
But moves towards harmonisation of telecoms privacy regulations across Europe would be welcomed by at least one leading industry player – 20-year-old European business-to-business provider Colt Group, which views ironed-out regulation as a business opportunity.
Despite annual revenues of some €1.5 billion and its FTSE 250 status, Colt still describes itself as a challenger to the established global names. But it has not been an exclusively upwards trajectory for the company. Recent years have been tough, with Colt executives only last month cautiously predicting that it will return to growth in 2012 after some time in the financial doldrums.
General counsel Robin Saphra has ridden out the global financial crisis with the business – having joined in the boom year of 2005. But he has done more than simply weather the storm – he has dramatically grown the in-house legal function and redefined its relations with external counsel.
What was the rationale behind your comprehensive retooling of Colt’s legal functions?
Legal used to be seen very much as a compliance area, a rubber stamp. It was seen colloquially as the business prevention department and not central to the business in terms of its status.
My mission was to change that – to make the lawyers much more business aware, to expand their influence and reputation around the organisation and to make them business partners. And last year was the moment when we finally achieved that. Over the last 18 months we’ve implemented several important programmes.
We’ve invested in people by growing the legal team enormously – we’ve more than doubled the size to a total of 43 lawyers. And we’ve moved from a country-based structure to a divisionally-based structure. I now have six legal directors, each of which heads a line of business or activity and is very embedded in the business. And under each of those directors is a team. I’ve given my business lawyers absolute empowerment and accountability, and have a very small corporate team of about four lawyers who do the non-transactional work.
One of the most important developments has been in Bangalore, where you’ve created a local branch of your legal department as opposed to using an outsourcing supplier. What motivated that move and how is it working?
I’ve set up a shared service legal function in India. It is not outsourcing – but we base them in India because that jurisdiction is cheaper.
I’ve gone from nought to 10 lawyers in India in 18 months. We’ve spent a lot of time with them and we’ve done a lot of training -- they have come to Europe on both secondments and specific projects. We have recruited relatively young lawyers – not new graduates, but those at two to five-year post-qualification experience – and we’ve introduced them into the business gradually.
Ensuring quality in recruitment has been the biggest learning curve. I originally thought we could just set this up and go. But what we’ve found is that you have to be very careful with recruitment because there is a lot of attrition in the market. But we’ve been amazingly successful since we started – we’ve only lost one person after 18 months. That is almost unbelievable in India. And the reason for it is that we’ve given them high quality work.
They are delighted with us because I give them real legal work. They get to work on transactions, to deal directly with customers and suppliers – they are not back office, they are front office. And when they engage with the business they develop and learn and you get higher quality performances because they are so much more motivated.
We’ve just appointed a senior director for our India office. She was general counsel at the Indian office of an international company and she’s joined a small growing team because she sees the opportunity with us.
There have been other developments – not least a major restructuring of your approach to external legal advisers.
I was spending about €12 million a year on legal services. That was why we decided to move more work in house and to hire more lawyers for our team. There’s no denying that having external advisers does add value to the business, but we wanted to get more bang for our buck.
We had favourite legal advisers in every one of the countries in which Colt was operating -- there were four or five per country. So when it was all added together there were between 50 and 80 law firms.
With that you might get a horses-for-courses approach, but what you don’t get is any interest or engagement from the law firms because you are dividing the legal spend into 50 or 60 pieces and nobody is getting a very big slice of the cake -- and therefore nobody is really interested in investing in you as a client.
Therefore, we decided to appoint a preferred legal partner in each of our countries, with the idea that they would do 90 per cent-plus in those individual jurisdictions. We held a one-day conference in London and invited 45 of our law firms to attend. They all told us nobody had ever done that before with them.
We told them the old model was not right for us, that we wanted a single main supplier in each country. And then we announced the big innovation – we’re not interested in paying for hours any more. We buy service, not hours. We said we’re going to define the required service and then ask firms to bid for it on a fixed price basis.
One suspects you could have heard a pin drop. Was there open hostility to that approach?
Some said it would be impossible, full stop. Others blamed their local national bar associations, saying they wouldn’t allow it.
We sent them away to think about it and then sent out a request for proposal setting out the detail. We received 29 out of 40 responses – some from magic circle firms, some from other global firms. Many provided us with a multi-country proposition, even though we’d said we wanted to have a country-by-country model – and some were from just very good, independent local firms that knew the market, knew us and gave us some interesting proposals.
There was the odd bit of attempted fudging in relation to the fixed fee point, but that didn’t hold any sway with us. If they were fudging, that indicated to us that the firm’s heart wasn’t really in it.
We came down to a short list. But what surprised us was that -- having thought we’d go country by country -- Baker & McKenzie made a tremendously compelling proposal. The firm said it would cover all 13 countries – and it would do it as a one-stop-shop, providing a highly co-ordinated, structured service that provides the same thing everywhere. And the firm persuaded us that that it was first or second choice in every country anyway, because it has such a good sector focus on IT and telecoms.
The firm’s proposition imposed itself on us. We did have a short list and had discussions with others, but Bakers won by a good yard.
What are the details of the arrangement? For how long are you tied in?
The deal will run for a minimum of three years. We now pay Baker & McKenzie a fixed fee and the firm provides the majority of our commercial legal services.
Only two areas are excluded – employment work, for which we’ve done a separate arrangement that is very much in the same vein, appointing Greenberg Traurig, which will provide a one-stop shop through a network of European specialist firms. The other area is actual litigation because you’ve got to be free to deal with conflicts, and also you can price litigation on a per case basis, but you can’t price it on a company-wide basis.
Privacy matters are currently preoccupying the sector. How do you see that issue playing out for your business?
There is a draft European Commission regulation that is set to harmonise the position across member states. This is controversial because it effectively raises the standards of data protection compliance required across Europe to what people broadly describe as the German standard.
We don’t have data protection issues specific to our business, but our clients have them. So we regard this as a business opportunity -- harmonisation provides us with an opportunity in the market to develop services that help our clients deal with pan-European compliance.
More generally, cloud computing and the lack of a regulatory basis for it is an interesting area. There are three issues: data protection – harmonisation will help here because companies will no longer be forced to accept that if they want a cloud service, that service must be based in, say, the Netherlands. The standard will become identical everywhere and the servers can be anywhere.
The second point is data security. Data being stolen is a real issue. The third is lock in, the fact that many of the larger companies have built large vertical bespoke solutions and they are not going to want to let that business go into the cloud world. The regulators are going to have to look at that issue -- it is crucial to the interests of business and of Europe more widely to assess whether they want to have an environment where there isn’t a high level of transportability of computing services between different providers.
Robin Saphra -- CV
2005 – present: General counsel at Colt Group. He leads the legal function and is responsible for leading the regulatory team and managing interfaces with government and regulatory agencies.
Career background: Studied at the University of Cape Town in South Africa before qualifying as an English solicitor in 1992. Was in private practice – at a London-based technology-telecoms boutique law firm – as well as having several other senior in-house roles: at T-Mobile (the mobile business of Deutsche Telekom), pharmaceuticals group BTG (US/USA) and Dubai-based telecoms business Du.
But moves towards harmonisation of telecoms privacy regulations across Europe would be welcomed by at least one leading industry player – 20-year-old European business-to-business provider Colt Group, which views ironed-out regulation as a business opportunity.
Despite annual revenues of some €1.5 billion and its FTSE 250 status, Colt still describes itself as a challenger to the established global names. But it has not been an exclusively upwards trajectory for the company. Recent years have been tough, with Colt executives only last month cautiously predicting that it will return to growth in 2012 after some time in the financial doldrums.
General counsel Robin Saphra has ridden out the global financial crisis with the business – having joined in the boom year of 2005. But he has done more than simply weather the storm – he has dramatically grown the in-house legal function and redefined its relations with external counsel.
What was the rationale behind your comprehensive retooling of Colt’s legal functions?
Legal used to be seen very much as a compliance area, a rubber stamp. It was seen colloquially as the business prevention department and not central to the business in terms of its status.
My mission was to change that – to make the lawyers much more business aware, to expand their influence and reputation around the organisation and to make them business partners. And last year was the moment when we finally achieved that. Over the last 18 months we’ve implemented several important programmes.
We’ve invested in people by growing the legal team enormously – we’ve more than doubled the size to a total of 43 lawyers. And we’ve moved from a country-based structure to a divisionally-based structure. I now have six legal directors, each of which heads a line of business or activity and is very embedded in the business. And under each of those directors is a team. I’ve given my business lawyers absolute empowerment and accountability, and have a very small corporate team of about four lawyers who do the non-transactional work.
One of the most important developments has been in Bangalore, where you’ve created a local branch of your legal department as opposed to using an outsourcing supplier. What motivated that move and how is it working?
I’ve set up a shared service legal function in India. It is not outsourcing – but we base them in India because that jurisdiction is cheaper.
I’ve gone from nought to 10 lawyers in India in 18 months. We’ve spent a lot of time with them and we’ve done a lot of training -- they have come to Europe on both secondments and specific projects. We have recruited relatively young lawyers – not new graduates, but those at two to five-year post-qualification experience – and we’ve introduced them into the business gradually.
Ensuring quality in recruitment has been the biggest learning curve. I originally thought we could just set this up and go. But what we’ve found is that you have to be very careful with recruitment because there is a lot of attrition in the market. But we’ve been amazingly successful since we started – we’ve only lost one person after 18 months. That is almost unbelievable in India. And the reason for it is that we’ve given them high quality work.
They are delighted with us because I give them real legal work. They get to work on transactions, to deal directly with customers and suppliers – they are not back office, they are front office. And when they engage with the business they develop and learn and you get higher quality performances because they are so much more motivated.
We’ve just appointed a senior director for our India office. She was general counsel at the Indian office of an international company and she’s joined a small growing team because she sees the opportunity with us.
There have been other developments – not least a major restructuring of your approach to external legal advisers.
I was spending about €12 million a year on legal services. That was why we decided to move more work in house and to hire more lawyers for our team. There’s no denying that having external advisers does add value to the business, but we wanted to get more bang for our buck.
We had favourite legal advisers in every one of the countries in which Colt was operating -- there were four or five per country. So when it was all added together there were between 50 and 80 law firms.
With that you might get a horses-for-courses approach, but what you don’t get is any interest or engagement from the law firms because you are dividing the legal spend into 50 or 60 pieces and nobody is getting a very big slice of the cake -- and therefore nobody is really interested in investing in you as a client.
Therefore, we decided to appoint a preferred legal partner in each of our countries, with the idea that they would do 90 per cent-plus in those individual jurisdictions. We held a one-day conference in London and invited 45 of our law firms to attend. They all told us nobody had ever done that before with them.
We told them the old model was not right for us, that we wanted a single main supplier in each country. And then we announced the big innovation – we’re not interested in paying for hours any more. We buy service, not hours. We said we’re going to define the required service and then ask firms to bid for it on a fixed price basis.
One suspects you could have heard a pin drop. Was there open hostility to that approach?
Some said it would be impossible, full stop. Others blamed their local national bar associations, saying they wouldn’t allow it.
We sent them away to think about it and then sent out a request for proposal setting out the detail. We received 29 out of 40 responses – some from magic circle firms, some from other global firms. Many provided us with a multi-country proposition, even though we’d said we wanted to have a country-by-country model – and some were from just very good, independent local firms that knew the market, knew us and gave us some interesting proposals.
There was the odd bit of attempted fudging in relation to the fixed fee point, but that didn’t hold any sway with us. If they were fudging, that indicated to us that the firm’s heart wasn’t really in it.
We came down to a short list. But what surprised us was that -- having thought we’d go country by country -- Baker & McKenzie made a tremendously compelling proposal. The firm said it would cover all 13 countries – and it would do it as a one-stop-shop, providing a highly co-ordinated, structured service that provides the same thing everywhere. And the firm persuaded us that that it was first or second choice in every country anyway, because it has such a good sector focus on IT and telecoms.
The firm’s proposition imposed itself on us. We did have a short list and had discussions with others, but Bakers won by a good yard.
What are the details of the arrangement? For how long are you tied in?
The deal will run for a minimum of three years. We now pay Baker & McKenzie a fixed fee and the firm provides the majority of our commercial legal services.
Only two areas are excluded – employment work, for which we’ve done a separate arrangement that is very much in the same vein, appointing Greenberg Traurig, which will provide a one-stop shop through a network of European specialist firms. The other area is actual litigation because you’ve got to be free to deal with conflicts, and also you can price litigation on a per case basis, but you can’t price it on a company-wide basis.
Privacy matters are currently preoccupying the sector. How do you see that issue playing out for your business?
There is a draft European Commission regulation that is set to harmonise the position across member states. This is controversial because it effectively raises the standards of data protection compliance required across Europe to what people broadly describe as the German standard.
We don’t have data protection issues specific to our business, but our clients have them. So we regard this as a business opportunity -- harmonisation provides us with an opportunity in the market to develop services that help our clients deal with pan-European compliance.
More generally, cloud computing and the lack of a regulatory basis for it is an interesting area. There are three issues: data protection – harmonisation will help here because companies will no longer be forced to accept that if they want a cloud service, that service must be based in, say, the Netherlands. The standard will become identical everywhere and the servers can be anywhere.
The second point is data security. Data being stolen is a real issue. The third is lock in, the fact that many of the larger companies have built large vertical bespoke solutions and they are not going to want to let that business go into the cloud world. The regulators are going to have to look at that issue -- it is crucial to the interests of business and of Europe more widely to assess whether they want to have an environment where there isn’t a high level of transportability of computing services between different providers.
Robin Saphra -- CV
2005 – present: General counsel at Colt Group. He leads the legal function and is responsible for leading the regulatory team and managing interfaces with government and regulatory agencies.
Career background: Studied at the University of Cape Town in South Africa before qualifying as an English solicitor in 1992. Was in private practice – at a London-based technology-telecoms boutique law firm – as well as having several other senior in-house roles: at T-Mobile (the mobile business of Deutsche Telekom), pharmaceuticals group BTG (US/USA) and Dubai-based telecoms business Du.
