28 Oct 2016

Law firms feel the heat from legal outsourcers

Not only do law firms have to compete with other law firms for legal work, LPOs are now a force to be reckoned with as demonstrated by VMware's work with QuisLex.

Outsourcers are giving law firms a run for their money as they are increasingly competing to supply legal services traditionally offered by law firms. With a new breed of legal operators running law departments, cost saving and efficiency is at the top of the wish list for corporates. Speaking before the GC Futures Summit next week, David Klein, a former BigLaw partner at New York law firms Shearman & Sterling and Paul Hastings, is poacher turned gamekeeper at QuisLex, a legal outsourcing company which sells many of the services also offered by law firms. 

Professional management

Speaking of the continuing pressure on legal departments to be efficient, Mr Klein commented that with legal departments increasingly being pressured to do more with less,one of the approaches corporates were taking was  "to professionalise the management of the legal department by creating legal operations groups responsible for managing outside counsel, looking for efficiencies in the organisation, and determining how to incorporate technology into the legal group."  He added that as part of the effort to make the legal department more efficient, "legal departments are also analysing their workloads, processes, and roles and responsibilities to determine whether certain types of work may be performed more efficiently by outsourced legal providers (LPOs). At the same time, legal outsourcing providers are performing increasingly complex work, such as compliance, M&A due diligence, and contract drafting and negotiation.  This confluence of law departments seeking more efficiency and legal outsourcing providers offering more complex services has resulted in a strong incentive for companies to lessen their reliance on law firms by relying more on LPOs."


One company which has benefited from using LPOs is virtualization and cloud infrastructure company VMware, where under the leadership of general counsel Dawn Smith, the company created a Worldwide Legal Operations Group headed by Deputy GC Aine Lyons to launch a three year transformational strategy. The result was savings of 18 per cent on legal costs as a percentage of revenue over the last four years. Trained in Lean Six Sigma, Ms Lyons brought a systems view to problem solving.  One notable example was her  re-engineering of the company’s entire contracting lifecycle, from automated playbooks to electronic signatures, which saw accelerated revenues through a 50 per cent reduction in cycle times. This was achieved by retooling the entire workflow through modularised templates (down 50 per cent), reduced escalations (down 74 per cent), and a managed-service relationship that has saved the company millions. 


On the contracts front, a team led by Ms Lyons, the company sales team leader Morris Kremen and QuisLex, turned the company's 60 main templates for professional service contracts into a single template,  cutting the number of deals handled by the legal department by 74 per cent. Routine deals which needed legal scrutiny were outsourced to QuisLex  - saving more than $2 million in annual headcount costs. This allowed VMware's legal department to focus on complex customer deals which demanded a higher level of legal input. Ms Lyons and Mr Klein will join general counsel from BT, Lloyds Bank, Skype and Colt to discuss the fast-changing landscape for law department operations and give their views on the law department of the future and what law firms need to do to catch up at the GC Futures Summit on I November. For futher information, contact benmartin@globalcitymedia.com.