Having spent over 30 years building and managing outsourcing and managed services businesses, I’ve seen these offerings evolve and I am confident that corporate legal departments can successfully adopt managed services at scale by building on the learnings made in other sectors.
How does outsourcing and managed services work?
Let us start by looking at how this all works. Typically, it begins with the client’s problems which often consist of one or more of the need to:
- cut costs significantly;
- access skills or technology not available in-house; and
- bring about radical change within an organisation (potentially after other internal initiatives have failed).
Due to the size of these contracts, they are usually procurement-led and involve a competitive bidding process via a Request for Proposal (RFP). The request revolves around:
- an agreed scope and volume;
- a set of Service Levels (SLAs);
- a set-up price and then a fee for running the service; and/or
- a complex multi-year contract covering change, IP, liabilities, damages, etc.
The competitive bid process itself naturally drives the price down which you would think would be a good thing – and to an extent – it is, but if it goes too far you may not experience the service levels you expect post-contract award.
What’s the next step for the legal profession?
With more law firms and legal operations within corporates considering building managed services parties into their operating models, how can get they get the right balance of financials, service and risk levels for all parties involved?
There is no easy answer, but it starts with understanding that not all providers are the same and there is more than one way to approach your specific requirements.
Careful consideration should firstly be given to which part of your legal service is right for a managed service – core and strategic aspects should clearly be retained, then it gets more difficult. You may conclude that given the peculiar nature of the legal service, and given the serious consequences of errors/failure, that it is simply too risky to pass all the responsibility over to a managed service provider. Yes, you may have some recourse to remedy, but it is your brand and your reputation which will suffer if things go wrong. So how do you get the benefit of high-quality outcomes at a better value price point and access to leading skills, processes and technology?
Several firms and inhouse legal teams have decided to opt for a hybrid model by selecting a partner who can deliver a mix of managed legal services and staff augmentation. Here control is retained by you, and your partner’s managed service experts take over those parts of the legal service that are suited to being wholly outsourced, while simultaneously providing a flexible number of skilled legal professionals (on or offshore) acting as a seamless part of your team. Staff augmentation is different to a simple flex resourcing service because the relationship is more collaborative; for example, by helping re-engineer processes and introducing relevant technology all in co-operation with you.
Beyond this hybrid model, what else should you look for? Some of the more repeatable and predictable services such as NDAs, commercial contracts and any high-volume template-driven contracts should be considered for a pricing model truly based on the outputs of the managed service. These contracts have the characteristics of:
- being relatively simple to scope and define in a process map which clearly identifies who is responsible for what;
- can be easily priced based on complexity bands and volumes; and
- can have definable and measurable service levels.
Other parts of the legal service with these characteristics could be reviewed as potential options for an outcome-based managed service. For now, perhaps collaborating with a partner who combines a staff augmentation model with a carefully selected outcome-based managed services approach meets today’s risk appetite in the legal profession?
Once you have identified the right partner and managed service approach for your business, you should consider:
- During the procurement process, meet the delivery team and get a clear commitment from your potential provider as to their assignment to your engagement. Many engagements are challenged post-contract when the promised “A Team”, all too visible during the sales process fails to materialise.
- If you drive the price down too far, particularly on the managed services aspects, the provider will be under pressure to adopt tactics to your detriment such as: recouping margin when inevitable scope change happens. Instead, focus on the value each potential partner can bring rather than simply seeing the transformation as a price reduction exercise.
- Agree a clear pricing approach up front for the inevitable changes in scope and volumes and set aside a budget for change within your business case.
- Remember, handing over a portion of your workload to a partner in a managed service relationship does not mean abdication. It’s important you stay engaged post-contract on delivery performance and financials. So, allocate skilled internal resource who can do this post contract.
We all have a key role in ensuring the legal sector creates successful partnerships with managed service providers. They are not all the same, and this becomes abundantly clear from looking closely at the culture of the companies you are considering. If you choose wisely, we can ensure that our profession goes from strength to strength.
Mike Farrell is an Executive Director of Cognia based in the UK. Previously, he was a senior executive at IBM and Accenture and advisor to Capgemini, Atos and Xchanging.