In addition to contract negotiation best practices, last week’s outsourcing conference organized by global law firm Baker & McKenzie revealed an increasingly integrated role for law firms within the global sourcing advisory industry. Lawyers and firms like B&M are now pushing their services beyond single function ‘legaleez’ contract drafting and negotiation into the domain of tier one consultancy. They are now ‘packaging’ their services throughout the “entire lifecycle of your sourcing agreement – from the decision to source, implementation, maintenance and review to re-bidding or exit.” As firms like B&M further establish themselves as full-service consultants, we ask how the competitive landscape of global advisory and consulting services is changing amid the growing adoption of outsourcing by the global business community.
Contract Structuring and Negotiation Commoditized
Lawyers have been on the front lines of outsourcing since its early beginnings, establishing the ground rules that buyers and vendors follow (or not). But apparently much of the contract structuring and negotiating going on these days has been taken over by in-house procurement teams. “Sourcing is getting smarter and enterprises have become more comfortable with the process,” explained Harry Small partner at B&M. Simply put, tasks that used to require entire teams of external council have now become standard.
In order to retain and shore up new clientele, the legal profession is advising on everything from multi-country deal structuring to data security
The lawyer’s traditional role in outsourcing was to negotiate monetary value for their clients – i.e. getting the most ‘bang’ for your ‘buck’ and to act as gatekeepers to limit liability and exposure to risk within the contract terms. But as sourcing managers become more seasoned in their jobs, law firms are moving beyond this initial negotiation stage of the outsourcing lifecycle. In order to retain and shore up new clientele, the legal profession is advising on everything from multi-country deal structuring to data security – areas more typically expounded by the likes of Deloitte and A.T. Kearney.
Law Firms Rebranding as Full-Service Consultants
Instead of hard-nosed negotiators, law firms like B&M are rebranding themselves as ‘relationship managers’ that can help “maximize the operational value of your outsourcing relationship.” “Sourcing relationships are too long to create an adversarial relationship from day one – both parties have to make money,” stressed Ed Hanson one of B&M’s senior outsourcing practice partners. “There has to be a business case behind your outsourcing objectives; I’ve killed outsourcing deals [during negotiation] because there was no clear business reason for going down the journey,” explained Small.
Lawyers are also contributing to the oft cliché outsourcing innovation discussion. “Outsourcing arrangements need to focus on business outcomes instead of cost savings; take a partnership-based/collaborative approach instead of an adversarial approach; apply gain-share arrangements instead of SLAs.” These are the same concepts that would typically come out of discussions with consultants and operational veterans with years of experience in change management and team building.
B&M Tackles Value Creation
Going beyond the consultative rhetoric, B&M has also moved into the research space in an effort to better understand their outsourcing client pool. 2012 is the second year that the firm implemented its Global Outsourcing Survey, measuring attitudes on value creation in sourcing and shared services. “We start with the assumption that limitation of liability and indemnity protection is not the answer to unlocking business value,” stressed B&M partner Michael Mensik during the conference as he explained how disruptive technologies (cloud; platform-as-a-service) and multi-country deals are compounding the complexity of today’s sourcing engagements.
Furthermore, according to their survey results, “overall procurement practices remain largely unchanged even though enterprises are engaging in increasingly complex and risky business transformation.” Herein lies the implied value that a seasoned legal practice seeks to bring to both enterprises and service providers as they hope to improve relationships and live up to big expectations.
Implications to Global Advisory Services
If anything, this more full-service role adopted by firms like B&M reflects the increasingly competitive landscape of the consulting & advisory services industry. Yet, despite a lack of operational expertise, law firms like B&M might be in a unique position to capture a larger share of the third-party consulting business. This is partly because outsourcing vendors are becoming the true masters of their domain.
In addition to their investments in scale, advanced technologies and plentiful offshored resources, buyers are leaning on vendor expertise to improve processes. One finding of the B&S survey revealed that customers care more about results and less about how things actually get done. Furthermore, stronger relationships between the vendor and buyer community, and transparency into vendor capability are also streamlining the vendor selection process.
In short, outsourcing best practices are becoming more established and requiring less third-party intervention from an operational perspective. However, as sourcing relationships grow and evolve past the terms of their original contract, lawyers could be well positioned to mediate between parties to ensure lasting productive relationships.