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Law Firms Take Direct Aim at Outsourcing Advisory Services

Law Firms Take Direct Aim at Outsourcing Advisory Services

By taking a bigger chunk of the contract “lifecycle”, legal looks to contend for business typically owned by Deloitte, KPMG and others

By Luke Bujarski

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.

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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.

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

4 comments

  1. I think there is a lot of truth in this article. I have been saying the same thing for a couple of years now. The outsourcing consultants promote the myth of complexity, insisting that buyers can’t possibly navigate outsourcing terrain without their “superior” knowledge. While consultants may try to convince their clients that each procurement requires extensive management, the fact is that the outsourcing “wheel” has already been invented . . . and it spins more easily than one might think. The thing that most buyers don’t know is that much of what is needed to get a sourcing procurement accomplished are things that providers often are willing to do for free as part of their marketing expense. This will enable buyers to leverage true creativity and innovation through “free market” outsourcing.

    Free market outsourcing focuses on collaboration and governance. The typical contract today is far too long and too complicated. Something much simpler with aligned objectives is where the market needs to evolve. That said, I question whether necessarily law firms are the best to lead this effort.

  2. I agree. Lawyers have traditionally shied away from the commercial core of the outsuorcing deal in the schedules of the contract and concentrated on the "front end" on areas such as limits on liability and indemnities. To demonstrate their commerciality lawyers now have to help clients by advising and draftng pricing models and service levels that are clear and make business sense. To do that you need technical understanding backed up industry knowledge of the subject mattter and an ability to write requirements that are clear and make sense.

    In general and there are exceptions, consultants strong suit is the former and lawyers the later. In a crowded marketplace, advisers that can genuinely combine both will be exceptionally well placed.

  3. Free market outsourcing. Great idea. Good luck. You want a vendor to do your business case for free? Assess your people issues and gaps? Sounds good. By the way which vendor is going to do that for you? How are you going to pick that vendor to do the free work? Are you naive enough to believe in a free lunch? Do you think that the business case will show a slightly positive case every time you get a vendor to do it for free? Their bid will be slightly better than your cost? Coincidentally, your strong performers all get job offers from the vendor? If its so simple why do agreements regularly fail? Lawyer and consultant provide different and valuable advice. Be smart and use both where you need them. Contracts may be too long but everything is there for a reason. This article is nothing but lawyer marketing in a tough market. The legal work is a commodity and too many lawyers are chasing too few deals. The legal terms are all well know and acceptable positions on each term are well established. You could phone in the the legal agreement. The lawyers are bored to tears on these deals now and they are trying to push out the consultants. Good luck. Every lawyer thinks they are technology experts because they do tech support for their wife’s Mac.

  4. Hi Sybil, Thanks for the sarcasm. Please read what I said, "much of what is needed to get a sourcing procurement accomplished are things that providers often are willing to do for free as part of their marketing expense". "Much" does not mean "all". It means you work smart. I have seen it work and end up in better contracts. It's exactly how I did every deal when I was on the buyer-side. Those contracts have been successful. Why do agreements regularly fail? It's precisely because buyers don't get the providers involved in the process early on and only listen to the advisors.

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