How Legal Departments Embrace Spend Optimization Mechanisms to Lower Spend and Manage Risk - Mitratech

How Legal Departments Embrace Spend Optimization Mechanisms to Lower Spend and Manage Risk

As a sales professional, I was recently struck by the contrast between the diligent, structured processes most companies use when selecting technology, and the processes many of those same companies use when selecting legal services partners.

In the technology arena, highly detailed requests for proposals (RFPs), competitive bidding, and detailed vetting processes are the norm. These procurement best practices ensure that companies are creating relationships with partners that mirror their values, share their goals, and – most importantly – will deliver a great return on their investment. But many companies shun these practices when it comes to investing their annual legal spend, which may dramatically exceed their annual technology investments.

Fortunately, there are companies in the market striking a positive balance between traditional relationship-driven vendor selection and creative new ideas around controlling spend and managing risk. These companies are:

  • Reducing/rationalizing the number of firms with whom they work. Just as rationalizing technology vendors yields efficiency and reduces overall support costs, reducing the number of firms used can result in deeper relationships. As highlighted in our recent whitepaper, “Embracing Disruption”, “For work that a legal department determines is best handled by an outside law firm, counsel evaluation systems may be put in place to aid with selection of the most appropriate firm or attorney.” The targeted firms both value and “know” your business, thus enabling you to negotiate better rate structures. When firms know they can bank on an amount of revenue from you they may feel comfortable reducing margin on some work; this can permit creative, alternative structures, such as volume discounts – which works to both parties’ advantage. “Panels” of firms for different types of work, with pre-negotiated rate cards, are helping companies reduce spend while also improving quality and outcomes.
  • Breaking down work and utilizing multiple service providers on a single matter. Project managers know that breaking down work and assigning pieces to the most cost-effective, yet still highly capable, resources can reduce overall project costs without increasing risk. Corporate counsel that review large, complex matters with an eye to parsing out work to multiple providers are finding similar success. It does require some new “project management” skills, but just as IT has learned that projects which are well-managed are more likely to come in on time and on budget, legal departments are finding that parsing work to multiple providers can lead to significant savings. In some cases, some of those savings can even be re-deployed to ensure that top talent can be employed for elements of the matter that require truly unique, bespoken work, thereby generating a better outcome than using a median cost provider across the board.
  • Requesting competitive bids as part of their legal procurement process. Competition isn’t a bad thing. It has forced providers in every industry to challenge the efficiency of their processes and organization and to learn to work smarter. Legal is the new frontier in this on-going, global quest for productivity. Particularly for largely routine work, competitive bidding amongst a number of providers who are all equally capable of delivering work of acceptable quality can reduce overall spend. Invitations to bid and analysis of proposals can be managed as an “RFP” to ensure only pre-qualified firms participate, or open auctions can be used for true commodity work.

The corporate legal departments that use all of these mechanisms together are quickly emerging as some of the most innovative and best-run departments. They are simultaneously reducing both costs and business risks to the benefit of their organizations. I’m proud to be delivering the technology solutions that make embracing these creative practices possible.

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