A new study by Professor Mari Sako at the Novak Druce Centre examines the disruptive forces at play in legal services outsourcing which are transforming legal practice and the power profile of general counsels (GCs) across a range of sectors.
In her report ‘General Counsel with Power?’ Professor Sako identifies two agents of change; that in a buyer’s market, the general counsel is able to exert greater power in relation to the external lawyer; and the entry of non-traditional suppliers, including so-called legal process outsourcing (LPO) providers, that are able to provide legal support services from low cost locations, and questions ‘how lawyers are responding to these gentle winds of creative destruction.’
Professor Sako found that the majority of in-house departments have grown over the last five years but that the 2008 financial crisis has intensified the drive to reduce costs. ‘The corporate cost pressure to do more for less has led many general counsel in this study to consider (and in some cases implement) a production-line approach to legal service delivery,’ said Professor Sako. ‘This approach requires three steps: not just disaggregation (breaking down legal work into finer constituent tasks) and standardisation, but also process management and project management.’ However, the majority of GCs were finding a variety of reasons – lack of scale, lawyers’ mentality, lack of time etc. – to reject or delay wholesale adoption.
Multi-sourcing — the use of multiple sources of legal service delivery — is likely to change the contour of legal services markets, according to the study. Value may migrate away from law firms to the in-house legal function if the general counsel takes a lead in project management and implements a production-line approach to legal service delivery.
The study, based on interviews with 52 general counsel in the UK and the US including Tesco, Vodafone, Deutsche Bank, Shell, Boston Consulting Group and Southwest Airlines, explored four key areas: (a) the changing size and shape of the in-house legal department, (b) the changing nature of relationships with law firms, (c) the extent to which legal work has become disaggregated in specific areas of work, and (d) how general counsel are making multi-sourcing decisions.
For press articles on this research, click on the links in the boxes above right, and on the below online publications:
Florida Law Journal - Legal Futures - Legal Support Network -
Legal Week Law - New Legal Review - Juve Rechtsmarkt - Lexpert