Lately, we have seen an interest among clients in outsourcing parts of their legal operations to third party managed legal service providers. Specifically, labor-intensive, more mundane functions such as contract lifecycle management are being outsourced to cut costs and enhance efficiency to meet an ever-increasing pace of business transactions. According to Accenture’s 2020 Legal Risk Study, 64% of polled respondents indicated their organization has either moved non-specialized/non-core legal work currently handled by their Legal function to an external third party legal managed services provider or plan to do so in 2020.
At the same time, many legal functions are also under-going transformational initiatives. Per Accenture’s 2021 Legal Risk Study two thirds of legal executive respondents reported their firm’s legal function will be implementing transformational legal change initiatives/programs in the next twelve months. This confluence of activities at firms has caused some confusion on what exactly connotes a Legal Transformation and if outsourcing qualifies. In discussions we have held with more than a few General Counsels and legal operations officers, there is a misguided view that outsourcing a function constitutes a de facto transformation of their legal function. However, in practice, we posit that true transformations of legal functions are much broader and deeper, typically lasting multi-years and should cover fundamental changes to at least 2 of the following 3 core pillars of people, process and technology.
To wit, to qualify for a full transformation, a firm’s legal operating model should be re-engineered to focus legal functions more narrowly on tasks requiring specialized legal skills and jettison those tasks that can be done better and more efficiently by other functions. Core legal processes should be examined to understand inefficiencies and manual activities that could be transformed by workflow automation (e.g. routine doc requests, routine drafting of filings, automated emails). For the trifecta, technology ecosystems should be enhanced with new tools that are integrated into platforms that solve multi-problems. For example, integrations of Client Lifecycle Management (CRM) tools and Contract Lifecycle Management (CLM) tools) into a common platform with workflow that covers early client contacts through to contract execution, revisions and renewals. Contrast this fundamental re-thinking of what legal does, who does it, how it does it and with which tools, undeniably heavy lifting, with more simply outsourcing a single function. The latter, arguably doesn’t truly move the needle in terms of long-term viability and responsiveness of the legal function to business changes and digitalization, while the former gives legal a chance to fight another day!
The case for outsourcing legal functions
The case for outsourcing a legal function is often driven more by a more tactical need to lower the hefty fixed-costs of relatively expensive in house and external attorneys by shifting to lower cost onshore or offshore labor. This refocus of talent allows in-house attorneys to invest time and energy on more value-add legal matters requiring their “highest and best use” legal training and skills. Leveraging a third-party managed service also allows a firm to scale up or down based on need, achieving greater economies of scale. For example, operations can be ramped up to handle a large scale regulatory, market or business driven event such as LIBOR contract remediation. Once the remediation is complete, operations can be scaled down. Finally, firms can leverage the third-party managed service provider’s technology platform rather than having to build and maintain their own technology platform. Often, these managed service providers have rigorous quality assurance/control reviews of work and produce dashboards that track the status and quality of throughput.
The case for digital transformation of the legal department
Full end to end digital transformation of legal departments is generally fairly uncommon as lawyers are typically overextended, change averse and less technologically proficient. Thus, legal departments typically do not fully optimize the way they work and interact with the business. Though arguably, there has never been a better time to fundamentally and fully transform legal departments. The pandemic/post-pandemic new normal of hybrid work and more agile business practices represents a unique opportunity, lead by proliferation of firms adopting new collaboration tools such as Microsoft Teams, Zoom, Slack, etc. The gift of a free pass has been bestowed more or less now to spend the money to re-invent legacy control/support functions (Legal/Compliance/Risk) in the eyes of many corporate leaders. Thus, legal departments now have a better chance to get the significant funding needed to invest in a full transformation than in any time in recent history. In fact, many businesses have been taking needed and reflective time during the downturn and pandemic to re-invent how they communicate and market to customers, sell more directly (B2C) and re-brand themselves. Legal departments should similarly sort out how they can better support their evolving customers (the business).
Doing so, requires a dedicated, digital transformation led by General Counsels and their operating chiefs strategic 3-5 year vision of what they want to become and measurable roadmap of programs/initiatives to get there. Support would be needed from dedicated change teams (either internal or external consultants) who should evaluate target operating models, frameworks and technology modernization platforms.
As shown in Accenture’s illustrative Legal Transformation Maturity Model below, some legal functions remain in foundational stages with most legal functions kept in house and rudimentary legal tech tools used for contracting and regulatory change management, etc. Over the past few years, data from our annual Legal Risk study has shown that many legal functions have become more solution enabled (maturing by outsourcing 1-2 non-core legal functions and using more advanced tech tools and workflow). We find most clients in this middle ground. However, to truly support the business and earn their keep, legal functions should become more insights driven and predictive, by measuring their efficiency in outcomes realized (e.g. dollars saved, incremental revenue generated by contracts), metrics (e.g. lawyers per matter reviewed) and throughput (e.g. contracts processed for renewals). To become more predictive, lawyers need to use more workflow automation and artificial intelligence to augment and scale their work along with using advanced analytics tools and dashboards to evaluate risks or opportunities (in contracts or mergers and acquisitions due diligence, for example). The holy grail is achieved when legal departments become truly intelligent or future proof themselves by outsourcing multi non-core legal functions, integrating tools into platforms and using advanced logic engines to automate and scale their work.
Accenture’s Legal Transformation Maturity Model (Illustrative)
General Counsels and their operating chiefs should formulate plans for true legal transformations and eschew merely relying on the lower hanging fruit of outsourcing, more cosmetically transforming in piecemeal fashion without full enterprise effects. Using a favored Spanish phrase, el cambio vale la pena (literally translated as change is worth the pain).
How we can help
We have explored why firms should think broader and more holistically at transforming their legal departments than merely outsourcing select non-core functions. Despite the challenges and lack of familiarity with transformational programs, legal departments that engage in multi-year transformational programs can better future proof their existence. And Accenture can help. Clients can engage in transformational programs with our support and access leading capabilities in the following areas:
- Conducting current state assessments and identifying gaps;
- Defining a legal target operating model for people, process and technology;
- Defining tools, business and technical requirements to enhance the technology architecture/ecosystem;
- system integration; and
- Contract managed services.
To find out more on the topic and how Accenture can support your needs, please contact the authors.
To find out more on the topic and how Accenture can support your needs, please contact the authors.
Newsletter Contact Person: Lisa Bloomberg
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