Economic crisis will make legal procurement more important than ever, says Dr. Silvia Hodges Silverstein
29 October 2020

Economic crisis will make legal procurement more important than ever, says Dr. Silvia Hodges Silverstein

Published on 29 October 2020

Since the GFC, cost-sensitive clients have been pushing for more value-driven, creative ways to obtain legal services. Fortunately, this is exactly a cause Dr. Silvia Hodges Silverstein, CEO of the Buying Legal Council and Lecturer at Columbia Law School can support.

The Buying Legal Council is an international trade organization for legal procurement. Its members source legal services or manage legal service supplier relationships, and it chiefly assists through advocacy, networking, education, and research on issues regarding how legal services are purchased.

Legal procurement emerged in the early 2000s

Companies with significant legal spending started to involve procurement in the evaluation and selection of legal services providers in the early-to-mid 2000s, with the earliest legal procurement activities dating back to the mid-to-late 1990s,” said Silvia.

“The CEO, CFO, or Board typically initiates sizing legal procurement opportunities and brings in a trained buying professional,” explained Silvia.

Highly regulated industries were the first to embrace legal procurement. This included pharmaceutical companies, financial services institutions, and energy and utilities companies.

“In many corporations, legal services were once largely exempt from the intense cost scrutiny other business units and functions have faced for years,” said Silvia. “The global financial crisis acted as a catalyst to accelerate the adoption of legal procurement, particularly in large corporations.

“Publicity about billing practices, big-ticket spending, and profit pressure was at the root of this seismic shift. The COVID-19 pandemic and the ensuing downturn is likely to cause a second wave of cost-cutting with the help of procurement professionals.”

Emboldened clients drive down costs

Legal innovation has provided clients with more insight into their legal services and budgets.

“As a result, clients have become bolder and now better manage legal spend to minimize costs,” explained Silvia. “Technology is routinely used to simplify and automate many tasks, particularly high volume, routine tasks. Alternative legal services providers, or ‘law companies’ that leverage people, processes, and technology to provide services at lower costs are now frequently used by many large organizations.

“Legal Process Outsourcing (LPO) companies are the industry’s answer to Business Process Outsourcing, using technology and an onshore or offshore workforce to further lower costs.

“Whether something is a threat or an opportunity is a matter of where you stand,” observed Silvia. “To quote Sun Tzu, ‘When we fear loss or hope for achievement, change may seem a threat. But the same change and chaos can also produce opportunity.’

“This perfectly applies to how legal innovation applies to our times.”

Expect continuing incremental change

Silvia predicts the next five years will see continuing incremental change.

“The market needs to absorb different legal innovations and deliver better, faster and less expensive outcomes,” said Silvia. “Topics like predictive legal analytics and automation will become more commonplace. In addition, cybersecurity continues to be a hot topic no one can ignore.

“On the client-side, legal operations has reached its peak in terms of growth but will continue to mature and become more sophisticated,” said Silvia.

In her view, the importance of legal procurement will expand rapidly due to the prevailing economic crisis.

“Procurement is always called upon when businesses need to manage their spending better,” said Silvia. “Legal ops and legal procurement will have even greater impact than ever before.”

Understand the new legal marketplace

Organisations facing a vastly changed economic reality must understand the new legal marketplace so as to benefit from the cost savings and efficiencies technology can offer.

“The legal industry must make new technology more accessible and easier to use,” said Silvia. “Technology needs to be more mainstream, less nerd-fest.

Law students graduating into the downturn must also adapt.

“You should go to law school with the right expectations and develop a good understanding of the ‘new’ marketplace,” explained Silvia. “Law school still teaches you how to think like a lawyer, but in today’s highly competitive world, it is imperative to bring more to the table: an understanding of the business world, technology, and law firms as businesses.

Students expecting a job as a Big Law lawyer in a wood-paneled corner office need to wake up and learn about technology and processes,” said Silvia. “What could this involve? You could work for a few years before you go to law school. Learn about how businesses operate and make money. Learn new skills that are not part of the current law school curriculum, including analytics. Be a self-starter. Be a solution-finder, not a problem seer - or creator. Teach yourself to see opportunities. If something doesn’t work, what could you do to make it work?

Silvia praised the Centre for Legal Innovation (CLI) for playing a vital role in helping the profession adapt, particularly in this swiftly changing environment.

“The CLI does great work,” said Silvia. “By providing information and educational outreach to the profession and to law students, they are helping to bridge the gap between what law schools teach and what clients expect.”