You better know their names and understand their metrics: corporate procurement influences the law firm selection.

Author:Hodges, Silvia
 
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You don't have them on your speed dial; you don't have their mobile number; you are not connected to them on LinkedIn, Google+ or Facebook. That is a problem. Or, at least, it will be soon if you want to develop business in law firms.

Unless you sit across from corporate purchasing, procurement, sourcing or supply managers in a pitch, they are the faceless people accused of everything from interfering with the lawyer-client relationship, having no knowledge or ability to judge the quality of legal services, unreasonably squeezing firm's margins and playing firms against each other, and cherry-picking to get the lowest price.

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Involvement of Procurement--The Legal Industry's Turn

An ever-growing number of companies bring in procurement or sourcing professionals to help evaluate providers of legal services and negotiate a good deal for their employers. "The identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives," after all, is their job. (1) After buying raw materials, goods and services for their employers, corporate purchasing departments started sourcing engineering and architectural services in the late 1980s; marketing, public relations and advertising services in the mid-late 1990s; and accounting and tax services in the mid-2000s. Now it is the legal industry's turn. So just in case anyone in your firm is hoping that procurement will go away when the economy finally picks up again, well, that is highly unlikely.

We recently conducted a study on the influence of procurement on the purchasing of corporate legal services in collaboration with the Institute for Supply Management and the American Purchasing Society. (2) More than half of the respondents in our research were from Fortune 1000 companies and about a third from Fortune 100 firms. Fifty-eight percent of the respondents said that the procurement or supply management departments have been involved in the purchasing of legal services for three or more years. (3) We found that despite the widely held belief among lawyers that procurement officers normally buy widgets and have no idea about the law, a good number of procurement people have a legal background. In fact, JDs made up nearly a quarter; the remaining majority held MBA degrees. Some worked in law firms and some in in-house legal positions prior to joining the procurement department. One example I found particularly interesting was the assistant general counsel of a Fortune 500 company who switched from legal to the company's procurement department in the 1990s and was responsible for sourcing legal services for a number of years. (Read Lynn D. Krauss' article "I Bought The Law: Purchasing Legal And Other Professional Services" on page 8 of this issue.)

Cost Control and More Transparency

Procurement's involvement is typically triggered by a senior management decision to save costs. Until recently, the legal department was mostly excluded from companywide cost cuttings. This is no longer the case. Procurement's skills are sought to manage cost and negotiate price, measure best value, manage the purchasing process efficiently, compare law firms more objectively and manage redundancies. Procurement's tactical potential as a cost killer is no...

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