Disruptions in Global Legal Services Market: Opportunities for General Counsel Professor Mari Sako Mari.sako@sbs.ox.ac.uk General Counsel Netherlands, Amsterdam 7 October 2016
Agenda � What are the top three disruptions for what you do? � How do you recognize a disruption? � Alternative Legal Service Providers as disruptors? � How can General Counsel respond? (c) Mari Sako, Oxford University 2016 2
How to think about disruptions I � What are your top three disruptions? � “More for less” challenge � Legal technology � Globalization � New entrants � Deregulation (c) Mari Sako, Oxford University 2016 3
How to think about disruptions II � How to recognize a disruption � Wars and crises � Discontinuous change � Innovation leading to creative destruction � Disruption = doing new things that make old things obsolete � Incremental but cumulative change, with a tipping point (c) Mari Sako, Oxford University 2016 4
“More for less” challenge as opportunity for disruption � “More for less” challenge has transformed the way GCs manage their legal resources (internal and external) � Use of law firms with alternative billing arrangements � Use of alternative legal service providers (ALSPs) � Use of legal operations staff within legal departments (c) Mari Sako, Oxford University 2016 5
Thomson Reuters Study in collaboration with Georgetown Law School and Oxford Said Business School Use of Alternative Legal Service Providers (ALSPs) RESULTS WILL BE RELEASED IN JANUARY 2017 (c) Mari Sako, Oxford University 2016 6
Categorizing ALSPs Providers of contract lawyers � Examples: Axiom, Lawyer on Demand (Berwin Leighton Paisner), Peerpoint (Allen & Overy) � Captive LPOs (legal process outsourcing) � Examples: Clifford Chance (India), Allen & Overy (N. Ireland), Baker & McKenzie (Philippines) � Independent LPOs � Examples: Clutch Group, CPA Global, Integreon, Quislex, Unitedlex � Managed legal service providers � Examples: Axiom, Riverview Law, Elevate Services, Thomson Reuters � Managed Legal Services (Pangea3) Corporations adding complementary professional services � Diversification by in-house legal teams to serve external clients � Example: BT Law � Accounting and audit firms � Tax law, banking & finance, corporate restructuring, human capital � Examples: Deloitte Legal, PwC Legal LLP, KPMG LLP, EY Legal � Technology-based business model disruptors � Online legal advice, data analytics, legal technology � Examples: LegalZoom, Rocket Lawyer � What makes legal services “alternative” and “disruptive”? Not location, not provider’s identity, but how legal service is delivered differently. (c) Mari Sako, Oxford University 2016 7
How to remain in the driver’s seat Implications for General Counsel (c) Mari Sako, Oxford University 2016 8
Implications for General Counsel 1. Greater proportion of lawyers will become in-house 2. GCs are, and are expected to be, in the driver’s seat 3. Sourcing strategies will dictate the size of the legal department 4. GC’s skill sets will change 1. Legal operations directors take care of operational efficiency 2. GC can focus on adding value to the corporation 5. Take on the challenge to be a disruptor yourself (c) Mari Sako, Oxford University 2016 9
Is more insourcing the only way to meet the “more for less” challenge? No. Huge variation in the 2010 study Sector Number in sample External to total legal spending Construction 4 20% - 83% Manufacturing 2 30% Energy 7 12% - 57% Financial services 11 50% - 77% ICT 9 27% - 93% Professional services 2 60% Public sector 3 n.a. Retailing and wholesale distribution 5 60%- 90% Utilities 2 20% Other* 7 40% - 60% TOTAL 52 12% - 93% Source: M. Sako (2010) General Counsel with Power? (c) Mari Sako, Oxford University 2011 10
GCs as Externalizers vs Internalizers Externalizers Mid-rangers Internalizers • 90%+ reliance on • 40-60% reliance on • LT 20%reliance on external resources external resources external resources • Type I: ‘outside • ‘Where do you want • Aim: tight budget lawyers who are to be in the middle?’ control + intimate more like in-house knowledge of internal • Aim: size of in-house counsel’ clients department • Type II: in-house determined by • Shift to in-sourcing department capacity and lawyers’ often accompanied proactively manages careers by REDUCTION in a network of law in-house lawyer firms (‘legal headcount community’) Source: M. Sako (2010) General Counsel with Power? (c) Mari Sako, Oxford University 2011 11
What determines the internal-external balance? Contracting with law firms can be challenging Relationship-based Bargaining-based contracting strategy contracting strategy • Small no. of law firms • Large no. of law firms • Multi-year relationships • Short-term relationships Supplier portfolio design • Broad range of practice • Narrow range of practice areas per firm areas per firm Make-and-buy balance More insourcing More outsourcing
Implications for General Counsel 1. Greater proportion of lawyers will become in-house 2. GCs are, and are expected to be, in the driver’s seat 3. Sourcing strategies will dictate the size of the legal department 4. GC’s skill sets will change 1. Legal operations directors take care of operational efficiency 2. GC can focus on adding value to the corporation 5. Take on the challenge to be a disruptor yourself (c) Mari Sako, Oxford University 2016 13
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