Two of the most fascinating sessions at this year’s ILTA conference were a pair of talks — Two (and More) Heads are Better than One! A Pricing Roundtable and How to Effectuate a Better Legal Services Delivery Model — on pricing and staffing issues.
But it was the juxtaposition of these sessions, held back-to-back with both the law firm and the client that had cooperated on a new process and pricing model, that made these discussions resonate long after the conference ended. Taken together, the panels denoted new ways clients and law firms can work together on the hyper-sensitive issues of billing, staffing and pricing matters in a way that just a few years ago would have been unthinkable.
In the law firm session, Davis Wright Tremaine pricing director Brian Fanning discussed how the firm works hard to find ways the firm can use pricing as a tool to align with their client’s goals and objectives. As an example, he presented a case study where a large client was looking to shift the first and second review of the vast volume of procurement contracts to outside organizations, thus freeing up their legal department attorneys for higher value work.
Pricing as an Alignment Tool
When the client put out an RFP requesting respondents go above and beyond the typical law firm deliverable, Davis Wright Tremaine offered to have their dedicated innovation and consulting team, DWT De Novo, design a solution. And after winning the RFP, DWT De Novo led a “kaizen-like” three-day design thinking session to empathize with the client’s current state of handling procurement contracts, identify the pain points and design a solution.
Fanning discussed how Davis Wright Tremaine worked with the client’s legal department to map out all the steps required to prepare and review procurement contracts — and then to develop playbooks to guide legal process outsourcers in the first review of these contracts. And in a classic design thinking process, DWT De Novo continued with it iterative design with the client and even after deployment, began the process of continuous improvement.
In the very next session, we heard from that client — Microsoft.
Lucy Bassli, Microsoft’s assistant general counsel, spoke about how she had realized that there was a lot of repetitive work in their contract processs and wondered if there was a better way to handle that work, to free up their legal department to focus on higher-value work, and not spend time answering so many questions from their outside counsel.
The solution Microsoft came up with out of their work with DWT De Novo was to stratify their legal resources, sending their high-volume of contracts first to legal process outsourcers (LPOs) to handle, if they were provided templates and playbooks to guide them, then escalating those that couldn’t be resolved to just a few law firms which could handle questions and interactions with the LPOs also. To that end, Microsoft hired Davis Wright Tremaine and another firm to serve as “outside counsel-managed services”. These two firms then could handle the contracts that required more negotiation and more subject matter expertise and manage the initial questions from the LPOs.
Distinguishing between Delivery & Payment
Bassli further explained that when it came to paying the law firms for this work, they had to distinguish between the operating model (how legal services are delivered) from the pricing model (how clients pay for legal services). Microsoft strongly believes pricing models should not be dictated by the entity delivering the services, Bassli explained, adding that alternative fee arrangements are really just another way of paying billable hours. “With a flat fee, at the end of the day someone, somewhere in the back of the law firm is still just counting hours.” Instead, Microsoft and the law firms embarked on transaction or outcome-based engagements.
The results of this new hierarchy of legal services for Microsoft speak for themselves. Microsoft has seen an 18% reduction in its legal spend, 40% of their legal work is being handled by lower cost resources, and most importantly, now Microsoft has one point of contact.
As a result of this cooperative endeavor with its law firms, Bassili’s in-house attorneys are now more focused on strategic transactions that provide the greatest value to the company, and Microsoft’s business owners can work directly with the outside counsel managing their legal services.
In turn, the law firms provide oodles of data to Bassli ranging from contract geographies, contract volumes, matter cycle times and even escalations. She can now immediately see which contracts get processed quickly, and which provisions consistently are in contention and require escalation from the LPOs to the law firms. The extra data on their entire portfolio of contracts at once allows Bassli more insight into the company’s legal activities and trends and gives her the ability to see if a playbook needs to be tweaked or additional training required. Microsoft even created a new dashboard to allow managers to see that whole contract portfolio at once.
To the attendees listening to these two talks, it was obvious the partnership paid mutual dividends. Davis Wright Tremaine won ILTA’s Innovative Law Firm of the Year (for the second year in a row), based in part on their unique and innovative partnership with Microsoft, whereas Microsoft won an ACC Value Challenge Award.
Further, the additional information is allowing Microsoft to make data-driven decisions, and Davis Wright Tremaine has clearly found a new way to work to meet their client’s needs.
And both have demonstrated a more beneficial way forward for law firms and their clients.