Consequently, many corporate law departments (CLDs) will remember these past 12 months as the great pricing reset in which law firms required significantly higher hourly rate increases over and above anything the legal marketplace has seen in at least a decade.

The new year finds both the buyers and sellers of legal services having to grapple with the economic reality of high inflation, increasing labor and infrastructure costs, attrition, labor arbitrage, and major shifts in market demand — all of which will in some way or another impact the cost of legal services into 2023 and beyond.

Using cost control counter-measures

With this reality, many CLDs are not looking forward to a repeat of last year’s rate hikes; however, that is not necessarily a fait accompli for corporate clients. Yet, there are counter-measures that can be deployed to help them mitigate, control, and even create cost savings in the face of such pricing uncertainty.

There are many familiar options that CLDs have at their disposal — such as tiering, RFPs, volume discounts, panel convergence, budget structuring, and in-sourcing — although these approaches, while important considerations for every CLD looking to control their costs, may take time to mitigate the impact of proposed rate increases.

Instead, let’s focus on a few things that might help CLDs achieve tactical and immediate results.

Rebates

Similar to, but distinct from, volume discounts, most rebates exist with those law firms that enjoy large volumes of billing. Rebates are typically negotiated at the start of a calendar year and are contingent on a firm achieving a certain dollar threshold or tier of billings in that year.

Rebates are a good tool for CLDs to utilize during any rate negotiations and especially on large matters or a portfolio of work where a CLD is looking to reduce its legal spend, offset the cost of future work, or simply to mitigate the impact of future rate increases.

Value-added services

Not all clients have sufficient scale with a law firm to entitle them to ancillary benefits with the firm. However, value-added services — such as free legal advice, secondments, market research, access to proprietary technology, education, and training sessions — can be separately negotiated.

If a CLD must accept higher rates, then perhaps trying to negotiate or tie some level of complimentary ancillary services to those rates may help offset the CLD’s legal costs in other areas.

Rate management policy

While many CLDs have billing guidelines in place with their law firms, far fewer have any language in their guidelines that talks specifically about rate management and prescriptive requirements related to how a law firm is to address any proposed rate increases. Consequently, the process becomes much more ad hoc.

A proper rate management policy should address criteria such as when a firm can make a rate increase request, the frequency of a request (e.g., one increase per year rather than two incremental increases), permissible rate increase caps for specific professional groups, and the permissible criteria or reasons that qualify for a rate increase (e.g., merit vs. market pressures). All of these criteria are fundamental to managing expectations up front for both the firm and the CLD and for providing predictability and transparency around rate management.

ALSPs

ALSPs offer CLDs an opportunity to leverage less expensive providers than traditional bricks-and-mortar law firms. Tiering transactional matters or components of a matter away from expensive firms to ALSPs provides CLDs with cost saving and convergence opportunities.

Contingent worker ALSPs are a good example of legal work that typically has been sourced to traditional (and more expensive) law firms. Now, however, CLDs have the option to utilize virtual and less expensive service providers for components of legal matters or other resource needs.

Staffing ratios

As part of rate negotiations, CLDs should consider imposing staffing ratios on firms requiring them to assign a greater percentage of their work to lower cost mid-level associates, rather than expensive partners, thereby offering up potential cost savings for the CLD.

Disbursements & cost recovery

Legal e-billing systems are great for implementing quantifiable rules around non-reimbursable expenses on invoices. However, there are many charges or billing practices that cannot be quantified and corelated to an automated e-billing rule that rejects the proposed expense. Further, there are also other expenses that may be subjective in nature and require more powerful tools to review.

Diving into law firm disbursement data offers a CLD an opportunity to: i) find patterns of billing that are non-compliant with a CLDs billing guidelines; and ii) use the exercise to close any compliance gaps and save money; .

Quick-pay discounts

The importance of timely payment is not lost on a law firm’s management team as tracking outstanding accounts receivable balances is instrumental in measuring productivity and effectiveness of lawyers or identifying servicing issues.

A CLD can utilize quick-pay discounts as a solution to a firm’s balance challenges by providing an incentive for the law firm to lower its rates or offer a discount in exchange for the CLD’s commitment to paying the law firms invoices within a specific time frame.

Alternative fee arrangements (AFAs)

AFAs (e.g., fixed fees, flat fees, contingency, volume discounts, risk collars, etc.) are often touted as the great pricing panacea to hourly rates; however, before accepting any AFA proposal, CLDs should consider asking the law firm to provide quantifiable proof as to the value of the AFA and what if any determination was made to validate that the AFA is a better pricing option for the client. Without any such empirical validation, CLDs risk making costly assumptions around cost savings, when in fact the opposite may be true.

Getting ready to negotiate

Before engaging any law firms in discussions of the above strategies, CLDs need to address two key components that must underlie any of their efforts — billing data and communications.

Billing data — When leveraged correctly, CLD billing data offers a plethora of opportunities to save money in a runaway market that has pivoted in favor of legal service providers. By mining timekeeper data (e.g., rates, year of call, geographic locations), disbursement charges, invoice line item detail, time allocation, staffing ratios, and more, CLDs may uncover opportunities for savings when comparing billing data between multiple firms and ALSPs.

Communications — Having an open and honest dialogue with their law firms on budget constraints or their companies’ cost saving targets may allow CLDs to obtain voluntary law firm rate freezes or even rate reductions in the interest of building stronger and lasting relationships.

Indeed, holding these candid discussions at an opportune time when a lot of companies are facing financial challenges, may remind law firms that many CLDs are committed to growing lasting partnerships with those firms that understand the client’s budgetary pressures and are willing to help clients meet their cost-saving targets for the greater good of the relationship.

This process then kicked off a volley of communications — internal and external — and necessitated forwarding emails, PDF letters, and spreadsheets for analysis and follow-up. The legal operations team provided some central support, but this was often challenging because data limitations made it difficult to account for past rate increases and freezes across different firms. Overall, the efforts felt somewhat ad hoc and very time-consuming.

“It has always been important to us to get this right,” says Antony Klapper, Deputy General Counsel in Product Liability & Regulatory at VWGoA. “We want to be fair to our law firms, whom we view as trusted partners. At the same time, we must manage our company’s finances responsibly — and execute all of this efficiently with a leanly-staffed team.”

Trisha Fletcher, Legal Operations Specialist at VWGoA, emphasizes these points as well. “Collectively, our team had a strong desire to find a better way to do this.”

Taking a new approach

The VWGoA team launched a new initiative to process rate increase requests more effectively for 2022 and beyond — one that would ultimately win them an ACC Value Champion Award.

The first step, the team decided, was to establish a more centralized, uniform approach. This would be managed by legal operations with strategic guidance from legal leadership. Of course, there would still be coordination with in-house counsel, but in a more efficient way — built around a centralized process, featuring stronger use of data analytics, benchmarking, and core decision governance from leadership.

The next step then, was to improve the in-take process. Outside law firms were asked to submit their rate increases within a designated window of time and through a common portal. This allowed the team to consider them all together, performing side-by-side comparisons of similar firms to ensure more consistent treatment under then-current market conditions. This commonality also enabled the use of greater analytics capabilities to assess past rate increase history, as well as internal and external benchmarking comparisons.

Within this framework, the team also began examining firms’ compound annual growth rate (CAGR). A law firm’s billing rate CAGR shows a multi-year view of the firm’s rate increase history, accounting for past increases and rate freezes. Standardizing the figures this way enabled better side-by-side comparisons across the portfolio, and showed which law firms were high or low outliers based on their multi-year rate history.

The VWGoA team also found it very helpful to use data to model the dollar impact of the requested increases per timekeeper for the coming year. This was instrumental in identifying the most impactful requests in order to focus on managing costs.

Seeing the benefits

Through this new approach, VWGoA legal leadership and legal operations were able to implement more effective governance and decision logic to streamline the rate decisions in light of portfolio metrics and company financial considerations. By streamlining and consolidating the process, they freed up considerable hours that their staff had previously spent responding to rate increase requests as they came in, managing them all through one common workflow. They saved further time be setting auto-approval thresholds for certain rate increase increments.

In the end, the projected savings for the coming year were significant, with rate increases for various timekeepers, for example, trimmed to about one-half of the increment originally sought. The VWGoA team devoted particular attention to adjusting high outliers and managing the impact on budget in a sustainable way.

Beyond time and money savings, the team built a process that leveraged better data to drive better decisions. The result is a strong business case showing how those in legal can use technology and data more effectively to increase productivity and execute against business metrics.

From law firms’ perspective, understanding the data that informs a client’s financial position is a helpful way to focus their rate increase conversations onto a productive end for both sides.

“We recognize that, in this economy, many clients are facing challenging headwinds,” says Susan Vargas, Partner at King and Spalding. “As trusted partners, we are glad to talk about goals and metrics to strengthen our relationship in mutually beneficial ways — and we welcome informative data to help us do that.”

Despite cost control being top of mind, however, executing on this goal is no mean feat.

In a new Thomson Reuters Institute Insights podcast, available on the Thomson Reuters Institute channel, we discuss what the LDO Index, an annual look at the state of affairs within corporate legal departments from those professionals tasked with managing the operations, says about department leaders’ thinking in the current environment. This year’s report compiled a wide range of responses from 107 different companies, from small businesses to those making in excess of $10 billion in annual revenue.

As the podcast looks into the key findings of the Index report, it sheds great light on where law department leaders are seeing their greatest challenges and opportunities. For example, the Index report showed that matter volumes are increasing for the vast majority of responding law departments, even as they cope with flat budgets.

You can access the latest Thomson Reuters Institute Insights podcast, featuring a discussion about the recent LDO Index report, here.

Indeed, few law departments report adding lawyer headcount. The end result is a situation where perhaps the only option to deal with the increasing workload is to send more work to outside legal counsel, even as those external law firms continue to raise rates.

Again, as discussed in the podcast, this is not an easy situation for corporate law departments to manage.

To help shed some light on some of the pain points as well as possible solutions, the Thomson Reuters Institute Insights podcast invited a panel of experts to join us from among the membership of the Legal Value Network (LVN), which partnered on the LDO Index. The Legal Value Network is a group of professionals with the mission to accelerate evolution in the legal industry, connecting business of law professionals from across the legal industry who are focused on designing, building, and implementing innovative models of legal service delivery.

In this week’s podcast, we speak to:

• Alexandra Guajardo, a pricing an analytics officer with Shell’s legal operations team. With her 20 years of experience in the legal industry, Guajardo functions as the right hand of the legal ops team at Shell.
• Justin Ergler, director of alternative fee intelligence and analytics at GlaxoSmithKline. An outspoken critic of the billable hour, Ergler has established himself as a thought leader and expert in the use of alternative fee arrangements for complex legal matters.
• Keith Maziarek, director of pricing and legal project management at Katten Muchin Rosenman. Bringing his 20 years’ experience focusing on strategic growth and profitability initiatives, Maziarek seeks to bring the voice of the client into his firm and helps guide firm strategy towards sustained profitability.

As the podcast illuminates, how corporate law departments control costs is an involved and complicated topic, with nearly innumerable necessary components. This podcast features a great discussion from both the in-house and law firm side of the equation and in doing so, reaches a key conclusion: No matter which steps a corporation or law firm may decide to take, three things are indispensable — transparency, communication, and trusting relationships.

Without those, controlling costs will become much more difficult, if not an impossible task.

For more from the Legal Value Network, you can follow their podcast, Off the Clock

Episode transcript.

However, in uncertain and hectic times – like now – only so much time and resources can be used to take measurements and assess results.

With budgets under rigorous scrutiny, a dearth of affordable talent and cost containment becoming a mantra, it’s important for law departments to determine what data matters most. First, department leaders must make the time to identify and measure the most impactful information.

Simply put, measuring what matters most is intended to prove your department’s value to the business. Most other divisions of any company analyze revenue, profits and their spend in a variety of categories, as well as new business, lost business, the cost and retention of talent, and diversity inclusion. The law department needs to be part of this effort, speak the same language, and prove that it is tracking according to clear, measurable targets of the same type. The general counsel who measure and prove that they are meeting defined numeric targets, and speaking the language of the business and business leaders, are the general counsel who become integral to leadership.

Additionally, measuring a few key things can really boost morale of your teams. People who understand their goals and the goals of the department are more open and productive. They suggest improvements or new approaches in order to reach a collective goal. They feel that they are working toward something specific, rather than just working. And communicating and striving for transparent, measurable goals enhances respect for the leaders pursuing such goals.

The fact is that metrics prove where we are and whether we are improving. For instance, if a company has a goal of increasing diversity by 5%, the law department should measure its diversity and work to also increase it by 5%. If the general counsel is tasked with reducing spend, a measurable goal will be assigned – it could be a spending reduction of a certain percentage or a set amount of money, but it is undoubtedly a measurable number. Understanding this aids in attaining measurable adjustments.

People who understand their goals and the goals of the department are more open and productive. They suggest improvements or new approaches in order to reach a collective goal.

How can you identify the most important metrics? Match your metrics to those of the company itself and of the C-suite. If the company wants to grow sales, the law department should prove that it shortens the time to sign sales contracts. If the company wants to improve diversity, the law department should prove that it has increased its diversity hiring, leadership, opportunities, and pipeline. If the company wants to reduce head count, the law department should assess its own headcount, its organizational structure, and the internal resources it uses. Then the law department should study a restructuring of roles and responsibilities, or determine how to rearrange work so that less full-time employees in the law department are needed. Align what you measure with the most important objectives of the company to prove that you are a key contributor.

Some of the most important measurable goals of today’s business world are geared toward talent retention, enhancing productivity, hiring for the right roles, measuring the legal team’s performance improvements via 360-degree input from the in-house clients, cost reduction, and outside counsel reviews and measuring the legal team’s performance improvements via 360-degree input from the in-house clients. Imagine if a GC was able to show the corporate board the law department’s legal spend has decreased by 10%; or its retention of diverse employees has been 100%; or it was able to reduce other vendor costs by 5%. Those statistics are powerful in proving the law department is valuable to the overall business.

Fortunately, these measurements aren’t that hard to accumulate. For example, the amount spent on legal fees is already known. Most GCs probably even know what is spent on legal fees per business line or per types of matters. Because that information is easily available, it is also easy to discuss with the department’s outside law firms in order to negotiate for cost reductions. Most law firms would be happy to keep your fees flat for a year rather than lose all your business, and keeping fees flat saves a calculable amount of money. Or, ask firms how they think the law department could be better structured in order to reduce fees.

For example, one of my clients and its firm realized, upon investigation, that time and expense could be reduced by training an expert in the company’s IT department to handle discovery responses, rather than randomly asking anyone in IT to handle these requests.

Another example is a law department I advised that educated a particular HR employee on how to search for lawyers, achieving quicker and better hires and reducing search firm fees, rather than simply assuming that anyone in the recruiting department could do excellent legal searches. The department was able to record and communicate how much money it saved on recruiting fees by investing in that particular HR colleague.

These success stories, fortunately, are not rare – they just take some initiative and collaboration.

Additionally, when a department has the ability to make a new hire, they should be sure to hire for the right roles. Just because a senior contract lawyer just left doesn’t necessarily mean there is an immediate need to hire another senior contract lawyer. Perhaps a mid-level contract lawyer can take on more responsibility, undoubtedly at a lower cost than going to market for a senior person. This is the kind of measurement that is sure to please – it saves thousands of dollars and allows a junior lawyer to develop vital skills.

If a law department doesn’t have the time or resources to embark on these types of key measurements, then it should hire a consultant for help. Believe me, the cost of hiring an expert to prove your worth and meet measurable goals is tiny compared to the progress that will be achieved and the savings that will be realized.

The bottom line is this: Data analytics is just another way of saying you can measure where you are and therefore track your improvement. Almost anything can be measured – all you need to do is figure out whether the law department and the overall company will benefit by improving these metrics. Then, it’s just a relatively simple matter of looking for easy-to-find numbers, working with your teams and figuring out ways to improve.

And most importantly, GCs should be sure to use the measurements and improvements that are achieved to make the case for their departments’ value to their corporate boards.

Underprepared for significant business threats

Cyber-incidents are topping the lists of the KPMG 2022 CEO Outlook report and the Allianz Risk Barometer 2022. KPMG’s report highlights the rapid evolution of the cyber environment and details how CEOs recognize that they are underprepared, with 24% admitting so in 2022 compared to only 13% saying the same thing in 2021. In 2022 thus far, ransomware attacks occurred worldwide every 11 seconds (a 20% increase from 2019). Some of these attacks are high-profile breaches.

The Allianz report places “cyber incidents” as the most significant business risk in 2022, outranking more conventional business threats such as business interruption, climate change, and workforce issues. Allianz notes that its respondents say that cyber is not as well understood as some traditional threats; consequently, mitigations are less well-developed.

Right now, there are three steps law firms can take to bolster their existing cyber-risk profiles, including:

1. Enhancing hybrid workforce security

Since the global COVID-19 pandemic in 2020, many firms are still operating under a remote or hybrid workforce situation. The distributed nature of today’s workforces increases a firm’s cybersecurity vulnerability because workers either use their personal computers for work or use their work laptops for some personal tasks. Additionally, third-party apps designed to foster collaboration and increase productivity are increasingly problematic. They could open the door to a cyber-attack because many have limited security tools, their default security options are not optimal, and it can be challenging for IT teams to access an app’s cybersecurity settings.

Do your employees have the right skills to protect against cyber-attacks? One way to educate employees is to conduct cyber-crisis exercises. Best practices suggest this must happen more than once a year. A report in Dark Reading, a widely read cybersecurity news site, provides a benchmark for employee cyber-resiliency: “An analysis of more than 6,400 crisis response decisions shows that technology and financial services companies prepare the most for cyberattacks, running nine and seven exercises per year, respectively.”

2. Strengthening the partner ecosystem

Three-quarters of the CEOs in KPMG’s report say they recognize that protecting their partner ecosystem — the network of suppliers, providers, contractors, and business partners — and supply chain is as important as shoring up their own organization’s cyber-defenses. As companies and their partners increase their mutual connectivity in the name of efficiencies and cost savings, these initiatives also expose vulnerabilities and gaps in systems and processes that cybercriminals can exploit.

What can you do to beef up your partners’ risk profiles? Experts recommend an approach that focuses on three Cs:

• • • • Tightening contracts and compliance to introduce additional controls and restricted access for third parties;
      • Exploring avenues for collaboration and community to share intelligence and increase knowledge; and
      • Increasing cooperation; because this issue is both global and systemic, it is challenging for a single function (IT) or entity (your firm) to do this alone. Exploring intra-industry, cross-sector, and public-private paths is essential to mitigating future cyber-risks.

3. Staying on top of technology innovations

The nature of cyber-attacks is that they are constantly evolving. While malware, ransomware, phishing, and social engineering attacks are common, newer technologies pose new risks. Security software company Symantec reports that, on average mobile app stores block 24,000 malicious mobile apps daily; while others have noted cybercrime is becoming more scalable and, therefore, more accessible for bad actors to launch more sophisticated attacks.

Indeed, the increased frequency of attacks is happening as experts are starting to realize the limitations of traditional risk-prevention methods such as standard password authentication, static networking, and trust-based security systems. But technology advancements also provide a way to mitigate this risk. Some of these are the ability to learn and modify behavior based on insights from artificial intelligence, machine learning, and adaptive networks technologies.

Given that October is National Cybersecurity Awareness month in the United States, this might be an excellent time to move beyond awareness and into taking action to better protect your firm and increase its cyber-resiliency.

Click here to download a copy of the 2022 Report on the State of the Midsize Legal Market.

Register today!

Balancing outside counsel & in-house workloads

It’s no surprise that controlling outside legal counsel spending remains a top priority for law departments. Spending on outside counsel remains the single largest budget item for most corporate law departments. Given the changing economic environment and increasing volumes of legal work matter, departments also are gearing up to handle more work in-house for the remainder of 2022 and beyond.

You can download the full 2022 Legal Department Operations Index here.

Roughly one-half of respondents to the LDO Index survey said their departments were hiring additional attorneys. However, increasing matter volumes and growing headcount have not necessarily translated into increased budgets for many departments, and relatively few say they’re increasing their hiring of legal operations staff.

The general trend of the economy is also weighing on in-house counsel’s minds as they adapt to continuously increasing law firm billing rates. In general, the rates paid by law departments to their outside law firms has continued to increase, although not necessarily across the board. Year-over-year rate increases in 2022, compared to 2021, represented modest growth, or in some cases, even a slight contraction. When compared to 2020, however, rates in 2022 are up nearly universally — and in some cases, they’re up quite substantially.

Even as legal departments try to get their outside counsel costs under control, the use of alternative pricing structures — such as alternative fee arrangements or blended rates — remain relatively rare. Indeed, most law departments rate their legal spend management sophistication as middle of the road, which means that most departments continue to rely on general billing guidelines and discounts as their primary cost-control measures.

In fact, the survey shows that more sophisticated cost-control measures and the metrics used to track their efficacy remain relatively underutilized by all but a few corporate law departments.

Technology & staffing

The most common technologies that are seen to bring value to law departments today are electronic billing, electronic signatures, and online legal research — although many also feel that these solutions, while purchased and deployed, remain underutilized. Perhaps as a reflection of this concern, legal operations professionals report that the pace of change in their companies regarding improvements to process and technology is, for the most part, moderate at best or slow to non-existent at worst.

Indeed, there is a similar sense of hesitancy with regard to resource and budget allocation. While 30% of respondents reported being satisfied with their departments’ budget and resource allocation, another 28% reported being either dissatisfied or very dissatisfied with their allocation.

This may be indicative of the fact that in-house matter volume continues to increase, while budgets and legal operation staffing remain, for the most part, stagnant. The average corporate law department in the survey reports only 3.8 legal operations full-time equivalent (FTE) staff members within their department. While this will obviously vary based on department size, the additional commentary provided by survey respondents indicates that for many companies, dedicated legal operations staff remain relatively rare.

The rising importance of ESG

Despite much conversation in the broader marketplace around the increasing importance of ESG issues in general, and diversity, equity & inclusion (DEI) concerns in particular, the majority of companies responding to the survey have yet to implement a diversity initiative. For those companies that do report having such an initiative, it is still a relatively new venture, often less than two years old. These initiatives also seem to lack granularity in the diversity information collected, and most companies report that they seem unsure of how to utilize the data that they do collect.

As focus on ESG and DEI issues continues to sharpen, however, the need to collect such information and use it in a meaningful way will only increase. Those companies which have already begun such initiatives, particularly the small percentage that have been at it for a while, will likely find themselves at an advantage.

However, it appears that much work remains regarding how to use diversity initiatives to drive meaningful change, or how to achieve desired goals and outcomes in terms of encouraging outside law firm diversity. Equally unclear, too, is how outside law firms can help their client companies meet their own ESG goals.

In fact, the majority (51%) of surveyed corporate law department leaders say expertise is a primary driver for viewing a particular ALSP brand favorably, according to recent Thomson Reuters research. Broken down even further, 20% of those surveyed point specifically to the quality of advice and to specialist knowledge that an ALSP imparts, while more than 5% reference the breadth of an ALSP’s service and the strength of specific individuals on its team.

The portion of law departments pointing to expertise may be slightly lower for ALSPs than it is for law firms, with around three-quarters of respondents saying expertise is a primary driver of law firm branding strength. For ALSPs, expertise still far outweighs other brand favorability factors, including technology (viewed by just 11% as a primary favorability driver) and value or pricing (9%).

The majority of surveyed corporate law department leaders say expertise is a primary driver for viewing a particular ALSP brand favorably

The data, coming from Thomson Reuters Market Insights, was collected from 1,378 interviews with corporate legal leaders, conducted between July 2021 and June 2022. The answers given in some of those interviews provide insight into why expertise remains paramount. For example, one General Counsel of a financial services company explained why they viewed a Big 4 firm favorably: “The main reason being that some years ago we engaged one of their partners as an expert in a litigation claim, and it seemed to me — and obviously they’re a ‘big-hitter’ in the accounting world — that they have a very good grasp of the legal side as well. So, if I needed that I would probably go with them, and they’re our auditors so we know them well.”

Interviewees also expressed similar sentiments for smaller ALSPs. An assistant GC for a healthcare company discussed their use of an ALSP that specialized in staffing issues, saying: “I like the skill set, the consistency of project managers that they provide, the attention to recruiting standards, and the effort to promote diverse candidates when they are involved in recruiting projects. I like their technical competence and their culture.”

And an in-house counsel at a technology company noted of a different ALSP: “I think that, particularly for an in-house function, they can provide flexible resourcing. Obviously, with internal budgets always smaller than you want, they can help you cover a project and offer quality services.”

Going with the experts

Expertise as a deciding decision-making factor rings true to Gabriel Buigas, a former technology industry deputy GC and now head of the Contracts, Compliance & Commercial Services business unit at ALSP Integreon. While Buigas jokes that “anybody who says that pricing doesn’t matter is maybe a Big 4 and hopeful that that’s the case,” he also explains that providing lower costs can only enhance an ALSP’s pitch rather than make it fully. “Just because you’re the low-cost provider, if you have no referenceable clients and no proven delivery capabilities, you’re not going to win,” Buigas adds.

The focus by law departments on expertise is not a recent phenomenon, however, corporate clients are becoming increasingly sophisticated in understanding the ALSP market, resulting in shifting priorities, he explains. “I remember doing pitches where what everybody thought was, you had to have the person that dressed well, spoke well, and had beautiful slides,” Buigas says. “More and more, clients don’t want to see you. They want to see who’s going to do my delivery: ‘I want to talk to that person and I want you to include that person on the pitch.’”

All of this is a welcome development, Buigas says, adding that he expects it to only continue to increase in importance as the ALSP market grows. He points to more mature areas of the ALSP market such as discovery as an example of the wider industry’s future, where a number of providers offer ever-increasing scale and lower costs. Expertise, then, becomes the ALSP’s primary differentiator by necessity.

“The difference starts to be: ‘I’m really good at this,’ Buigas explains. When clients have the kind of case in which they need foreign language capability, or particular expertise in a particular jurisdiction or on a certain type of matter, they can go to particular ALSPs because that’s their specialization, he notes.

“So it does help in terms of how you distinguish yourself in crowded markets, particularly for areas that have become increasingly more commoditized.”

You can learn more about how to create the kind of partnerships that will drive the strategic, financial, and operational priorities of your corporate law department here.

As the legal technology landscape rapidly evolves, law firm associates play a pivotal role in understanding time-consuming or inefficient processes impacting not only the practice of law, but also business development, risk and knowledge management, and the quest for service delivery innovation.

In its ongoing quest to advance the practice of law, the Global and Large Law Firm division of Thomson Reuters is excited to host an global cohort of large law firm associates for an interactive, day-long “Ideathon” alongside key Thomson Reuters executives. Inspired by the increasingly popular “hackathon” model, participants are invited to help create prototype API use cases to drive efficiency around law firm knowledge management, risk management, and business development.

Due to popular demand, registration is now closed.

Indeed, AI is often seen as something far in the future, or not developed enough to be useful in today’s practices, or perhaps even an unnecessary distraction for those lawyers who are focused squarely on billable hours. But as it turns out, the vast majority of today’s lawyers are already using AI — and they may not even know it.

Harnessing AI can bolster legal work, aiding lawyers rather than replacing them. However, there are a number of misconceptions surrounding AI in law, from what type of work AI can do to how technically savvy attorneys need to be to understand it. Combatting those misconceptions is the first step to understanding how to best use AI’s power.

“[Lawyers] don’t like change. We take the ‘if it ain’t broken, don’t fix it’ attitude. But I think what we often fail to understand is that the current traditional workflows, they’re broken.”

In this week’s podcast available on the Thomson Reuters Institute channel, we spoke with one of the people on the frontlines of fighting these misconceptions: Bobby Malhotra, who is of counsel in the Los Angeles office of law firm Munger, Tolles & Olson. Malhotra was recently named co-leader of the firm’s information governance and e-discovery practice, and he is a regular speaker on legal technology trends and issues. He also was a featured participant in a panel on AI held at the 2022 International Legal Technology Association Conference (ILTACON).

In our podcast, Malhotra explains what is meant by AI in law, and how the technology uses data to mimic human behavior, but in a way that augments legal work and frees attorneys and legal professionals to do what they do best. From there, he runs down the four most common misconceptions he sees with AI, including that AI is no longer just for litigation and that it’s easier to “trust” AI than ever before. He also explains that it’s not crucial to know every under-the-hood piece of AI technology, but it is important to know how AI would fit into a law firm or legal department’s processes before trying to integrate it into a practice.

Adoption is key

The podcast also discusses how legal practices can adopt AI in the first place. And Malhotra describes the ways he helps encourage AI adoption in his firm — as clients, firm partners, and other technologists may all require a different type of pitch. Interestingly, these pitches seem to be working: Malhotra notes he’s been in the legal industry for more than 15 years, but due to exploding data volumes, more legal AI has been adopted within the past two to three years than in the previous decade combined.

Ultimately, “the sky is the limit” as to how AI can help legal practices, Malhotra says, adding that the common way legal work is done needs to change. “We as lawyers, you know, we’re creatures of habit,” Malhotra says. “We don’t like change. We take the ‘if it ain’t broken, don’t fix it’ attitude. But I think what we often fail to understand is that the current traditional workflows, they’re broken. They were doing things inefficiently. We need a way to remedy that, and AI can really help.”

Episode transcript.

You can access the latest Thomson Reuters Institute Insights podcast, featuring a discussion with Bobby Malhotra, of Munger, Tolles & Olson, here.