Procurement as a profession has never been in a better place than it is today. The last ten to fifteen years have seen procurement teams, and the practices they deploy, evolve from tactical and cost-centric cost-killers to strategic functions which unlock value, collaborates with stakeholders, and has become an intrinsic part of many a leading organisation.
Where procurement was once pigeon-holed into leading basic tenders, or, having an extremely limited remit imposed upon them and with very little influence over the end-result (“send company XYZ this spreadsheet, add it up, and send it back to me”). How many times have your procurement professionals been unable to impact the right areas, due to the need to undertake a non-value add tender due to some arbitrary rule…I would hazard a guess at a lot!
Many procurement teams have struggled to break out of this mould…Categories such as tax advice; audit; legal advice and other advisory services have historically been the preserve of the executive team or legal counsel. Procurement teams have often been harshly criticised by internal stakeholders as interfering in what they feel to be unique areas of expenditure and not suitable for the “pens and pencil buyers to get involved in”.
However, how procurement teams are working is fortunately changing…a growth in digitisation; greater availability of ‘on-demand’ procurement services; and a greater use (and availability of) software programmes, artificial intelligence and machine-learning-based services are helping organisations ditch the transactional, freeing up invaluable ‘thinking time’ and get stuck into the right work. Procurement teams and procurement leaders are now leading from the front in strategic supplier sourcing; supplier management; and improving the competitive advantage of their organisation through supply-chain collaboration.
How legal advice requirements are being fulfilled may also be changing. Corporate clients are increasingly bolstering their in-house resource and unbundling the remaining external legal services, dispersing them across the most cost-effective providers (including non-lawyer providers), to drive down the cost of legal spend. This increased unbundling of legal services is leading potentially to the growth in market segmentation.
This is music to our ‘procurement ears’. It provides us a greater choice; increases competition; and creates even more opportunity for procurement teams to influence and shape complex, and previously inaccessible, categories. Or putting it bluntly, to disrupt and shake up categories that may be been 99% relationship-driven.
So, how best could I best explain the scale of these changes to a law firm? In one word, big!
Their audience is changing, both in terms of who they sell to, who manages them, and who engages them.
Their traditional sales channels are being eroded.
You have to work with these procurement folk…
This very challenging frontier means that legal firms are having to react and adapt, and there is no sign of this frontier getting any easier. The Legal Services Consumer Panel (LSCP) 2020 Legal Services report predicts that in 2020 there will be ‘less involvement by lawyers in many of the tasks that until now have made up their staple diet’. Focusing on consumer/retail markets, the LSCP panel envisages that consumers will seek alternatives to lawyers or use them in different ways: ‘in place of lawyers will be greater self-lawyering, online services, entry by unregulated businesses, and also by regulated providers, such as accountants and banks’. The Law Firms in Transition Survey (Altman Weil 2015) reported that 83 per cent of law firm leaders believe that competition from non-traditional service providers is a permanent change in the legal market.
Ouch! So we can add one more to the mix…people still want legal advice, but may not necessarily want, or perceive that they want, a traditional law firm. So, what does this mean for the supplier? How are these changes in buying habits and the market as a whole affecting and shaping how firms generate business and work with procurement teams positively and collaboratively?
Contributing author and previously Head of Client Development at past client RPC Law, Giles Daubney. RPC Law is one of the most modern, progressive and commercially-oriented City law firms. The firm is made up of over 600 employees, including over 80 partners and more than 300 lawyers, some of the sharpest minds in the legal market. Oculus was proud to work for RPC in 2019, undertaking a strategic review of certain procurement matters.
In this article, Giles gives us his thoughts on how these changes, including the growing trend of procurement teams having an active role in procuring legal services, are affecting how legal firms demonstrate their value within a procurement process. Also, what procurement teams can learn in how to approach legal firms…
“For many law firms, the increasing prevalence and influence of procurement departments is having a significant impact on the way that clients are buying legal services. Just as in-house teams have professionalised the way that they purchase legal services (and indeed manage their strategic vendor relationships), law firms have had to rethink how they sell to their clients. It’s no longer the case that the GC or in-house counsel is the sole decision-maker when making panel appointments or instructing lawyers on a dispute or transaction.
“Ideally we (RPC) would win work without having to participate in a competitive tender process which is why we focus so much effort on client relationship management. But the reality is that more and more work is competitively tendered which is why engaging with procurement long before the pitch document lands in our inbox is so important. One of the biggest challenges is the exponential growth of competitive pitches which is putting a real strain on law firm’s resources including partner, fee earner and pitch professionals’ time which significantly increases our cost of sale.”
Procurement as a function continues to become more established across all businesses, and the value it adds continues to be recognised. Furthermore, whilst procurement professionals will always meet pockets of resistance and silo mentalities, procurement exercises continue to be more transparent, professional and cross-functional. As Giles comments, the procurement professional is a key party to the decision-making process and one which must be managed accordingly.
“The rise of procurement means there is an additional stakeholder group which needs to be engaged with and managed (never ignored) by law firms before and during the pitch process. Wherever possible we seek to build relationships with procurement professionals at our clients…”
So, good news it seems? Business development teams recognise the involvement of procurement teams are ‘here to stay’ and, in the main, procurement appears to be mature and well thought out. However, an apparent inconsistency in approach should cause our profession concern. Are procurement teams still tarnished with the unfair ‘cost killer brush’, or are we just interested in knocking off a few quid here and there, because it helps our cost-saving target? It appears to be both and heavily dependant on the maturity of the procurement function in question.
“…We always seek to follow due process and never try and go round them during a pitch process. In my experience legal procurement as a profession is at different stages of maturity…”
“Particular frustrations of mine include procurement led pitch processes which force law firms to provide templated and standardised responses which restricts scope for creativity (this is increasingly becoming the norm); procurement functions which restrict access to the business which impacts on our ability to scope the pitch properly and provide a tailored response with an accurate fee quote, and the use of blunt tools like e-auctions which I’m not convinced deliver significant savings for the client.”
“There are some procurement teams which do focus solely on cost rather than value and are used by some in-house counsel as a blunt instrument to drive down rates. But my experience is that the majority of procurement teams do understand that buying widgets is different to buying professional services. The key for law firms is understanding what value means to procurement professionals (for example not just lowest price, but the savings you have offered to the business by way of discounts or other value adds which procurement can easily quantify and put a notional price against, or the provision of transparent and accurate management reporting).”
This fantastic insight from Giles should hopefully cajole buyers to take stock of their approach. A tender with an excel spreadsheet is not a ‘silver bullet’ to absolve a buyer from really understanding the nuances of this relatively unique category and process at the expense of pragmatism is never a good thing and can lead to stakeholder frustration; demotivated suppliers during the pitch process; and, at worst, a poor outcome for the sourcing organisation.
Instead, as a profession, we must recognise that the job of a procurement team is to create and lead their business by way of intelligent category and sourcing strategies which look to manage internal stakeholders effectively, whilst incentivising bidders to put their ‘best foot forward’ and commit to a pitch process.
So, there we have it…Greater competition; the emergence of on-demand services by non-lawyers and an ever-increasing level of involvement by inquisitive procurement teams. The environment in which buyers and suppliers operate in is changing greatly and there are a few key themes we have taken from our discussion with Giles and our own experience in procuring legal services.
- Observe, listen, and learn – Do you as the buyer actually understand what your legal function needs from its suppliers, or are you just trying to get a tender out of the door? Do you understand the type of legal matters that your company outsources and the motivations behind that decision? The procurement professional cannot simply sit back and await a specification of requirements if they are to lead a credible and effective process. Negotiation, deal-making, and the formation of strong relationships based on value, not cost, are all de rigueur to lawyers, and the procurement professional would do well to learn from their experiences of the category.
- Professionalism – The legal industry is highly professional in its very nature. Lawyers are highly educated and operate in a highly regulated environment. Your procurement process, and your approach personally, should be equally professional.
- Start small –Change is difficult and introducing formal procurement practices into an area which may have been primarily, if not totally, relationship-driven is going to be a test for all stakeholders. With any change comes risk. Negotiating your involvement into areas which are perceived (by your legal budget holder) to be lower risk is likely to be more successful than something more contentious or strategically important. Use this as an opportunity to demonstrate the value of a procurement approach and develop trust.
Once trust is given, it becomes easier for the procurement professional to widen their considerations and sourcing options, gradually moving stakeholders away from the mantra of ‘doing what we’ve always done’ and giving consideration to other delivery models which are becoming more prevalent in the legal sector.
We hope you’ve enjoyed this short article and we give great thanks to Giles ‘contributions and insights. Oculus Procurement is a specialist procurement advisory company, working with some of the UK’s most recognisable brands and organisations in Legal, Retail, Finance, and Insurance. If you would like to speak to us about how we can help your organisation then we would love to hear from you.
ABOUT THE Author:
A highly experienced procurement manager, Matthew has spent near 20 years in high performing centre-led category teams within the Transport and Logistics, Financial Services, and Insurance sectors. Before starting Oculus Procurement, Matthew’s was the Procurement Category Lead for HR, Professional Services and Facilities Management, at Swinton Insurance, the UK’s leading high-street general insurer (and then part of the wider Covea Insurance group) where a whole-of-business procurement transformation was delivered.
Since starting Oculus, Matthew has applied his experience in Industry and continues to deliver a range Procurement Consultancy engagements that see our clients transform their functions from tactical departments, into centre-led strategic functions that drive procurement best practice across their organisation.
Outside of our Procurement Consultancy engagements, Matthew also leads various profit improvement and operating-cost-reduction programmes for our clients across a very diverse range of areas – banking and merchant fees; corporate insurance programmes; and treasury management systems to name but a few, as well as the traditional areas of focus across HR, facilities management, professional services and alike.