The quarterly publication of the International Legal Technology Association
Issue link: https://epubs.iltanet.org/i/34686
from purchasing because it’s the more modern term) into the acquisition of legal services is a change that will not be undone in better times. The Evolution of Procurement To understand why that is so, a little background might help. Wikipedia defines procurement as: “[T]he acquisition of goods and/or services . . . at the best possible total cost of ownership to meet the needs of the purchaser in terms of quality and quantity, time, and location.” Thus, procurement disciplines provide structure and management in connection with the acquisition of goods or services in order to assure the highest quality at the best price level. Procurement practices grew up over the course of the last century. World Wars I and II saw the rise of procurement as a management discipline in order to meet the extraordinary demands for goods and services associated with global warfare. In the decades since World War II, those management disciplines crept further and further into corporate management practices, particularly as companies became more global in scope and their supply chains extended across borders. I witnessed the impact of this while running a company in the transportation sector during the 1990s. During that decade, transportation services became subject to procurement management practices in a way never seen before. That was part of the “end-to-end supply chain management” revolution, during which companies undertook to manage every aspect of the sourcing, transportation, production and delivery of their manufactured goods. It changed the transportation industry forever — and a number of transportation companies did not survive the decade as a consequence. In the time since then, companies have been extending procurement practices beyond the direct acquisition of materiel and production and delivery of goods. Procurement disciplines are now being extended into areas that do not directly touch the supply chain. Along the way, procurement has been elevated to a top discipline within corporate hierarchies, and it is often led by C-level executives — Chief Procurement Officers. Accelerating a Process Already in Motion It was inevitable that the law department would eventually come under the gaze of CPOs. In my view, the Great Recession accelerated that process, but did not originate it. And that is a very important distinction. In fact, procurement practices were already creeping into law departments prior to the onset of the recession. Widespread fee auditing, either inside companies or with the aid of outside consultancies, is the best evidence of that. What I see and what I think many industry observers see since the recession is a continuation of the process that had begun before the recession. It appears that the long- term role of procurement in the acquisition of legal services is assured. Foremost among all the evidence is the ever- expanding use of RFPs. Requests for Proposal are now used for most large portfolios of legal work and, more and more, are being used for individual matters. They force intense competition among law firms, both over price and quality of services. And some firms are getting quite good at both responding to RFPs and managing the work that ensues once the competitions are won. More evidence is found in the continued use of alternative fee arrangements (AFAs). Industry-wide statistics report rapid growth in such fee arrangements, and that has been my own firm’s experience as well. A key element of AFAs is the shifting of risk from the client to the law firm. Such risk-shifting has also taken place in many other industries that have gone through the procurement revolution. Think how tightly bound auto manufacturers or large retailers are to their suppliers now and how, as supply chain management became more and more pervasive, companies shifted risk to suppliers. As that happened, suppliers began to look more like partners and less like mere suppliers. In my view, the same thing is happening in the legal marketplace. All the evidence I see is that procurement disciplines are exerting an ever-wider influence in the acquisition of legal services. Procurement officials are actually involved in face-to-face negotiations over new engagements on a more regular basis. I don’t think we’ll ever see that change walked back. The future is indeed now. ILTA John Alber is the Strategic Technology Partner at Bryan Cave LLP. He joined the firm in 1981 following a judicial clerkship and, in 1988, he left to serve as CEO for a software and database company in the transportation sector. In 1999, John rejoined the firm to set technology strategy. John has written and spoken widely on legal technology subjects and received a number of technology awards, both in the legal field and in information technology generally. John has worked with ILTA’s conference planning committees over several years, and he is instrumental in the creation and development of ILTA’s Law2020TM initiative. He can be reached at john.alber@bryancave.com. Peer to Peer the quarterly magazine of ILTA 89 year in one