While procurement has long kept close watch over spending on outsourced services, law firms were exempt from their influence. But challenging economic times have forced Fortune 500 companies, and their international equivalents, to expand procurement’s influence to their legal departments. So if you want to work with these business leaders, you better become accustomed to dealing with procurement first, according to the 2016 Legal Procurement Survey, published by the Buying Legal Council.
“It has definitely become a buyer’s market,” says Silvia Hodges Silverstein, PhD, Executive Director, Buying Legal Council. “Clients are starting to flex their muscle and bring in procurement or professional negotiators.”
Continue reading to find out some of the most important procurement trends that are facing law firms today:
1. Discounts of 10 to 20 percent or more are now expected on legal services. That’s because procurement professionals are often professional negotiators; general counsel can sometimes be inhibited in negotiation because of relationships with existing law firms. So legal and procurement departments often assume “good cop” and “bad cop” roles in negotiation.
2. Procurement always wants the best value and realizes that doesn’t always come at the lowest price.
“Procurement is becoming increasingly sophisticated in sourcing legal services,” explains Dr. Silverstein. “They’re working with the general counsel to understand that it’s more than about cost savings, it’s about getting the best value. High price doesn’t always mean high quality, but low price doesn’t always mean low quality either.”
3. Law firms better know how to respond to a Request for Proposal (RFP), because that’s what will drive new corporate business. An RFP is the first step procurement takes to source business, and a larger percentage of legal spend is under professional, institutionalized procurement management.
“The good ol’ boys network of hiring lawyers is definitely a thing of the past for large corporations,” notes Dr. Silverstein. “Procurement introduces a professional approach to selecting law firms and legal services providers as well as to managing supplier relationships.”
4. Relationships with corporate general counsel still matter, however. While procurement acts as a gatekeeper that filters information, 87% of the survey respondents indicated that general counsel makes the final buying decision. In fact, in large companies, the decision makers in legal services are almost exclusively the general counsel and their team.
Stay tuned for more information from Dr. Silverstein on how to effectively work with procurement. In the meantime, if you want more information on the shifting business environment for law firms, check out Four Experts Predict the Future of Law Firm Marketing.