How to Procure Well for Outside Counsel: Part 2
Once you've decided to buy, this is how to do it well
Last week, we covered what it looks like to buy software. Law firms are not as used to buying software as in-house counsel. The procurement process can be new and confusing to law firms. And so we laid out what a procurement ought to look like to help software buyers structure their process.
But once you’ve decided to buy, what is the best way to do it? You want to make sure that it is not too strict, but has guardrails to prevent errors; that you are gathering the appropriate level of information; that you aren’t going too slow and lose out in the competitive landscape; and more. This week in Nonobvious, we cover some tips to be bring your procurement process to the next level.
This is part of a series to help lawyers get better at buying software.
To see Part 1 of our procurement guide for outside counsel, look here.
To see our guide for procurement for in-house counsel, look here.
Master Your SaaS
Types of products
First, let’s talk about the types of products you might buy. When you take the time to decide what you truly need, often you may find that there are several functions that need to be solved to achieve a certain objective. There are two main approaches here:
Best of breed: Here, you buy a different product for each core function that is the best at what it does and stitch everything together. The positive of this approach is that you get the best solution for everything and have more leverage over a vendor because you are less dependent on them. The downside is that the integrations may not exist or require a lot of work.
Full-service: Here, you search for a vendor who can do it all. The benefit of this approach is that there are often benefits to integrated tools and the procurement process is often simpler because you are only dealing with 1-2 entities. The downside is that the vendor becomes more essential to your business and that full-service solutions often do not integrate well with other solutions, so if they don’t have everything you need you could be stuck.
One subtlety of the best of breed approach is that it is more amenable to startups. This is a huge positive. Startups are often more innovative and attentive to the needs of their customers. While it is easy to be risk-averse and look for a well-known name, I cannot encourage you enough to take startups seriously as vendors. Especially in AI, where almost everyone is a startup, this will help you access great technology faster.
The best of breed approach is best for work that only affects a single team or person, where integrations are not important, and where the purchase decisions are not massive. It is also almost always the best for products that are using a new technology because the incumbents will often do a poor job designing them. The full-service approach is best when integrations between different aspects of a job are important or in very mature sectors where a large company can not only meet your needs but plausibly do a good job with them at a volume discount.
Who decides to buy?
Next, let’s talk about who controls the purse strings.
Law firms have historically almost always engaged in top-down purchase decisions where feature checklists rule the process and consensus among all the partners is required.
Checklists are almost always a mistake to follow strictly; it is better to determine which features are important and which are nice to have. The real world has trade-offs, so your procurement process should too.
Particularly for tools that support individual contributor work—for example, an AI drafting tool—you might want to adopt a “prosumer” model. Here, individual lawyers get their own budgets to spend on tools that support their work instead of going through a managing partner or a committee. There is no obligation to ensure the tools are the same or even do the same work; they just need to meet certain minimum requirements. This allows individual team members to solve their needs. It is also a decentralized way to figure out the best tool. If one tool grows rapidly in your organization, or is clearly superior in the metrics you track, you can then reach out for an enterprise license and go top-down.
The prosumer model is particularly amenable to law firms because of the control individual partners have over their teams. You might even consider allowing associates to be prosumers since they can then buy tools that they need to do their work; a complaint I often hear from associates is that tools that would support their work isn’t prioritized because partners make all of the purchasing decisions but often do very different work. However, partners often don’t have the time to get too deeply involved. This can help resolve that tension. It would be a big shift because associates have historically been given no control over their work or budget. But in the software world, junior engineers are given a (small) amount of control over how they work and this has increased productivity significantly.
In fact, this approach has become very popular in Silicon Valley and has been good both for buyers both by making teams more nimble and by helping support a more vibrant vendor ecosystem. This approach doesn’t work for everything, but it can be more flexible than you might think. For example, when choosing between Teams and Slack, you might think this has to be a top-down decision, but you could instead push it down to the team level.
How to improve procurement at a firm-wide level
For the managing partners out there, here are some tips for improving your procurement posture on an organizational level:
Let partners own their budgets. Many partners do not own the budget for their team; rather, purchasing decisions are made on a partnership basis. You should fight for your own budget that you can control; don’t surrender to the law librarian. Importantly, make sure you also get a pilot budget that you control. Many software companies will not do a trial without a paid pilot to show the seriousness of the buyer. The amount will depend on the scope and scale of the pilot, but it could be anywhere from $10,000 for 4 weeks to $100,000+ for several months per paid pilot. This will also allow you to move faster.
Have teams practice ROI calculations. An important part of this is getting used to ROI calculations. Often, lawyers only consider the cost of software and think of it as money out of their pocket. While that is true (and it’s great you’re thinking like an owner, which you likely are), there are also benefits. It may be time saved so you can focus on higher-order matters for your clients, costs saved, or something else. But once you start to really look at the benefits of something, not just the costs, you will start to have a better sense of what is worth buying. This will likely mean your firm starts buying more software, but it will also help you avoid buying duds.
Get to know your law librarian and IT. In a typical procurement process, there are two well-known roadblocks to deals. The first is legal. And as a law firm, well, you can get through that barrier quicker, but this does require engagement (see next tip!). But the other is IT. First, maintain strong relationships so they will prioritize your needs. But more importantly, know the core requirements and have a strong grip on the process. Are there core requirements, like SSO or security certifications like SOC2 or ISO 27001? What is the normal timeline? As for the law librarian, at many law firms, the librarian actually owns the procurement process. If this is the case, you should try to change that. But the law librarian will always be an important partner in a purchasing process. Get to know them. They can provide experience and give context that you may have not considered, especially with your busy job doing legal work.
Own legal compliance as much as you can. It is quite common for companies to rely on outside consultants in generating compliance requirements for a purchasing organization. Law firms are no different, but it can get a little absurd. I have heard from a world expert in privacy law who was told by his compliance team that he couldn’t do something because it created a privacy issue. (You can imagine how well that went over with him.) The best way to avoid this issue is to engage in the setting of these policies before you need to buy something. This may also involve speaking with your malpractice insurance provider far in advance to know what is in-bounds, out-of-bounds, and what the process looks like for gray areas. Just know that malpractice more has to do with how you conduct your firm more so than what software you buy.
Set firm-wide priorities with wide latitude. Big decisions on things like budget, priorities, and more are often set by big decision makers in an organization on an annual and quarterly basis. Consider doing this on a partnership level. However, there needs to be significant latitude. Different teams and groups have different needs, and it is important for firms to accommodate this so that they can be effective. Often this will mean dividing budgets into a general firm-wide budget used to achieve firm-wide priorities while having some of the budget set aside for partners to make their own decisions.
Procurement processes are a somewhat general process, but sometimes there can be elements that are unique to a particular industry. For example, the pharmaceutical industry will often provide blind tests to vendors to see if their product really works on questions that they do not know the answer to because of the complexity of the field. In the case of law, I do not believe that there is anything as unique as the pharmaceutical industry, but I do believe that there is a need to focus on two common aspects more than other fields do.
The first is accuracy. While many areas of the law require creativity, lawyers have a duty of competence and can face severe consequences for mistakes—though most of the fears surround sanctions, a much more common problem is the fact that many legal actions are immutable. This can be handled by testing or asking for references. You must think about what the acceptable bounds are for accuracy—perfect is often impossible—and which categories require more accuracy. Let’s take the example of writing a brief. On the one hand, it is an art, so there is no “right” way—100% accuracy is nonsensical. On the other hand, there may be some things where accuracy is very important. For example, if a brief cites a case, the citation should exist and be correct 100% of the time. The summary of the case is up to opinion but less subjective, so determine what “accuracy” means and how you test it.
The second is confidentiality. Lawyers have the benefit of privilege and a duty of confidentiality. While this does not mean that lawyers have a duty to use super-measures, but it does mean that lawyers have an obligation to review the confidentiality of every vendor they use. State bars have been addressing this issue for over a decade now and you should simply follow this guidance. On a practical level, most of these issues can be handled by reviewing policies and asking for common cybersecurity certifications. If someone is SOC2 or ISO 27001 certified and has a reasonable privacy policy this should be enough for 95%+ of cases.
On one final note, you may consider design partnerships. This is where a buyer partners with a vendor to provide them higher levels of support and feedback, and sometimes data, to help the development of a product. This will sometimes accompany an investment in the vendor. In exchange, the buyer will often get access to the product early, have their needs prioritized on the product roadmap, and get preferred pricing.
Prior Art
Previously on Edge, we covered the 2028 patent cliff. Nearly $100 billion of Pharma revenue is at risk from patent expiries. For some companies, nearly 1/3 of revenues could come under threat.
This week, Biospace has an interesting article covering the different approaches taken by three Big Pharma companies: Pfizer, Johnson and Johnson, and Bristol Myers Squibb.
Weekly Novelties
The UPC officially opened its Milan division (Law360)
In a landmark en banc Federal Circuit ruling, the bar was raised for the second prong of the Alice test with a requirement that the claims be “explicitly linked” to the specification (World IP Review)
Starbucks was sued over a French Press coffee maker over patents held by some of its partners (Bloomberg Law)
An Apple patent showed a radically different iPhone design with a removable back panel. Though it could be meant to more easily comply with “right to repair” laws, it also brings to mind the mid-2010s modular Android phones (Forbes)
Although Microsoft canceled its Xbox cloud, the patents still come out (The Verge)
The UPC’s first substantial rulings will be coming out in the coming weeks; this analysis goes into what they could mean (Juve)
In a valuable venue ruling for defendants, the Federal Circuit held that Haptics, a Texas company, must sue Apple in California for convenience (Patently-O)