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How in-house law teams can transform into strategic business partners

Aligning with business priorities to create value and manage increased risks is key. Using alternative legal service providers can help.

In brief

  • Law departments are under significant pressure to innovate to be a strategic partner to their organization.
  • To do so, they need to reduce time spent on low-value, repetitive or routine work.
  • With leading-edge technologies and process management capabilities, alternative legal service providers are well-placed to help address this issue.

Arecent survey conducted by EY Law and the Harvard Law School Center on the Legal Profession revealed that law, procurement and commercial contracting departments are under increased pressure from boards, CEOs and CFOs to operate differently.

We speak to Rishi Ballakhan, EY Asean Legal Operations Leader, to understand the challenges faced by in-house law departments and how EY teams work with them in their transformation journeys to play a more strategic role in driving business objectives.

From your perspective, what are some of the issues and challenges that in-house law departments currently face?   

Since the 2008 global financial crisis, there has been increased pressure for law departments to step outside their comfort zones and operate like other departments in the business. This trend started in the US and Europe and has been making its way around the world.

According to the 2021 EY Law Survey, a key challenge that law departments face is in reducing their overall expenditure. At the same time, the legal and regulatory landscape has become increasingly complex, with organizations facing more legal challenges and risks. With working from home becoming common due to the pandemic, law departments have to help organizations manage and protect their companies from the risks involved. Accordingly, law departments that were already stretched thin are expecting a significant increase in the workloads. What this means is law departments are being challenged to do more with less. 

Law departments also need to transition to become business value creators. Only half of the general counsels (GCs) surveyed said their law department is effective at adding value to the business. There is a clear need for the function to be a strategic partner to the business, yet only 52% reported that their day-to-day work is aligned with the broader business strategy.  

Eliminating inefficiencies in existing processes that are stifling revenue recognition and growth is also important. Almost all business development leaders surveyed said they faced challenges working with their contracting teams, with 57% reporting that such inefficiencies in the contracting process have resulted in lost business. Therefore, law departments are now challenged to review their workflows and processes, drive improvements and enable the business to operate efficiently, while controlling risk.

Do you think accelerated digitalization brought about by the COVID-19 pandemic has an impact on how law departments will work in the future?

Digitalization, accelerated by the COVID-19 pandemic, has changed the business landscape. Added to the change already underway from a broader digital transformation perspective, there is a significant impact on law departments.

There are heightened legal risks that the law department has to manage. Take for example how organizations must comply with the related privacy, cybersecurity and employment laws, particularly with the rise of remote working. Organizations’ desire to digitalize increases the burden on their law departments as they deliver their core responsibility in advising and protecting their organizations. 

And while digitalization has also brought about an influx of digital tools and solutions that can help increase productivity, law departments have either had challenges successfully deploying technology or have been slow to adopt them.

According to the EY CEO Imperative Study 2021, digital transformation is ranked as the number one priority among CEOs. However, 70% of Asia-Pacific in-house counsels in the law survey said they do not have the technology needed to do their jobs, and interestingly, only 50% of law departments have made greater use of technology in the last 12 months. GCs in the region clearly agree that digital transformation can help — 50% of them believe that greater use of technology offers significant or very significant cost-saving opportunities but have not been able to move the needle on implementation in their departments.  

Several factors are driving this discrepancy between intention and action. These include challenges in finding the right technology, implementation taking too much time, or a lack of investment. In fact, 97% of law departments reported facing challenges in securing budgets for technology investments. GCs recognize the need for technology, but it is important for law departments to firstly consider different approaches when developing the business case for technology investments. Secondly, they need to think about the approach, identify the desired outcome and plan the process before implementation, so that the use of technology is optimized. 

How EY can Help

  •  Legal Managed Services

    The EY Legal Managed Services team can help address contracting, regulatory compliance, entity governance and legal operations challenges. Learn more.

    Read more

Can the use of alternative legal service providers (ALSPs) help law departments with these mounting challenges?
 

Over the last few years, there has been a visible change in how organizations procure legal services, with a shift from traditional to non-traditional options, resulting in an increased use of ALSPs. Our interviews with GCs suggest law departments that use ALSPs are likely to increase their use in the future, indicating that those who have tried this type of sourcing strategy have had positive experiences and want to continue exploring options in this area. We therefore expect to see increased adoption of these types of providers in the near future.
 

There are several benefits of using ALSPs. First, they are typically “full-service providers” that have invested heavily in many of the areas we discussed, such as people, processes and technology, which enables them to maximize efficiency and reduce cost. The survey also indicated that the majority of law departments worldwide believe ALSPs have stronger technology and process management capabilities than them. Organizations can therefore benefit from the ALSP’s established technology and processes, negating the need for them to procure the technology themselves or spend time and budgets on refining processes.
 

Second, ALSPs are able to provide continuity of resources and shared knowledge, which helps reduce legal and business risks. ALSPs are also cognitively diverse — they comprise not just lawyers but also technologists, data scientists and project management specialists.

Third, ALSPs are typically global in scale, which allows organizations to potentially outsource activities in regions in which the corporate law team has limited or no presence. Finally, in order to remain competitive, ALSPs are also constantly evolving and seeking to adopt leading-edge technologies and refine processes to maximize efficiency. This ultra-competitive landscape is incredibly beneficial to customers, in this case, corporate clients, which should expect to see year-on-year benefits as their providers continue to invest and enhance their services. 

How should law departments prioritize their transformation efforts to help CEOs and their organizations grow? 

Enabling growth, delivering faster contracting, providing better data and transforming risk management are key strategic priorities for business leaders. Law departments should embrace change and enhance their ability to align with the overall strategy of the business. For example, integrating the law department into an organization’s digital transformation initiative is a good way to start as it allows the department to obtain investment in technology to improve efficiency.

In the law survey, law department leaders also reported that 20% of in-house counsel hours is currently spent on low-value, repetitive or routine work. Therefore, it is important to review the type of work, headcount and structure of the department to improve efficiency. Law departments can choose a combination of outside counsel management, insourcing — including center of excellence and self-service capabilities — process and technology optimization, co-sourcing or outsourcing to help them with this. The key is freeing up in-house counsels’ time, so they can be more proactive and help enable the broader business strategy. 

And finally, law departments have a wealth of data that allows them to be strategic business partners where their feedback and input can help drive tangible business value. Such data, with the help of digital technology, allows law departments to advise CEOs on proactive risk management that can in turn help reduce legal spend on outside counsel and their own liability. 

How have you and your team supported clients on their legal transformation journeys?

I oversee teams that provide legal function consulting (LFC) and legal managed services (LMS) to companies across Southeast Asia. The LFC team assists clients throughout their legal transformation journey. We have successfully helped law departments improve legal processes, talent and sourcing models, and technology and data strategies. The LMS team is an ALSP and provides easy-to-integrate end-to-end solutions that can lift the routine work that burdens law departments, freeing them up to concentrate on high-value activities that are of strategic importance to the business. We have a diverse client base across a wide range of industries and have successfully supported organizations of all sizes. 

Summary

In-house law departments are under increased pressure to innovate to manage the impact of digitalization and focus on creating strategic business value.

By engaging an alternative legal service provider, in-house law departments can gain access to leading-edge technologies and process management capabilities to maximize efficiency and lower costs.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.