What is managed legal services and is it a viable alternative?
What is ‘managed legal services’ (MLS)? At its simplest, MLS is the contracting out of a part or whole of a legal function to an independent legal service provider, whether on a short term or longer-term basis. While offshoring can be part of the solution, it’s certainly not a pre-requisite. Depending on the engagement model used, the services performed by MLS providers typically include tasks such as regional coverage (often where the HQ sits outside the region), specialist expertise (e.g. a new business line or regulatory compliance), high volume work (e.g. transactional work), and repetitive work (e.g. leases or supplier contracts). MLS can serve as a cost-effective additional option to traditional law firms in a number of key areas. These are explored in a greater detail later in this article.
In a few short years, MLS has emerged as a viable alternative for general counsels (GCs), who are increasingly asked by their CEOs and CFOs to solve the ‘more with less’ dilemma. Based on an Allen & Overy global survey, about 24% of customers have either used or are currently using services provided by MLS providers. In Asia Pacific region (APAC) – a region with many regulatory, cultural and political complexities, MLS is on the rise as companies become more familiar with the concept and its benefits. While Managed services have been widely used in technology companies and projects for many years – it is now starting to impact the legal sector in a meaningful way.
But is it merely a passing fad or is it a value-added solution that’s here to stay? This article seeks to answer that question by uncovering some of the unique features and benefits of MLS.
What’s driving the change?
If you are a GC that is more receptive to change, innovation and of a better way of doing things, the MLS service model should appeal to you. Across the APAC region and beyond, GCs are turning to alternative legal service providers as a way of getting more value and impact from ever-shrinking legal budgets. They will reward providers that can pro-actively suggest better and more bespoke solutions by engaging them on various projects, including strategic and cross-regional ones.
As GC, you’re being asked to deal with a multitude of complex legal matters and issues every single day. You’re also increasingly involved in helping to formulate the overall strategy and direction of the business, often working closely with the C-Suite and Board. And you may be under enormous internal pressure from your CEO and CFO to find more cost-effective and efficient ways to process legal requests, manage risk and help the business drive growth and expansion.
In APAC, these complexities and challenges are multiplied several times over by the sheer number of jurisdictions and the complexity and diversity of the legal and regulatory frameworks in the region. A ‘one size fits all’ approach is simply not available. For example, if you have a small legal team but are tasked with supporting 10, 20, 30 or more APAC (and beyond) jurisdictions with vastly different laws and regulations, how can you do that effectively without quickly racking up large amounts of external legal spend?
Electing to go with an MLS provider with the right expertise who has had extensive proven experience managing similar projects, and who will manage the project on your behalf, can help to significantly reduce this external legal spend. Further, the final deliverable is produced by a single provider who vets the final deliverable for quality, consistency and relevance.
The MLS provider constantly asks the question: does this add value to the end-customer and how does it help their business. The exercise is thus not just to answer a legal problem – it is to help the customer come up with a practical solution(s) to a commercial or business problem or challenge (albeit with important legal implications).
GCs are more willing to experiment with some alternatives. This is becoming more common in areas where GCs and in-house teams simply don’t have the capacity or expertise, where they have a higher risk appetite (e.g. document review and drafting of standardised contracts, repeatable high-volume work, etc.) or in areas where the law firms don’t have the relevant experience or expertise.
Using its real-world, practical experience and regional and local know-how, the MLS provider can fill this gap, quickly adding value to your company’s business and provide services which are complementary to those provided by the law firms, at a more competitive price point.
Different MLS service models
These are an example of the different service models for providing MLS to different classes of customers, depending on their unique needs:
- Regional coverage – supports GCs that don’t have a substantive legal presence, team or capabilities across the wider APAC region;
- Specialist expertise – provides technical expertise or experience in certain specialised areas of the law (e.g. employment, technology/IT contracting, payments and other financial services, financial crimes compliance, risk management, etc);
- High volume work – high-volume, lower risk legal, regulatory or contractual projects (e.g. response to request for proposal (RFP) processes, review of high-volume transaction due diligence documents, etc); and
- Repetitive work – where repetitive contracts and standardised playbooks, can provide support to help your team to focus on more high-value strategic legal matters.
As a service delivery model, MLS will be an appropriate solution that can apply to most in-house legal function activities. In cases where the MLS provider is an alternative legal services provider and not a law firm regulated as such, one possible area where it may be less appropriate is in areas of very high risk (regulatory or reputation-wise), such as regulatory enforcement action or investigations from regulators and other regulatory authorities, where there might be a direct impact on the legal liability of the company, its director or senior management. In areas of high legal or regulatory risk, it may be prudent for customers (particularly listed companies) to be supported by the law firms.
Depending on the area of support being outsourced, services provided by MLS providers can either supplement existing services provided by the law firms or they can replace them altogether. Consider for a moment the categories of specialist expertise, high volume or repetitive work described above. A customer can opt to outsource to an MLS provider for its specialist expertise needs. For example, the law firm may not have the required expertise in the area of payments or financial services regulatory work for various jurisdictions or the MLS provider can provide these services more cost-efficiently. The customer can continue to work with the law firm on other large corporate transactions (e.g. M&A deals or large litigation matters).
Equally, the customer may decide to outsource to the MLS provider for high volume or less complex repetitive work because it is a more cost-effective solution typically provided on a fixed fee or other alternative fee arrangement compared to the usual hourly rate model charged by most law firms.
Put simply, as GC, you don’t have to go with just traditional service providers. You have additional options which are viable and cost effective – you don’t have to settle for one or the other; you can ‘mix and match’ depending on your budget, business requirements and risk appetite.
How does it work in practice?
The MLS provider needs to collaborate closely with you as the customer. So is the effective and smart use of project management, technology integration and the adoption of lean management systems and processes to drive greater efficiency and accountability in the execution of projects. While you outsource the solution to the MLS provider, importantly, you as the customer get to retain control and oversight over the project. The MLS provider does the heavy lifting by managing the solution and process for you.
Here are some practical examples of its application:
- Regional coverage: the MLS provider acts as an extension to your team’s in-house capabilities in APAC and supplements your home-based team by making available consultants on the ground in the region. Consultants not only provide the hands-on, same-time zone support needed by the local business and operations teams, but also provide local jurisdiction expertise, know-how and counsel that your HQ team simply doesn’t have or doesn’t have the capacity to service effectively. For example, if you or your team are mainly based in Singapore, but your business colleagues are spread across multiple countries across the APAC region, leveraging the know-how and expertise of consultants with cross-regional and on the ground expertise and experience gives you confidence that your business clients’ needs will be well-supported. Your MLS consultants in the region can continue to provide the seamless support to your internal business stakeholders.
- Specialist expertise: the MLS provider collaborates closely with you and your team to assist them to come up to speed on the legal and regulatory frameworks that may potentially impact your company’s business and operations across the APAC region, or that may be exposed to new risks which you may not have previously encountered. APAC is a large region, with specialist knowledge required for most (if not all) jurisdictions and the reality is that most law firms, even regional or global ones, lack the depth and breadth of expertise or experience across multiple jurisdictions. Quite often, they have to rely on correspondent law firms, and this can sometimes result in inconsistent quality in terms of the analysis and the practical usefulness of the advice. Having already been involved in such projects, they can help you to make informed decisions about which countries to enter first, highlight what are the pros and cons of each market, where the opportunities lie, what are the key challenges they’re likely to face and how to overcome them and which markets to prioritise over others. This should help to achieve significant cost savings and time.
- High volume and repetitive work: by using technology, having disciplined and streamlined processes, and by using standardised practices, templates, playbooks and toolkits, MLS can help your teams to handle large volume, lower risk projects and activities without compromising on quality and accuracy. Playbooks can be standard off-the-shelf tools, or more tailored playbooks can be developed for clients. Another great tool for APAC from a project management perspective where your legal HQ sits outside of the region.
MLS is here to stay!
MLS is a new solution that is structured very differently from more traditional ‘outsourcing’ services. It’s the ‘must have’ for your legal toolkit for APAC (and beyond).
An MLS offering is not only driven by your own legal function’s goals and needs, but importantly, also those of your internal business stakeholders. The MLS provider invests time and effort to understand your goals and needs, and puts together a cross-functional, cross-regional team that works collaboratively with your own team to co-design and deliver tech-enabled and process-driven solutions. These solutions integrate technical expertise in specified areas of the law, regulatory affairs and government relations, project management, and change and stakeholder management.
Further, an MLS solution removes the age-old tension between the customer and the professional advisor/lawyer – the nagging suspicion that the advisor is not really incentivised to reduce complexity because the billing model is based on higher billable hours. Under the MLS model, billing can take different forms depending on the particular needs of the customer. These include hourly rates, daily rates, monthly retainers, and fixed fee for projects that can be scoped out with some degree of accuracy and certainty. Fixed fee projects can be further broken down with separate pricing for different project modules or components (e.g. project management, regulatory assessments, etc). The solution drives the pricing; not the other way around.
Because of this, MLS typically provides greater transparency and efficiency to the delivery model. If the pricing is on a fixed fee basis, certain payments can be tied to the MLS provider’s achievement of agreed milestones.
MLS is not just a passing fad. It’s here to stay because it can help GCs to come up with creative ways to solve their internal business stakeholders’ most challenging problems. It becomes a key business enabler that helps to improve the efficiency and effectiveness of the legal department and to drive down costs, spurs growth and helps the company to access new customers and markets.