5 Ways In House Counsel Can Talk to Law Firms

74 ACC Docket November/December 2005
Ways In-house
Counsel Can

ACC Docket 75November/December 2005
Mark Chandler and Paul Lippe, “Five Ways In-house Counsel Can Talk to Law Firms,” ACC Docket 23, no. 10 (November/December 2005): 74–89.
I
T IS A RARE CONVERSATION WITH general
counsels these days that doesn’t turn to the sub-
ject of outsourcing. Usually, the discussion goes
something like this: “My boss (the CEO or CFO)
is after me because legal spending keeps growing
when everyone else in the company is tightening their
belts. She wants me to look at outsourcing as an option
to lower costs. But how do you maintain quality with
folks in India?”
From our perspective as a leading networking com-
pany GC and a former software company GC and
business development head who also helped set up his
company’s Indian operation, this question is almost
completely backwards—but usefully so. We submit
that the movement of legal jobs to India will be among
the least important trends of the next twenty years.
(See “Offshore Lawyering?” on p. 80.)
But the discussion of outsourcing is highly relevant
to one of the most pronounced trends in the legal pro-
fession, the increasing tendency of companies to
insource their legal function. This tension between
insourcing and outsourcing will force us to address a
critical issue for our profession: the need to have a
much more sophisticated conversation around the
boundary line between what law departments do and
what law firms do and on how each does their work.
Unlike corporate finance departments and their pro-
fessional accounting firms, law firms and law depart-
ments have strikingly similar roles. But the question of
what gets insourced and what gets outsourced has
never really been systematically addressed. (See “The
Ins and Outs,” on p. 76.)
Talk to Law Firms
BY MARK CHANDLER
AND PAUL LIPPE

We suggest that law department leaders be pre-
pared to sit down with their law firms to discuss:
• how work optimally gets done,
• whether it gets done in-house or by a law firm, and
• how the law department and law firm can use com-
mon technology and methods to collaborate better.
Changing the conversation to address how collabo-
ration can drive productivity, rather than talking about
billable hours and discounts, is essential to achieving
the benefits that CEOs and CFOs are seeking.
In this article, we aim to show how you might
encourage leaders in your law firm to ask questions
that would lead to a more productive conversation.
(For a cumulative list of the questions contained in
this article, see “Law Firm Homework: Questions
Your Law Firm Should Ask You,” on p. 86.) We
will focus on three themes:
• What are the competitive drivers for outsourcing
across most industry sectors?
• What is the trend in law and what’s behind it?
• What are some winning strategies for law depart-
ments and law firms to adopt as these themes
play out?
WHAT DRIVES OUTSOURCING? CORE VS. CONTEXT
As described extensively in recent books such as
Thomas Friedman’s The World is Flat and Roger
McNamee’s The New Normal, we have entered a
period of rapid and accelerating change, driven by
technology and globalization. Constant innovation,
intensifying competition, and ongoing movement of
capital and jobs around the world are the new nor-
mal in a flat world.
While many Americans prefer to remember the
1950s as a period of normalcy, that was in fact one
of the most atypical periods in the world’s history.
Mark Chandler is chief legal officer of Cisco
Systems, Inc., the worldwide leader in
networking for the internet. He manages a 120-
person team of legal and other professionals.
Paul Lippe is the founder and chief executive
officer of Quality Legal Automated Systems, a
start-up that has licensed software from Cisco
Systems for law department automation. He also
is a former general counsel of Synopsys, Inc., an
electronic design automation software company,
and CEO of Stanford SKOLAR, an online
knowledgebase for physicians. He can be
reached at: paull@qulas.com.
THE INS AND OUTS: TYPICAL ALLOCATIONS OF LEGAL WORK

In the wake of World War II, the United States rep-
resented nearly half of the world’s economy, and US
companies (and law firms) dominated every sector.
If we take the longer view, the period 1492–1892
represented a 400-year effort by Europe (and the
United States) to catch up with the greater wealth
of China and India. It should be no great surprise
that today China and India are trying to catch up
with the United States and Europe.
In this accelerating competitive dynamic, we
have seen any number of astonishing changes in the
business world. IBM, which appeared to own the
PC industry, saw all its profits go to component
vendors Intel and Microsoft, saw Dell exploit a
hyper-efficient supply chain to become the leading
vendor of PCs, and ultimately sold its PC business
to a Chinese company, Lenovo. United, Delta, and
American, once the leading US airlines, have been
overwhelmed by Southwest and JetBlue. And of
course, we have all seen Wal-Mart transform the
world of retailing to become the world’s largest
company. In every case, upstarts have been able to
To understand how operating companies approach
these issues, it is helpful to look at the world’s largest
outsource manufacturer, Solectron. Solectron is a
California-based business that provides outsource man-
ufacturing for leading US companies, including Cisco
and IBM. Much of the manufacturing and materials
management that we traditionally thought were the
essence of business for large companies is now done by
outsourcers like Solectron. If you go to Solectron’s
website (www.solectron.com), much of it is devoted to
their quality methodology, Lean Six Sigma.
Lean Six Sigma
At Solectron, Lean Six Sigma permeates every-
thing we do. It is a discipline focused on elimi-
nating waste (muda) and variability throughout
the supply chain, and it mandates that every
company activity add value for customers.
Lean, which is based on the world-renowned
Toyota Production System, is driven by five key
principles at Solectron:
•• Value—Understanding the value of the work we
perform by defining it as something that our cus-
tomers want to pay for.
•• Value Chain—Mapping the process steps that we
perform throughout the supply chain by identify-
ing the steps that add value and striving to elimi-
nate those that add waste.
•• Pull—Eliminating the primary sources of waste—
overproduction—by only producing what customers
want, when they want it. This means starting pro-
duction only when the customer “pulls.”
•• Flow—Removing other major sources of waste—
bloated inventory and waiting—by ensuring that
goods flow continuously through the supply chain and
never stop.
•• Kaizen/Continuous Improvement—Striving for
the total elimination of waste through a succession
of small, action-oriented (kaizen) events within
the production process.
To complement Lean, Six Sigma is the well-
known, data-driven set of standards that drives
exceptional quality in all Solectron operations. It
requires in-depth statistical metrics to analyze
quality at all levels of the supply chain, eliminating
defects. Six Sigma—when combined with Lean—
allows for easier identification and quicker resolu-
tion of quality issues or problems, and reaps quick
results while opening people’s eyes to new and
better possibilities on plant floors.
As we can see, the essence of Solectron’s approach is
pretty straightforward:
• Because we have a sophisticated method and high
volume, we’re better at what we do than anyone else.
• Because we’re better at what we do, you’ll get higher
quality and lower cost.
• We can back this up with data.
Implicit in Solectron’s approach is that quality is not a
function of time spent performing a task, but of thought-
fulness in organizing it, and that excess time spent actu-
ally hurts quality, not improves it. Lawyers often seem to
take the position that quality of output and time of input
are the same, a proposition that is very much the oppo-
site of Solectron’s Lean Six Sigma model.
QUALITY CONTROL AT THE CORE: ONE COMPANY’S APPROACH

November/December 2005 ACC Docket 79
leverage innovation, efficiency, and quality to dis-
place established leaders.
One of the rapid changes driven by this interna-
tional competitiveness has been the increasing ten-
dency of many companies to find significant savings
in outsourcing work and moving it offshore. When
outsourcing, there are typically three sources of pro-
ductivity gains and cost savings:
• lower costs,
• better task definition, and
• sharing of specialized expertise.
Thus when determining which activities to out-
source, the first step is to determine exactly what
the task is, and how central it is to the business.
And in fact, this has been the basic quality strat-
egy of operating companies: determining which
activities were truly central and focusing on those
central or core activities. These companies try to
be the best in the world at their core activities,
while outsourcing other, noncore activities, and
holding those outsource suppliers to very strict
quality standards. In a world of rapid change, you
can’t be the best at everything, so it’s best to focus
on those things you can be best at and then hire
the best for the others. The visionary business
author Geoffrey Moore systematized this outlook
in his pathbreaking book, Living on the Fault
Line, and calls it Core vs. Context.1
(See “Quality
Control at the Core,” on p. 78.) This approach has
led Cisco to draw the insourcing/outsourcing line
differently than most companies.
WHAT’S THE TREND IN LAW? QUESTIONS FOR
LAW FIRMS
Today’s widespread discussion of legal outsourcing
comes at a time when the trend in almost every field
has been toward outsourcing, facilitated by the advent
of improved technologies and sophisticated computer
networking systems. But for the past twenty years,
law has been the exception: There the trend is to
insource legal work. Over the last twenty years, the
percentage of lawyers working in-house and the per-
centage of dollars spent in-house have grown dramati-
cally. While there are no definitive sources of data,
our estimate is that in-house headcount and spending
have grown from 15 percent to 35 percent of total
legal headcount and spending over the 17 years since
we first became GCs, and that these percentages are
much higher for the Fortune 100.
At a recent roundtable of large-company GCs,
the theme was clear: “we can get lower costs and
better quality (by being closer to the client) with in-
house lawyers.” In talking to a number of GCs over
the last year, we found they generally believe that
in-house lawyers cost them one-half to one-third of
what law firm lawyers would cost.
But just as outsourcing is not a panacea, we
don’t believe that cost is the entire reason. Instead,
we would point to a more fundamental explanation:
In-house lawyers, because they are part of enter-
prises, are much more attuned to today’s global
competitive dynamic; law firms are not yet in the
same place. Simply put, enterprises (including their
in-house law departments) are much further along
in the evolution to a technology-accelerated, global
marketplace. But if the work of law departments
and law firms is much the same—the difference
between what gets insourced and what gets out-
sourced being just a function of company stage and
size—then law firms must match or exceed law
departments in keeping pace with this evolution.
(See “The Ins and Outs,” on p. 76.)
To illustrate this difference between companies
and law firms and to see how it is likely to change
law over the next decade, let’s contrast how compa-
nies and law firms talk about (and therefore think
about) five critical themes:
• productivity and pricing,
• quality,
• competition,
• sourcing, and
• technology.
Many, if not most, GCs will find these ideas obvi-
AS LAW FIRMS CONTINUE AGGRESSIVE GROWTH
STRATEGIES, THEY WILL INCREASINGLY FIND
THAT SCALE WITHOUT INFORMATION AND
TECHNOLOGY WILL NOT WORK. YOU WOULD
FIND VERY FEW $1BB OR EVEN $200M
COMPANIES THAT OPERATE WITH AS LITTLE
INFORMATION AS LAW FIRMS.

ous—but there’s no way that legal departments can
be as effective and efficient as they must be unless
these ideas are understood and properly implemented
by law firms. So we have developed a set of questions
we would encourage GCs to ask their law firms to
think about, so that law firm leaders can develop a
better understanding of what’s driving their clients.
1.PRODUCTIVITY AND
PRICING QUESTIONS
In the Enterprise
For enterprises, the definition of productivity is
the classical economist’s definition—the value of
output divided by the amount of labor required to
produce it. Most companies today have clear expec-
tations of regular productivity gains, which they use
to maintain competitive pricing. In the core tech-
nology sector, Moore’s Law means that companies
deliver dramatically more performance every year
for the same or declining prices. Prices for goods
and services are set by value and competition, and
most of those goods and services have flat prices
and improved quality every year (except, of course,
oil- and real-estate-driven asset inflation).
In Law Firms
Law firms define productivity not by outputs, but
by inputs—the total number of hours billed by part-
ners and associates. They have an ongoing expecta-
tion of year-over-year rate (price) increases. And the
basis of pricing is the income expectations of lawyers.
For law departments, productivity is measured by the
cost of the services delivered relative to the output of
the enterprise—most simply, percentage of revenue
devoted to legal services—with a focus on problems
avoided and opportunities realized.
At Cisco, for example, almost 80 percent of the
work with outside counsel is on other than an hourly-
billing basis. This means that both Cisco and its law
firm partners have a common interest in efficiency
and productivity. And it also means that profitability
depends on the way the work is done, not on the bill-
able hours that are the inputs. Cisco doesn’t expect its
semiconductor vendors to raise prices every year, and
its customers expect per port costs to decline; by the
same token, its law department is expected to deliver
more law for less cost per unit of output each year.
That’s why letters from law firms announcing “next
year’s increased billing rates” are so counter to every-
thing the law department is supposed to accomplish.
Cisco is working to make those letters irrelevant by
changing the measure of what gets delivered.
Testing These Ideas
Here are some basic questions law firm leaders
can ask their clients to test these ideas:
• Here’s how we measure productivity—what do
you think?
• How many of the goods and services that you
buy had price increases over the last year? By
how much?
• How many of the goods and services you buy
have input-based pricing (e.g., hours it took to
complete)? Do you view variable, input-based
pricing as an indication of service-provider
sophistication and quality?
Winning Strategies for Law Firms
Companies have many resources for improving
productivity. Just as they have made these resources
available to other, larger suppliers, companies can
start to provide this knowledge to law firms. Law
firms have the opportunity to learn from their clients
and meet their expectation of improved productivity.
Outsourcing has two very distinct meanings. The popu-
lar meaning of outsourcing is moving jobs offshore, typi-
cally to a lower-wage location such as India or China, but
the phrase can also mean moving jobs to a lower-cost
location in the United States.
Although we sometimes hear about outsourcing legal
jobs to lower-wage countries such as India, we believe
that we are a long way from such outsourcing being
remotely comparable to that which occurs in the IT
field. IT-based labor arbitrage took twenty years to
fully develop, during which time the Indian IT-educa-
tional system attained world-class status and huge
numbers of Indian expats worked for US IT companies.
These conditions are not now present in the legal field.
Indeed, we believe that there are far more gains to be
had from better task definition than from onshore or
offshore labor arbitrage.
OFFSHORE LAWYERING?

Law firms should offer to partner with clients to
apply their clients’ best methods for improving pro-
ductivity, and then split the added profits from those
improvements between the client and the law firm.
2.QUALITY REVOLUTION
QUESTIONS
In the Enterprise
As illustrated in the Solectron example above,
quality in the enterprise is defined as the voice of
the customer. (See “Quality Control at the Core,”
on p. 78.) Companies are constantly looking for
feedback on customer-defined quality and have
developed very sophisticated end-to-end processes
and methods, like Six Sigma and Lean, to define
and measure quality. Companies try to instill a
culture of openness, inquiry, and learning to facil-
itate continuous improvement. Most companies
are relentless about measuring quality and dili-
gent in collecting data to do so. Whether in auto-
mobiles or electronics or medical care, there is no
doubt that quality has dramatically improved over
the last fifteen years.
In Law Firms
While most law firms would define quality as
their core value, they would also insist on its funda-
mental immeasurability. Law firms’ methods for
managing and delivering quality have not changed
over the last thirty years, are generally uninformed
by the quality methods used by their clients, and
are generally data-free. Many law firms resist any
attempt to define or measure quality, falling back
on that so-called definition of pornography, “we
know it when see it.” Traditionally, professions have
been able to define their own standards of quality,
independent of their customer or client view.
Indeed, one definition of a profession is “a business
where the end user can’t judge the value of the ser-
vice delivered as well as the provider.” But this his-
toric attitude ignores today’s reality that clients
employ sophisticated lawyers in-house who are fully
capable of assessing the quality of services.
For example, in the area of patents, it is very diffi-
cult to measure the quality of a patent, because it is
generally at least five years before the key elements
of commercial importance, validity, and likely litiga-
tion success are tested. But one key near-term mea-
sure is the satisfaction of inventors, who work with
patent lawyers day-to-day and can assess their techni-
cal sophistication, responsiveness, and speed in
grasping new concepts. Cisco therefore systematically
gathers feedback from inventors and uses their qual-
ity grading as a way to determine future patent law
firm assignments.
Testing These Ideas
• What are your highest quality operations (internal
and external)? How do we compare?
• Given that SarbOx is driving process maturity
across your organization, how do you characterize
our process maturity?
• Are there any “formal” methods we can use to
measure the quality of legal services?
• Can we set up some metrics that will demon-
strate over the coming year that our quality is
superior to that of other firms?
Lawyers have the quality gene in abundance—it
is innate in our thoughts and our culture, so we
have no doubt law firms can recapture the lost
ground. Twenty years ago, their clients would have
certainly seen law firms as preeminent quality
organizations. Lawyers need merely be open to the
possibility that they can in fact learn from their
clients, and embrace the processes and disciplines
that their clients apply, including the fundamental
requirement to define and measure quality in a
transparent way. Clearly law firms should seek sys-
tematic feedback from clients and respond to it.
As the tools and methods for improving quality
become more broadly adopted, we predict we will
see less interest in outsourcing as a panacea. The
real questions will become:
• how to optimally do the work,
• whether the work gets done in-house or by a spe-
cialist outside firm, and
• whether it gets done locally or in a lower-cost
location.
In other words, it’s the “how” that matters most,
then the “who,” and then the “where.” The geo-
graphic outsource may force the implementation of
better quality methods, but it will be more the cata-

lyst than the cause of quality gains and cost savings.
We are at a time when SarbOx, as the lawyer-cre-
ated “master process” of business, is forcing compa-
nies to improve all their processes, and we as
lawyers will be expected to keep pace.
GCs should insist that young associates in their
key law firms do at least a six-week in-house rota-
tion. Over the course of our careers, we have
talked to many lawyers who moved from law firms
to in-house roles. All of them said the same thing:
“Now I get it.”
3.COMPETITION
QUESTIONS
In the Enterprise
Ask anyone in any company, and they’ll tell you
the competitive pressures are intense and increas-
ing. The greatest threats are not coming from tradi-
tional competitors, but from technology-enabled,
low-cost challengers (Dell, JetBlue) or low-cost
newcomers in India and China. For most profes-
sional employees in companies, a very large per-
centage of their compensation is variable, based on
company performance (either bonuses or stock
options). While we hear about some exceptionally
highly paid CEOs, the reality is that for most pro-
fessionals in the enterprise, incomes have been flat
or down over the last five years as company perfor-
mance has been uneven. Because company compen-
sation plans are set up to reward employees when
stockholders benefit, there is an immediate connec-
tion between company revenues and profits on the
one hand and individual pay on the other.
In Law Firms
While most law firms say they face intense
competition, the data suggests they are riding the
crest of a ten-year boom. As reported in the
American Lawyer and elsewhere, law partner
income rose dramatically not only during the
1990s boom, but also during the 2000s post-
boom. Law firms and accounting firms are the
only industries that have done extremely well over
the last five years. A few unique and probably
one-time factors are driving recent law firm rev-
enues (e.g., SarbOx, the growth in class actions),
and it seems unlikely that law firms can continue
to dramatically outperform their clients.
There are also four more fundamental factors
changing the competitive dynamic for law firms.
First, most large non-New York law firms are fol-
lowing essentially the same strategy—be one of the
top twenty national (and international) law firms by
expanding in as many big cities as possible and
acquiring as many lateral practices as possible. So
whereas Gibson, Dunn was once dominant in its
home market of Los Angeles, and McDermott was
once dominant in its home market of Chicago,
today they compete in many cities and practice
areas. This increasing competition will certainly
raise their costs of sales and lower margins.
Second, because the number of acquirable law
firm assets is limited, acquirers will naturally fall
into what’s known as the “winner’s curse”: Since
the highest bidder will usually acquire an asset,
more likely than not the highest bidder will overpay.
Winner’s curse is endemic to corporate M&A pro-
grams, which is why so many companies’ acquisi-
tions don’t meet expectations.
Third, large clients are increasingly using
Requests For Proposals (RFPs) and other purchas-
ing-style techniques to acquire legal services. In a
recent Fortune 10 company RFP, there were 300
respondents, of which 3 got work. The cost of
For more on how the international legal community
addresses this topic, see the following ACC and associated
resources:
• Karen Sinniger, “Choosing Foreign Outside Counsel,” ACC
Docket 23, no. 2 (February 2005): 12, at www.acca.com/
protected/pubs/docket/feb05/outinfront.pdf.
• PLC Global Counsel Best Practice Indicators: “Outsourcing to
External Counsel,” at http://ld.practicallaw.com/0-102-4203.
• For more resources, visit the Virtual LibrarySM
at ACC
OnlineSM
at www.acca.com/resources/vl.php.
Exploring International Resources . . .

sales of operating in a world with a 1 percent (or
even 20 percent) success rate is dramatically dif-
ferent than the world law firms have historically
operated in and requires far greater operational
rigor. At Cisco, the department has tried to drive
RFP content responses to focus on what the law
department can do for the firm—how the two
working in tandem can lower overall costs. From
Cisco’s point of view, the client, not just the firm,
needs to enter into a “Service Level Agreement”
that will make both successful.
Finally, law firms don’t even acknowledge what
is in fact their number one source of competi-
tion—insourcing. For most very large clients, no
law firm represents more than 5 percent of their
total legal budget, while their in-house depart-
ment represents around 40 percent. Every year
clients move more work in-house, and law firms
dismiss that work as “commodity,” just as IBM
dismissed Dell as a commodity provider. We pre-
fer to think of the day-to-day work of companies
as “operational law” requiring a sophisticated sys-
tems approach. Many sophisticated GCs think
that operational law, which frequently has much
more impact on the overall success or failure of
their companies than episodic transactions or liti-
gation, is more important, more Core, than the
work done by large law firms. The problem for
law firms is that if law firms don’t do any of the
operational law, they lack sophistication about
how companies work and the ability to prevent or
solve many problems.
If law firms don’t respond to the emerging
competitive environment, we are likely to see
AUTOMATING LEGAL FUNCTIONS: ONE EXAMPLE
Cisco has established a basic flow that permits nonlawyers to create nondisclosure agreements (under
the supervision of the Cisco legal department). Authorized employees can go to a website, Nondisclosure
Agreement Central, and search for existing NDAs, check the status of NDAs in progress, and create NDAs
by filling in a template. Below is a screenshot that shows how Cisco gathers information that can be used
to identify and track NDAs.

more large companies sharing best practices
directly with one another and dis-intermediating
law firms. For example, Cisco is currently work-
ing with eight other large companies in an effort
to define common technology platforms and law
firm deliverables that can change the way services
are delivered. The goal isn’t to undermine law
firm profitability, but to drive productivity so that
both firms and clients can benefit. And if you
think that means more competition—and a com-
petition of ideas and output, not of billable
rates—you’re right.
Testing These Ideas
• For legal services, is your primary trend insourc-
ing or outsourcing? How does that compare with
other services that you buy? What should we
learn from this?
• How satisfied are you with your relationship with
your audit firm? Given that audit firms are expe-
riencing boom times, what should we infer about
what our own very strong financial performance
means about your level of satisfaction with us?
• If we were advising you on an outsourcing contract,
there is no doubt we would recommend some basic
provisions like a Service-Level Agreement, pre-
dictable pricing, sign-off on satisfaction, and quality
standards. Can we explore those with you?
• We believe the day-to-day work of the company
in hiring, generating revenue, designing and
building new products, is the Core of what you
do. Yet our law firm is generally not engaged
with that work. Is there a cost-effective model
where we can help in these areas?
Law firms should recognize the coming competi-
tive clash and adopt differentiated strategies for
dealing with it. The fundamental strategy will be to
be closer to clients and to adopt the processes,
technology approaches, and pricing policies needed
to do so. That said, in any environment of competi-
tive change, there are usually big winners as well as
losers. We believe that those law firms who truly
listen to their clients and understand where the
competitive dynamic will go will be the big winners.
4.SOURCING
QUESTIONS
In the Enterprise
Most sophisticated enterprises recognize that the
people who sell them goods and services are integral
to their success. Whether it’s a new chip that enables
Apple to build the iPod or a staffing partnership that
allows Accenture to manage headcount and costs
more effectively, the flip side of the Core vs. Context
model is to collaborate intensively with companies
that provide Context. One enabler of that collabora-
tion is that vendors provide goods and service at pre-
dictable prices with mutually agreed measurements
of quality. This is true whether a company is buying a
component or a massive project. Purchasing is a dis-
tinct occupation within most companies, but not nec-
essarily a well-paid one.
In Law Firms
The default model for law firms is that the people
who matter in a client company are the control
group—the board, the CEO, the CFO, the GC, and a
few others. But in today’s enterprise, information and
decision-making are more distributed. In a world that
is ever more global, more IP-driven, more heavily reg-
ulated, and more email-connected, every knowledge
worker is a potential user of legal services or creator
of legal problems. This requires a one-many model
rather than the law firms’ traditional one-one model.
Law firms should look at ways to use technology to
reach and serve the many clients inside the client.
Law firms have largely moved away from the old-
time retainer-style relationship to a reactive, hourly-
priced model. While many lawyers would sniff at the
notion that they are “a mere widget manufacturer,” if
you visit Widget Systems Worldwide you might find
in many cases that they view their widget component
manufacturer as more of a strategic partner than they
do some of their law firms. An hourly-pricing model
is an overwhelming disincentive to clients’ partnering
with law firms. Owning some of the responsibilities
for predicting costs will force law firms into much
more serious analysis of “goals and roles,” i.e., who
does what (not just within the law firm, but between
the law firm and client) and how success is measured.
To illustrate how much law firm relationships are
now held at arm’s length, look at Examen, an e-
billing software company recently acquired by Lexis.

Examen’s fundamental value is to audit law firm bills
and point out anomalies and overcharges. Most large
companies apply far less scrutiny to the billing prac-
tices of most of their suppliers than what Examen
enables for their law firms.
Testing These Ideas
• What could we do to get more of your work?
• How can we get a better day-to-day understand-
ing of what’s going on in your business?
• How can we get involved earlier in problem preven-
tion and get paid for success rather than time spent?
• Can we define a “get-up-to-speed” curriculum
that ensures that everyone working on your mat-
ters has a basic understanding of your business?
• Can we define the work that gets done and figure
out what doesn’t need expensive associates but
could use different kinds of staffing?
Law firms should have a much better understand-
ing of their costs and better ability to predict costs.
Then they can propose engagement models that
focus on client-defined success and deliver greater
profits to the law firm. They should be prepared to
sell based on data that proves quality rather than
• Here’s how we measure productivity—what do
you think?
• How many of the goods and services that you buy
had price increases over the last year? By how much?
• How many of the goods and services you buy have
input-based pricing (e.g., hours it took to complete)?
Do you view variable, input-based pricing as an indi-
cation of service-provider sophistication and quality?
• What are your highest-quality operations (internal
and external)? How do we compare?
• Given that SarbOx is driving process maturity
across your organization, how do you characterize
our process maturity?
• Are there any formal methods we can use to measure
the quality of legal services?
• Can we set up some metrics that will demonstrate
over the coming year that our quality is superior to
other firms?
• For legal services, is your primary trend insourcing or
outsourcing? How does that compare with other ser-
vices that you buy? What should we learn from this?
How satisfied are you with your relationship with your
audit firm? Given that audit firms are experiencing a
boom year, what should we infer about what our own
very strong financial performance means about your
level of satisfaction with us?
• If we were advising you on an outsourcing contract,
there is no doubt we would recommend some basic
provisions like a Service-Level Agreement, pre-
dictable pricing, sign-off on satisfaction, and quality
standards. Can we explore those with you?
• We believe the day-to-day work of the company in
hiring folks, generating revenue, designing and build-
ing new products, is the Core of what you do. Yet
our law firm is generally not engaged with that work.
Is there a cost-effective model where we can help in
these areas?
• What could we do to get more of your work?
• How can we get a better day-to-day understanding
of what’s going on in your business?
• How can we get involved earlier in problem preven-
tion and get paid for success rather than time spent?
• Can we define a “get up to speed” curriculum that
ensures that everyone working on your matters has a
basic understanding of your business?
• Can we define the work that gets done and figure out
what doesn’t need expensive associates but can use
different kinds of staffing?
• This is the data we gather about how we run our law
firm. What do you think?
• Do you think we could improve your service with
thoughtful use of technology?
• How could we get more business from you with
LAW FIRM HOMEWORK:
QUESTIONS YOUR LAW FIRM SHOULD ASK YOU

just assert quality based on credentials. Law firms
will inevitably explore new staffing models, with US-
based labor arbitrage to places like Pittsburgh;
Wheeling, West Virginia; and Boise, Idaho.
5.TECHNOLOGY
QUESTIONS
In the Enterprise
Most sophisticated enterprises view technology
as critical to business success. Like anything new,
technology has had its over-hyping and disappoint-
ments, but if you look at those companies that are
succeeding in today’s competitive dynamic, they are
almost all aggressive and thoughtful users of new
technologies. Leading companies view technology
as a revenue enabler and treat their chief informa-
tion officer as a C-Level executive whose pay is
typically comparable to other C-level executives.
One of the key purposes of technology is to pro-
vide data about what’s going on inside companies,
which can be used to analyze and improve opera-
tions. By making information and metrics more
widely available, companies also enable more
broadly distributed decision-making, empowering
people across the organization.
In Law Firms
In law firms, the role of the CIO is far less
strategic, primarily focusing on making sure the
email doesn’t go down. Law firm CIOs are paid
far less than the median partner, and the domi-
nant data requirement is tracking billable hours
and receivables; law firm leaders operate with
essentially no other operating data. As law firms
continue aggressive growth strategies, they will
increasingly find that scale without information
and technology will not work. You would find
very few $1BB or even $200M companies that

ACC RESOURCES ON RELATIONSHIPS BETWEEN
IN-HOUSE AND OUTSIDE LAWYERS
• ACC’s committees, such as the Law Department
Management Committee, are excellent knowledge
networks and have listservs to join and other bene-
fits. Contact information for ACC committee
chairs appears in each issue of the ACC Docket, or
you can contact Staff Attorney and Committees
Manager Jacqueline Windley at 202.293.4103, ext.
314, or windley@acca.com or visit ACC OnlineSM
at www.acca.com/networks/committee.php.
• James R. Buckley, “Welcome to Lawyerland: Why
Even Brilliant Outside Counsel Cost Too Much,”
ACC Docket 23, no. 1 (January 2005): 22–32, at
www.acca.com/protected/pubs/docket/jan05/
lawyerland.pdf.
• James R. Buckley, “Adventures in Lawyerland:
Part 2, Cautionary Tales of Complex Litigation,”
ACC Docket 23, no. 3 (March 2005): 78–84, at
www.acca.com/protected/pubs/docket/mar05/
adventure.pdf.
• James R. Buckley, “Escape from Lawyerland: Part
3, How the Right Business Tools Can Cut Lit-
igation Costs Down to Size,” ACC Docket 23,
no. 4 (April 2005): 58–77, at www.acca.com/
protected/pubs/docket/apr05/lawyerland.pdf.
• “Leading Practices in Strategic Outsourcing and
Alternative Service Models: What Companies Are
Doing,” an ACC Leading Practice Profile, at
www.acca.com/protected/article/lawdman/lead_
outsource.pdf.
• Eric Margolin, Jacqueline Oliver, Rob Thomas
and Kent Zimmerman, “Outside Counsel
Relations: The Basics,” ACC 2004 Annual
Meeting course material, available at
www.acca.com/am/04/cm/805.pdf.
• “Outside Counsel Management,” (September
2004), an ACC InfoPAKSM
, at www.acca.com/
infopaks/ocm.html.
• Ronald F. Pol and Patrick J. McKenna, “The
Quest for Seamless Service: Ensuring Con-
sistency with MultiOffice Law Firms” ACC
Docket 23, no. 1 (January 2005): 34–55, at
www.acca.com/protected/pubs/docket/jan05/
seamless.pdf.
ACC offers a wide range of resources on the
topic of outside counsel management, including
sample forms and policies such as:
• Law Department Evaluation of Outside Counsel
(2004), available at www.acca.com/protected/
forms/outsidecounsel/evaluate_oc.pdf.
• Outside Counsel Policies and Procedures (2005),
available at www.acca.com/protected/forms/
outsidecounsel/manage.pdf.
For more, visit the ACC’s Virtual LibrarySM
at www.acca.com/vl/ and search under the sub-
ject-matter heading “outside counsel manage-
ment.” Looking specifically for a sample form?
Limit the search to the material type “Sample
Forms and Policies.”
ACC’s Virtual LibrarySM
is located on ACC
OnlineSM
at www.acca.com/resources/vl.php. Our
library is stocked with information provided by ACC
members and others. If you have questions or need
assistance in accessing this information, please con-
tact Senior Staff Attorney and Legal Resources
Manager Karen Palmer at 202.293.4103, ext. 342, or
palmer@acca.com. If you have resources, including
redacted documents, that you are willing to share,
email electronic documents to Julienne Bramesco,
director of Legal Resources, bramesco@acca.com.
From this point on . . .
Explore information related to this topic.

operate with as little information as law firms.
Cisco has sought to automate as many of its
internal functions as possible, to create a self-ser-
vice department that allows NDAs to be created
and contracts to be signed on a 24-7 basis. We’ve
illustrated the basic flow that allows nonlawyers
inside Cisco to create NDAs—following rules
established and managed by the Cisco legal
department—in the graphic “Automating Legal
Functions” on p. 84.
Cisco’s simplification of transactions was only a
starting point, however; the bigger change was the
use of electronic tools to transform interactions.
This means interactive tools that allow for simpler
disclosure of patentable ideas and simpler prose-
cution of the patents. This also means a discovery
lab that radically changes the economics of docu-
ment production. Each area of practice is suscepti-
ble to being restructured. For law firms and their
clients, the key will be developing technology tools
that drive more efficient interaction, simplifying
information flow, avoiding duplication of effort,
and allowing all parties access to information at
all times.
Testing These Ideas
• This is the data we gather about how we run our
law firm. What do you think?
• Do you think we could improve your service with
• How could we get more business from you with
Law firms can use technology to get closer to
clients and access information. Like every other
industry, they can find ways to leverage technol-
ogy to improve efficiency. Indeed, unless law
firms can find ways to better leverage technology,
it is hard to imagine how their scale-driven strate-
gies can be successful.
LAW FIRMS AND LEGAL DEPARTMENTS: SEEKING A
NEW PARTNERSHIP
Law is a marvelous profession and law firms are
terrific institutions. But as our friends in medicine
have clearly seen in the last 15 years, talent, hard
work, and even valued service are no guarantees of
ever-rising incomes or professional satisfaction.
Law is about to enter a new era, which will reward
the winners and punish the losers. Embracing the
challenges of this new model will be professionally
enhancing for many, if frustrating and difficult for
others. The good news is that this new model will
largely take lawyers “back to the future,” toward
the historically close relationships facilitated by
retainer-style pricing and aligned goals. GCs, who
are often closer to this future than law firms, can
help law firms move forward.
NOTES
1. Geoffrey A. Moore, Living on the Fault Line: Managing
for Shareholder Value in Any Economy (Collins 2002).
ACC Alliance Partners
The following ACC Alliance partners offer outside counsel-related services. To receive your ACC
discount, be sure to mention that you are an ACC Member when inquiring about services.
Bridgeway helps corporate legal departments improve performance through technology-based best
practice solutions. www.bridge-way.com
Examen offers Web-based outside counsel management services, including alternative pricing
models. www.examen.com

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