Strategic Sourcing of Legal Services: Why Use Virtual Counsel?

This article provides an overview of the various types of service providers available to perform legal services for organizations and suggests a strategic sourcing model that is guaranteed to provide the best value for money.

A. Sources of Legal Services – Corporate Counsel / Outside Counsel

There are 2 traditional types of legal service providers. In legal services circles, they are referred to as “corporate counsel” (sometimes called in-house counsel) and “outside counsel”.

1. Corporate Counsel

A strong corporate counsel will have a general knowledge of business law and experience managing legal issues as part of the management team.

Corporate counsel help business owners apply a risk-based approach to legal issues – they will know when to call in external lawyers and when it’s not necessary.

Corporate counsel services can be provided by a full-time employee, a part-time employee or by a virtual resource that’s retained to provide services on an ‘as required’ basis.

The most cost-effective model for obtaining corporate counsel services is the full-time employee. However, this is not always suitable for businesses that do not have sufficient legal work to justify hiring a full-time staff. Organizations that do not have sufficient routine legal needs to justify a full-time corporate counsel should consider hiring a part-time or virtual corporate counsel as their first line legal service provider. Virtual corporate counsel can also be used to augment an existing in-house team.

2. Outside Counsel

Outside counsel normally have specialized knowledge or skillsets and normally work within a law firm.

These specialist lawyers are well equipped to handle an organization’s exceptional legal issues.

Given outside counsel’s focus is on the pure practice of law, they are not ideally suited to help the business make risk-based business decisions based on an assessment of legal risk in the context of the organization’s business.

B. Relative Cost of Corporate vs. Outside Counsel

Type Cost Comments
Corporate Counsel Full-time/ Part-time $
Virtual $-$$
Outside Counsel $$-$$$$ Cost is a function of seniority of lawyer, specialization, and location.

C. Strategic Sourcing – Using the Right Service Provider for the Legal Requirement

Every organization has a mix of routine and exceptional legal matters that require the assistance of a lawyer.

A strategic purchasing strategy matches the needs to the right type of legal service provider.

In a strategic sourcing model for legal services, a corporate counsel should be appointed to perform front-line legal services to the business much like a family doctor does for day-to-day health issues.

Using corporate counsel to address the day-to-day legal needs is a good strategy because corporate counsel will support a risk-based assessment to business decision-making. Not only will counsel assist in resolving the matter, it will help the organization decide how much time and money to invest in resolving a matter.

For example, not all issues require a fully developed legal opinion on letterhead. A corporate counsel understands when an email is sufficient vs. a fully developed legal memo vs. the need to refer the matter to outside legal counsel.

D. Ideal Allocation of Time Spent depending on the Legal Need

TIME SPENT
Legal Need Corporate Counsel ($-$$) Outside Counsel ($$$-$$$$)*
Routine legal matters 90% 10%
Exceptional legal matters 30% 70%

*When using outside counsel in conjunction with corporate counsel, normally the outside counsel is more senior and has greater expertise and therefore at the top of the range in terms of costs.

It may come as a surprise to see that under this model corporate counsel continues to provide services and add value when outside counsel is retained. When corporate counsel is involved, they will perform the information gathering and preparatory work that feeds into the outside counsel’s work, play an important liaison and quality assurance role and ensure the business is receiving value for money from the outside counsel.  Corporate counsel may also play a part in developing initial drafts of material.

If there is no corporate counsel involved, the law firm will normally assign a junior lawyer (lower end of the $ range) to assist on a file who will perform the functions otherwise performed by corporate counsel.  While the cost of junior counsel will sometimes closely approximate the cost of corporate counsel, the junior counsel may not have the experience and knowledge of the business to add the same kind of value for each dollar spent.

Summary

A strategic sourcing strategy for legal services will almost always include using corporate counsel to provide day-to-day legal support. Corporate counsel are best positioned to help businesses on routine matters, are cost-effective and can also help businesses avoid spending needlessly on outside counsel.  For organizations that can’t yet justify hiring a full-time in-house lawyer, virtual corporate counsel can serve as a proxy to a full-time employee and augment an existing legal department as required.