Mission Possible

BY ROBERT C. MATTERN
Legal Management, August 2009
 
Every law firm is exploring ways to reduce expenses and increase billable revenue in the current economic climate, but decision makers such as firm administrators may overlook a key negotiating factor: vendors are under even more pressure to maintain accounts and the associated revenue streams. This creates an ideal environment for the negotiation, or re-negotiation, of the contracts that create the foundation of your firm’s support services.
 
In reviewing the contracts/costs for each service area in your firm – including equipment and outsourcing, in-house operations, cost recovery services, output/printer management, overnight delivery, off-site records storage, legal research and office supplies – make sure to consider:
 
• pricing that is competitive and describes how any changes will boost the firm’s bottom line;
• the provider’s ability to adapt to changes in volume, service levels and equipment requirements;
• detailed performance standards; and
• regular reporting criteria.
 
THE UNTOUCHABLES: READY FOR CHANGE?
The new economy also offers an ideal time to re-examine how all of your firm’s support services are utilized. Is it necessary to maintain current service levels? Areas once considered “untouchable” now may be eligible to be
reviewed and modified.
 
In examining these areas, you also must consider how the firm is recovering the costs associated with each of these areas. Again, the “unchargeable” areas of cost recovery may now be seen in a different light. If your firm has drawn the line at adding areas of recovery – for example, printing and scanning – then it may make sense to re-structure your support services to minimize your firm’s exposure to their costs.
 
EXTENDING CONTRACTS
Now also may be an ideal time to extend your equipment or outsourcing contract if your firm is satisfied with the vendor’s performance. However, if you last renewed your contract without seeking competitive pricing, you should seek competitive proposals now before simply making a contract extension.
 
Typically, the highest-value support service contracts – with the possible exception of legal research – involve equipment and outsourcing, areas ripe for major savings. If the firm’s per attorney costs have not decreased by 20 percent or more over the past five to seven years for your equipment and outsourcing contracts, then you are leaving money on the table.
 
But let’s say you renewed your contract, and generally your firm is happy with the services being provided. If your vendor hasn’t offered, then ask the company to re-evaluate its service offerings, staffing levels, hours of operation, equipment placements and pricing. In other words, take a look at your operation from “ground zero” because much may have changed since the last time you reviewed it:
• Your print volume has doubled, which means your copiers / multi-functional devices (MFDs) are        under utilized unless you are using them for print output.
• Your staffing levels have changed.
• The workflow software incorporated in your current agreement is probably not being utilized to its fullest extent, and native software incorporated into the equipment will now handle the functions you are using.
• Facsimile volume has continued to plummet, as scanning and e-mailing have increasingly replaced faxing.
 
OPTING FOR EARLY RENEWAL
If your vendor comes back with attractive pricing and some type of renewal incentive, then it may be worthwhile to consider an early renewal. Discounted pricing should be in the range of 12 percent to 22 percent, with a renewal incentive equal to the discount that the firm would have received if it agreed to the contract terms that you are extending.
 
The one key aspect of this extension/renewal is the equipment. Typically, convenience/satellite equipment will not last much longer than three years. If you built into your original contract flexibility language (ability to add, delete and upgrade) without lease buyouts or early termination fees, etc., then you should be able to swap out your equipment and place new equipment for the extension. Depending on the equipment’s age, there may be some advantages to extending the equipment currently placed and/or right-sizing the equipment to adjust for usage and functionality.
 
TO REDUCE OR NOT TO REDUCE
If your support services operation is managed by an in-house staff, then reducing staff and hours is more difficult. If you have the management professionals in place, you can conduct the same exercise as you would if they represented an outsourcing vendor. Have the management of the area start at ground zero and, based upon the volumes and service levels, envision what ideal support service models would look like.
 
Another area of opportunity is to examine what is being sent off-site to overflow vendors (repro and litigation support) and determine what can be brought back in-house. An operational review and return-on-investment analysis must be completed to determine if the services can be brought back in house profitably.
 
Lastly, make sure your clients will pay for these services if they are performed in-house. There is no sense in incurring additional costs and then not having the vehicle to recover them.
 
OUTPUT/PRINTER MANAGEMENT
One huge area of opportunity is developing a firmwide plan on the deployment and maintenance of local and networked laser printers. For every “impression” shifted to a MFD from a local or network laser printer, the firm can generally cut its costs in half if the MFD contracts are structured correctly.
 
Other areas that typically have opportunities for savings and service improvements are overnight delivery, off-site storage, legal research and office supplies contracts. Creating a competitive situation either through a bid process or the use of benchmarks can only lead to reduced expenses and, if done correctly, improved services.
 
PLAYING YOUR CARDS RIGHT
Remember, vendors are under as much pressure as you are to retain clients. Use that fact to your advantage when evaluating and negotiating for your support services and equipment. Even if you are completely satisfied  with your current providers, you owe it to your firm to seek out more favorable pricing and arrangements with those vendors. Also, because the business world has migrated from copy/fax to print/scan, your support situation probably needs to be refreshed anyway.
 
The good news in a bad economy is that you, the customer, hold all the cards. How you choose to play those cards could save your firm a lot of money – and that would certainly reflect well on you as a strategic asset to your organization.

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