Ingram Micro GC: In-House Law Departments to Keep Growing

There’s a clear trend in Big Law practice of corporations building more capable legal departments that are less dependent on law firms, but it’s not so obvious where this evolution will lead.

Asked whether companies and law firms have found an appropriate balance, Larry Boyd, Executive Vice President, Secretary, and General Counsel at tech giant Ingram Micro , said the pressure is still on law firms to do more or charge less.

“I think companies are going to have to continue to figure out ways to do more things themselves,” Boyd said, conceding that companies will always need law firms for “bet your company” litigation, but insisting that corporate clients, even those whose legal departments have already grown considerably, are still looking for ways to take over legal work.

“As far as transactional work, corporate governance, securities work, working with lenders on financial instruments, and things of that nature are concerned, firms will continue to feel pressure to get more efficient, or to lower their rates, otherwise I need to find cheaper counsel.”

Ingram Micro is a wholesale technology products distributor based in Southern California. A graduate of Stanford undergrad and Stanford Law, Boyd has been Ingram Micro’s GC since 2004. He recently spoke to Big Law Business about the future of corporate practice, how he keeps down legal spend, and the need for lawyers to be concise.

Part I Excerpts:

In some respects, if the firm is not willing to embrace the same approach — if they’re not willing to embrace the idea of not using $400-an-hour associates to do document reviews or contract reviews for M&A due diligence — then we’ve got to go and hire our own outsourced provider to do that at a much more attractive price point.

I count on somebody that can pick up the phone and give me an answer to a question in five or 10 minutes, and bill me for five or 10 minutes, not an hour. Somebody who won’t hand the thing off to some associate who’s going to spend two to three hours preparing a long memo on something, which I really don’t need.

When I find a lawyer who is thrown into a crisis situation or a very important transaction, or is answering a really important corporate question, and is able to get on the phone and in 15 minutes just spell everything out for a board meeting — that’s a great lawyer. That’s someone you want to have on your team.

Below is an edited transcript of the first installment of the interview.

[caption id="" align="alignleft” width="300"][Image “Larry C. Boyd” (src=http://corp.ingrammicro.com/CorporateSite/media/Corporate-Website/Bio%20Photos/exec_larry_boyd_1.jpg?width=300&height=450&ext=.jpg)]Courtesy of Ingram Micro[/caption]

Big Law Business: You were at at Gibson Dunn for 22 years. What kind of work were you doing there?

Boyd: I started out in corporate real estate and very quickly jumped into litigation my first year there. That was back in the day when you actually had a formal rotation program. My corporate rotation was mercifully brief at the time.

I was working in a smallish office, and one of the partners had a jury trial up in Pasadena and desperately needed help. So they grabbed me, and I helped on the trial brief, helped on jury instructions, sat in the second chair during the trial, fed evidence, and helped him figure out cross examinations.

It was rather energizing, and something I decided I wanted to do. So I did it for the next 20, 21, 22 years, with a focus on general business litigation, intellectual property, and unfair competition. But I was in the Orange County office, which varied in size between about 50 and 80, 90 people while I was there, so you tended to do a little bit of everything unless you wanted to travel a great deal.

Big Law Business: What made you want to move in-house?

Boyd: Towards the end of my career at Gibson, I was starting to realize that, despite my early jump from corporate work to litigation, the thing I found the most rewarding was when clients were starting to use me as more than just a hired gun.

Occasionally clients would call me up when they wanted to bounce something off me, or wanted help with particular corporate problems, and depending on what it was, I’d either field it myself or pull in some corporate associate or one of my fellow partners to help the client out. But I really liked the feeling of being part of a team.

So I just started looking around and came up with a short list of companies here in Orange County that were public, that I knew had legal departments, that I felt would have sophisticated, interesting problems. I just sort of kept my ear to the ground.

In 1999, about halfway through the year, I found out that the general counsel at Ingram was looking to hire someone to run the North American legal team for him. I just called him up and offered my services. We hit it off, and he hired me.

Big Law Business: What are some of the unique challenges that firms have to face when they’re dealing with corporate clients in the tech world?

Boyd: If we’re talking services, it’s a somewhat different equation, but in the world of tech products and software, you’ve got constantly falling price points. Average sales prices for the same amount of computing power, the same gizmo, the same tool, is necessarily, year-to-year, quarter to quarter, going to be less.

So we’re constantly faced with the challenge of providing more value to our customers in order just to stand in one place, let alone increase the top line and increase profitability. We really need our outside legal counsel to approach things the same way, and that isn’t necessarily the world of the big corporate firm.

Big Law Business: What are some things you’re doing to keep down outside legal costs?

Boyd: Part of it is try to be as selective as possible in what we send outside. We don’t do our own litigation. Fortunately, we don’t get sued that often, so we haven’t had too many life-changing experiences with litigation.

In securities work, disclosure, M&A transactions, things of that nature, we used to hand things to a competent firm that we were comfortable with, and although we had discussions up front about the budget, who would be working on it, those sorts of things, we pretty much left things in the firm’s hand.

Now, we’re starting to disaggregate the work that’s been done, split tasks up, keep some tasks in-house, and work with the outside counsel for things that are really in their sweet spot — things they can do more efficiently, even if they’re not going to do it all that cheaply.

In some respects, if the firm is not willing to embrace the same approach — if they’re not willing to embrace the idea of not using $400-an-hour associates to do document reviews or contract reviews for M&A due diligence — then we’ve got to go and hire our own outsourced provider to do that at a much more attractive price point.

Big Law Business: How much do you spend on outside counsel versus inside legal expense?

Boyd: The rough breakdown is probably about 40 to 60, in terms of in-house expense versus outside spend. That doesn’t necessarily count M&A. That’s the year to year bread and butter work.

Big Law Business: Do you feel that at Ingram Micro, and maybe industry-wide, the trend toward bigger in-house legal departments has run its course, and you’ve found a sweet spot? Or do you think in-house departments will continue to search for more things they can do themselves?

Boyd: I think companies are going to have to continue to figure out ways to do more things themselves. I put aside “bet your company” litigation, large class actions, and that sort of thing. It’s going to take an extraordinary internal legal team to be able to handle that type of thing efficiently, and God forbid you would have enough of it that you’d actually want to have in-house attorneys with those skill levels on your payroll.

As far as transactional work, corporate governance, securities work, working with lenders on financial instruments, and things of that nature are concerned, firms will continue to feel pressure to get more efficient, or to lower their rates, otherwise I need to find cheaper counsel.

I tend to hire lawyers and not law firms. If I’ve got a particular partner that I’m working with, and he or she decamps to another law firm, I’m very likely to follow that partner unless they’re suddenly $200 more an hour.

I count on somebody that can pick up the phone and give me an answer to a question in five or 10 minutes, and bill me for five or 10 minutes, not an hour. Somebody who won’t hand the thing off to some associate who’s going to spend two to three hours preparing a long memo on something, which I really don’t need.

Big Law Business: We frequently hear from GC that they need attorneys to be able to communicate concise, practical answers. Is that it at the top of the list of things you value in a lawyer?

Boyd: It really is, because business people value good advice, but good advice usually is succinct and comes to a point. A good lawyer tells the business person what he or she really thinks they ought to do, rather than giving them two or three alternatives.

Unfortunately, there are still a lot of good law firms out there where the interactions are that way. Lawyers say, “Well, you could do this, or you could do that.” I believe it’s because they don’t want to make the decision for you. They just want you to be well informed.

All of those are good things, but it wastes a lot of time. I can filter that, and I can cross-examine the lawyer — I can try and get him or her to say how they really feel about something. But business people don’t have the same interaction, and God forbid you have to speak directly to the board.

When I find a lawyer who is thrown into a crisis situation or a very important transaction, or is answering a really important corporate question, and is able to get on the phone and in 15 minutes just spell everything out for a board meeting — that’s a great lawyer. That’s someone you want to have on your team.

Part II of the Larry Boyd series will include: Boyd’s thoughts on why firms don’t understand corporate clients like they used to, the best way to strike up a relationship with Ingram Micro, and his current reading list.