Bloomberg Law
Feb. 16, 2017, 4:08 PM

Microsoft is Overhauling How it Hires Outside Law Firms

Stephanie Russell-Kraft

Microsoft Corp. is planning to overhaul its so-called “preferred provider program,” its internal system that determines which outside law firms the corporation routinely uses, one of its lawyers said.

“We’re about to launch a significantly redesigned version of it over the next 12 to 18 months,” said Lucy Endel Bassli, assistant general counsel of legal operations and contracting at Microsoft.

Although development is in its early stages, the new program will prioritize law firms with expertise in specific practice areas rather than general services, and will experiment with so-called “affinity relationships,” in which expert panels of firms will be asked to provide the company with advice on issues from a variety of perspectives.

Additionally, the new program will aim to create direct lines of connections between female associates and minority associates and Microsoft’s junior attorneys, Bassli said.

“We’d like to shake up the traditional relationship of one managing partner to one senior attorney in our department.”

The move by Microsoft toward hiring firms by specialty comes as some law firms such as Dentons and Norton Rose Fulbright have merged in hopes of creating a one-stop shop for clients’ legal needs.

Microsoft’s outside law firms in federal courts over the past five years have included Perkins Coie, Davis Wright Tremaine, Sidley Austin, Fish & Richardson, Orrick Herrington & Sutcliffe, Gibson Dunn & Crutcher and King & Spalding, according to a search in Bloomberg Law’s Litigation Analytics.

The changes tie into a broader shift in how in-house law departments interact with their outside firms as corporate executives seek greater certainty in their legal budget. In December, Big Law Business reported that General Electric had developed an internal website for in-house attorneys to search preferred outside counsel, offering a directory of firms that features information about their rates, expertise and past relationships with the company.

The news may not all be good for law firms. Earlier this month, the Association of Corporate Counsel surveyed 1,100 CLOs in 42 countries to find that 46 percent of chief legal officers said they either definitely will or may replace a law firm in the coming year.

“General counsel are looking for general flexibility with their law firms around how their relationship is structured, to make sure there’s more value they’re bringing to the company and not just bleeding money by the hour,” said ACC president and CEO Veta T. Richardson.

At Microsoft, Bassli said the company is taking a deliberate effort to think beyond the billable hour. The legal department will set targets for managers to hit a certain number of alternative fee arrangements in their budgets, for example.

Bassli said she also hopes Microsoft’s new program will support the work of chief marketing officers, data analysts, program managers, project managers, and financial modelers. These new positions, she explained, can help law firms lower costs in other areas and then pass those savings on to clients. “All of these new functions are growing in law firms, but what I’m hearing is once they’re in, they still have an uphill battle,” she said. “We want to be the client that can help justify and validate the need for these other functions and skills.”

“We also want to figure out how we get more value, different kinds of outputs, and a greater focus on data. Let’s see what our firms can do with technology and automation.” She said Microsoft is also an “avid user” of legal process outsourcing, and will be looking to law firms that do the same.

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