Corporate Counsel Q&A: TMT
In a wide-ranging, candid discussion, Who’s Who Legal spoke with Harry Glasspiegel, founder of Glasspiegel Consulting, about his distinguished career in the outsourcing field, what the future holds for global organisations, and the ways in which lawyers and consultants can best advise their clients on all forms of outsourcing relationships.
With extensive experience in outsourcing as partner at a major US law firm, technology venture CEO and entrepreneur, customer, consultant, and industry thought leader, Harry Glasspiegel is well placed to provide a unique insight into the sector’s development, effective strategies for increased collaboration among customers and service providers, and what it takes to build and maintain successful practices in the field.
Since co-founding the legal industry’s first outsourcing advisory group at Shaw Pittman in the 1980s, Glasspiegel has structured numerous technology and business process sourcing transactions and strategic alliances with leading providers for Fortune 500 companies. Having established his own consulting business in 1999, he continues to assist technology-driven enterprises in sectors experiencing rapid transformation.
Who’s Who Legal: After working inside Shaw Pittman (now Pillsbury Winthrop Shaw Pittman), you left your practice in Washington, DC in 1997, moved with your family to Chicago, and have undertaken a number of different entrepreneurial business roles since. Explain the strategy and consulting work you do for clients involved in outsourcing.
I’ve spent about 25 years in the global technology and business process outsourcing (BPO) arena, working with both private and public entities. It has given me a feel for how technology and business process (and law) help to drive organisations through dynamic markets.
Organisations are looking for ways to use outsourcing efficiently. I try to help them broaden their perspectives – to use the right people at the right time with the right process, avoiding common pitfalls.
Outsourcing incorporates a mix of IT, finance, procurement, legal, HR, and subject matter disciplines. Transactions and relationships can be complicated, political, and bureaucratic. These are typically multi-year arrangements, not one-shot deals – success depends on people learning to work constructively together for a long time.
Though outsourcing has become a multibillion-dollar global market, and an essential tool for organisations, it is still relatively immature as a strategic business model.
The Silicon Valley venture capitalist, Peter Thiel – PayPal co-founder and first Facebook outside investor – asks startups: “What is something you believe that nearly no one agrees with you on?” How would you answer that question for outsourcing?
One minority opinion (with a nod to Hamlet) is: In outsourcing, neither a buyer nor a seller be.
Much of the contending and contentiousness prevalent in outsourcing deal processes is counter-productive. Though it’s important to know and pursue one’s objectives, it’s also wise to think and act less like a buyer or seller, and more like a co-participant in a shared, interdependent enterprise. Doing so requires as much unlearning as learning.
What leads you to this view?
Outsourcing still largely exists on a procurement, buy-sell platform. It’s a cost-driven, competitive, commodity market. However the base service – technology or a business process or service – is constantly evolving.
Although companies may initially think of outsourcing and providers as a commodity, what sophisticated customers ultimately want are flexibility and market leadership that continually improves products and services for their customers.
Customers generally fear outside partners more than they fear themselves. They often don’t realise they have become more overseers than facilitators and collaborators with talent and resources that augment or exceed their own. They frequently employ aggressive transaction and governance process models that do not serve their best interests for long-term success.
Why do you think this perspective isn’t more widely held?
A lot of it seems to be the embedded procurement/purchasing mindsets, and the perception that outsourcing introduces greater risks than keeping existing practices with existing employees in place. The latter is paradoxical, since dissatisfaction with internal processes, and the decision to target internal operations on true core competences, are what lead customers to consider outsourcing in the first place.
The fact is – the industry does not spend a lot of time publicly critiquing mistakes internal to customers, or innovative ways customers can more effectively help providers succeed. The focus is largely outside the company, on “vendors” – a term widely used by the market, but one few customers or advisers are comfortable attaching to themselves and their businesses.
The literature on technology and business process outsourcing reflects this bias. The focus is mostly on shortcomings of service providers (of which there is no shortage), rather than serious inquiry into how customers can do better and motivate their service providers to react more quickly, take prudent risks, and be more innovative.
It’s also generally against the interests of providers to criticise customer processes, for fear of biting the hand that feeds, and customers are not inclined to take the risk of criticising themselves or their own processes, especially when jobs and so much money are at stake.
Your advice to customers?
While most of the commentary in the market revolves around the service providers, it’s the customer who shapes the relationship. Change and innovation must start with the customer. Providers won’t innovate without investment, resources, ideas, support, and encouragement from customers to do so. Customers should in turn understand from their internal operations that innovation does not happen without risks and mistakes along the way.
Lead the way in building a great relationship, cultivate the fine art of compromise, be flexible, and self interest will usually take care of itself.
Find people who can help you build a more collaborative tone and relationship with outside firms, and who will be honest with you about the need to develop additional internal talent to help lead these engagements in a constructive and open manner.
Strong, cross-boundary EQ, diverse knowledge of technology and business, and sophisticated risk management judgement are not easy attributes to find in the market. The best leaders manage to integrate all of this efficiently and sensitively, with great people skills.
Customers also need advocates for a deal at all levels of their organisation – executives who get rewarded for the success of an outsourcing relationship. Instead, the focus has been on risk avoidance, with various types of “vendor managers” given responsibility to supervise the relationships.
What are some other lessons learned for customers?
Service providers frequently make mistakes and over-promise – no question about it. But the same is true for internal operations. Customers have more influence over the success or failure of a service arrangement – beyond the deal they negotiate, or the oversight or “governance” they put in place – than they often appreciate.
Large customers bring enormous leverage to the table in deals, but may misuse it and fail to drive mutually advantageous deals. Within the prevailing culture, internal leaders driving sourcing, IT and BPO transactions and relationships are often inadequately trained or motivated for collaboration outside the boundaries of their companies, let alone inside them.
The prospect of large-scale job losses as a result of outsourcing increases politics inside customers’ organisations, which complicates transactions. It can be difficult to secure the assistance of long-time, knowledgeable employees in an outsourcing, given their self-interest.
Customers are in actuality more heterogeneous than homogeneous – outsourcing draws on different elements and inputs of a large company. There’s no single mind or voice of the buyer. It is challenging to amalgamate the views inside a customer organisation in order to speak with one voice and perspective throughout a transaction and long-term arrangement with another company. This presents challenges for companies doing business with the organisation, as well.
Your advice to outsourcing attorneys and consultants?
Companies sometimes begin discussions with prospective partners guardedly, aggressively and wrong-footedly, and without full transparency into historical issues within the organisation. In my experience, transparency increases the providers’ ability to understand and improve an operation, and reduces risk.
Many customers understandably see themselves as powerful awarders of business, who stand to be injured by third parties who don’t share their risk, rather than as humble firms looking for help to better serve customers, and prospective partners (not in the technical, legal sense) in a common, interdependent endeavour.
One result is that RFPs and contracts are often overly detailed, excessively risk-averse, prescriptive, and constraining; too much in the mode of covering every conceivable eventuality and deflecting future criticism. They frequently are not in plain English, and misdirect the tone and orientation away from collaboration.
Lawyers and consultants advising on these deals do not themselves labour under detailed, written performance specifications and procedures. They would brace under the kinds of detailed contracts and service agreements that govern outsourcing arrangements. They typically have greater collaborative interaction with their clients, and more flexibility to be creative for clients, than do most IT and BPO service providers.
Lawyers are trained to represent one side in a deal, and often don’t make the correlation that they can do this best by helping to shape and structure a cooperative, shared-risk relationship. The term “fighting for my client” comes to mind – literally – rather than guiding clients to build a strong, mutual deal.
A majority of customer advisers and sourcing leaders operating in the field do not agree with this assessment. The advisory and sourcing community has provided tremendous expertise and experience, which has helped the industry to grow, and they do not view themselves as overly adversarial or bureaucratic.
What most shaped your views on this?
My parents (whose parents ran small businesses) emphasised respect and collaboration, and dealt with people that way. It’s one of the aspects I most enjoyed in being part of a law partnership with diverse, bright, highly motivated colleagues. Teamwork among lawyers and supporting professionals was emphasised and rewarded. As a result, the law firm grew steadily and markedly over the 18 years I was there.
I’ve seen and experienced the damage to clients and organisations of adversarial behaviours, tone, communications, and relationships, and conversely, have seen the benefits of having likeable, sensible people guiding the discussion and build process. I’ve also been fortunate to sit on all sides of the outsourcing market for many years, learning to understand different, legitimate perspectives, grievances, biases, etc.
What led you to start a new global legal field – advisory services for outsourcing customers – in the late 1980s?
I was a young partner at our law firm in Washington, DC, working with the largest bank in Texas. The Bank’s General Counsel came to me with a new kind of hybrid transaction EDS had proposed to the bank, before the term “outsourcing” even entered the business lexicon. EDS (also based in Texas) offered to take over their internal technology operations and employees under a ten-year “facilities management” arrangement for a large fee of several hundred million dollars. There were no prior prototypes for the arrangement.
My partner and I worked together and drew on resources from existing practice groups at our firm to shape the transaction with our client and EDS. We then realised there was a need and opportunity to organise a separate group of integrated talent to deal with this new, emerging business phenomenon.
How did you explain this new practice to your partners and to clients at the time?
I wrote a one-sentence mission statement to explain the idea to our management committee, which read: “We provide advice and representation to customers and users of complex technology services.” No IP lawyers or corporate law firms were thinking that way at the time. I was merely observing and following what I had learned from our clients (beginning with banks, airlines, energy and health-care companies, and governments) – that the market was beginning to formulate this new business trend and tool, which has mushroomed since.
I suggested adopting a new tag line for our growing, multi-specialty business law firm, and proposed: “where business, law, and technology converge.” The management committee changed that to “where law, business, and technology converge” – still a victory.
This was well before the internet, smartphones, apps, social media, and the cloud became ubiquitous.
Why did you think that was anything more than marketing?
I thought it was important to understand our legal specialties as meeting at the point of intersection where the client and the client’s products and services were provided to the client’s customers.
For me, the key was to learn how to integrate understanding and expertise, rather than to offer it department by department. This was the trend I saw developing in the market among leading businesses, which began to realise they were operating too bureaucratically, in parallel, insular towers within their firms.
I remember Jack Welch at GE writing in annual reports with prescience about the convergence of “front” and “back” offices in businesses, and what he called “boundaryless behaviour”. Everyone is market-facing in one form or another today.
Also, by being in the market, I perceived that technology was becoming a key driver in every aspect of our clients’ and our law firm’s businesses.
I felt that attorneys were too narrowly focused in their thinking, and spent too much time reading about and talking with other lawyers, and not enough time talking to the markets outside law.
While a private practitioner, I was a founding adviser to the largest outsourcing interests group in the market, in which the only initial members – other than myself – were senior technology leaders at global firms. We later expanded membership to lawyers, but the tone and focus on the group remained centred on business.
Even today, many general counsel and private practitioners insist that they do not give business advice, and they spend most of their time with other attorneys. I think that can be stultifying, and doesn’t serve clients or the lawyers well in many cases.
As I see it, much of corporate law consists of business advice, and relationship or organisational advice. Understanding the subtleties of where and how the issues intersect – and how business and values and human relations drive law – and vice versa – distinguishes the good and great lawyers.
What’s an example of advice you give to young attorneys looking for opportunities to distinguish themselves?
Law is a conservative profession, based on following precedent and written strictures. It also requires great mental dexterity and creativity, since no two fact patterns or legal contexts are identical. I often think about two words, from Steve Jobs’ brilliant, simple, and transformative 1997 formulation: “think different”. The only way to innovate is with an open, imaginative mind. This is part of the paradox of “best practices” – they reinforce conventional current ways of operating among the best companies. That’s good. But it doesn’t break anyone out of the pack.
Parenthetically, the phrase “think different” is ungrammatical. Why didn’t Jobs say “differently?” I’m sure he knew what he was doing, and intended the messaging to convey the notion that when we think, we should think: different. Not: the same. Not: best practices. Think about how to differentiate, which is where the edge of the market is. What makes us different? Why should a client or customer work with us, rather than someone else? Why should a judge agree with our theory of a case?
Why do you think lawyers may fail to appreciate this point?
Lawyers too often pride themselves in staying in their lanes – and clients often shortsightedly enforce that territorial mindset, but what’s required today is different and more nuanced.
The paradoxical term, general counsel, applies here even to specific problems. I’m not sure whether general means “widespread, common, extensive,” or refers to a commander, but both apply. The market requires leadership, and increasing levels of broad, strategic thinking, cooperation and hybrid approaches, not unlike what we realised in starting our new outsourcing group back in the 1980s.
Great business lawyers I have known are also great business people, so the lines between law and business are not – at least in my experience – bright. As a client, I want lawyers who blend in to the deal and the team, who are practical, efficient, understand the business and have common sense. I don’t want lawyers walking into the room and everyone stiffening up and holding back, which unfortunately is the norm.
The adversarial model on which much of the legal system is based, and on which attorneys are trained, can lead business attorneys inadvertently into a pattern of guarded or confrontational demeanour and engagement, when a more open, cooperative demeanour and approach can build trust and be more effective.
Is this why you focus on the role of collaboration?
Yes. In those early years – before businesses and individuals were using the internet – there was not the appreciation at law firms, or in the broader business market, for the importance of working and collaborating across boundaries of specialisation or geography, or for the transformative role of information technology. Technology – as distinct from intellectual property – was poorly understood by attorneys and their clients at the time for its potential to disrupt and redefine business paradigms.
Ross Perot, who founded EDS in 1962 after a successful career as a top salesman at IBM, had the vision, creativity and entrepreneurial instincts to move early technology markets from a product mindset (selling hardware and software) to an integrated services mindset – something firms like IBM, Accenture and others did not do until decades later.
That was an important intellectual and market inflection point. It’s only relatively recently that we’ve seen law firms evolving from emphasising their individual legal specialties, to a greater focus on teams and helping clients achieve “business solutions”.
As part of this same evolution in thinking, when IBM first entered the services space in the early 1990s, it formed a unit called ISSC, which stood for Integrated Systems Solutions Corporation. They later changed the moniker to IBM Global Services, in part to broaden the messaging and redirect the emphasis from integrating technology to serving global business.
This was part of my thinking in placing the word “business” first, when I recommended the tag line “business, law, and technology” for our law firm. But business law firms, legal departments, and the legal profession in general, are naturally law-centric, just as technology firms and IT departments are technology-centric, and the transformation to breach boundaries and see themselves as business people serving other business people is difficult for “professions” to embrace.
What was your practice before outsourcing? How did it help prepare you for your subsequent work?
I had come from a background in nuclear regulation – which was at the cutting edge in terms of complex technology intersecting with practical application, legal regulation, and contracting, and in the cross-disciplinary nature of nuclear energy production.
We had lawyers who were also nuclear engineers working closely together with generalists like myself in our group at our law firm. I spent much of 1979 and 1980 at the site of the Three Mile Island nuclear power plant, working on the response to the accident there, where I developed an early appreciation for technology and its applications, and for crisis management.
Teamwork was paramount – there were thousands of engineers, constructors, and operators working together on a small, physical site to design, build, and operate nuclear reactors in those days.
You’ve compared law and technology to medicine in discussing specialisation, integration, and innovation – please explain.
I have spent over 20 years as my older brother’s lead health-care advocate. He unfortunately was diagnosed in his forties with neurofibromatosis – a neurological disease attacking multiple systems of the body – and had to retire early from his robust pediatrics practice. I’ve accompanied him to leading tertiary care hospitals around the US since then to treat his disease.
What I have learned from the experience in the health-care system with my brother, and for myself, has taught me valuable lessons for my legal and business roles since.
First, specialisation is both critically necessary and at the same time, limiting. It can be lethal in medicine. Conditions and problems cut across systems and expertise. This is part of the basis for the concept of “systems integration” in IT.
Lawyers, technologists and doctors emphasise the depth of their specialisation, but often fail in working horizontally, collaboratively, apolitically, and with understanding across disciplines and specialties – to the detriment of patients, clients and customers.
Part of the reason the new health-care insurance site, HealthCare.gov, got off to a rocky start a year ago in the US is that there was a failure initially for one quarterback, visionary and designer to adequately integrate all of the elements of the new program and system – a daunting task, given the self-interested, legacy health-care relationships and practices, and the plethora of players and politics clashing to shape the details of the new health-care “system”.
Of course, customers looking to get insured don’t need or want to see the complexity. Part of Steve Jobs’ brilliance was to convert all the technical complexity of Apple’s devices into simplicity and ease of use by the time the customer saw it.
What’s the best way to broaden perspectives?
There’s no better way to learn a service business than by being a patient, client or customer. My brother often comments that, if he were healthy enough to practise again, he would be a better, more compassionate physician today, using all that he has observed and learned about doctors and medicine from being a very sick patient for two decades.
It’s also true that customers, clients and patients become more effective in their roles by understanding what it takes to provide services.
In outsourcing, it helps to have walked in the shoes of customers, employees, providers, advisers, CIOs, general counsel, shareholders, and investors, in structuring and implementing the most effective, durable, long-term relationships.
What are some other lessons from the health-care field?
Geographically, I research globally for the leading edge medical research and treatments. I treat locally when I can, and go to specialised doctors elsewhere in the US when that seems warranted. I want to know that all my doctors are aware of best doctors and practices locally, nationally and globally. Lawyers, either at firms or in corporate legal departments, need the same breadth of intelligence and knowledge – both for subject matter and the market at large.
Communication among doctors and patients is critical to outcomes in medicine. Leading tertiary care institutions such as Johns Hopkins and Massachusetts General promote doctor-patient e-mail communications, for example, which in my experience tremendously increases the quality of real-time understanding and care, reduces risk and improves outcomes.
Both hospitals and law firms are spending a lot of time advertising their collaborative approaches, but my experience with disease is that it takes a constantly diligent and inquiring patient to self-manage his or her treatments. I’ve yet to meet a great “systems integrator” physician who has the time or interest to manage all elements of a complex disease. Neither internists nor specialists can provide this service in today’s complex health-care markets.
What is the role you see for the patient or client?
I explain to doctors my view that we are collaborators; that we need to work closely together and communicate well and openly. I don’t view the doctor as my arm’s-length vendor, or service delivery agent. I tell them my job is helping them to help me be successful in treating my health. They appreciate that.
For current outsourcing and procurement conventions, that is not the prevailing mindset of the market. Customers are often demanding and adversarial in ways they don’t realise actually interfere with their objectives and success. This is true as well for many other lawyer-client and IT-user relationships.
You have compared business process outsourcing with medical transplants. What’s the analogy?
Like a transplant, removing a major internal department from an enterprise, and substituting the services of an external partner, can be a necessary, but difficult and risky undertaking. Using the medical analogy, it’s necessary to prep the body through rigorous benchmarking, communication and intervention. There can be no downtime in removing the internal “organ” and inserting the new organ in its place. The rest of the body needs to be prepared for the trauma. It takes an experienced, skilled surgeon as quarterback and integrator, who can identify and react quickly to adverse indicators.
The greatest risk post-surgery is when antibodies recognise the presence of the foreign body and seek to reject it. This is the least well understood risk of outsourcing, employees left behind in the host organisation who unfortunately do not ever accept the outside entrant and work insidiously and persistently to expel it over time. There is little discussion of this risk to success, and many deals ultimately fail for the same reasons transplants do – the antibodies see an invader and destroy it, often stealthily and beyond the knowledge and understanding of a CEO, CFO, general counsel, or outside advisers.
What are your thoughts about legal outsourcing?
Global companies are constantly evaluating what combination of inside and outside lawyers best serves the corporation, with cost as a constant and powerful driver of strategy. There is no one right solution for everyone, or even for one company, across time. Business mix, talent, supply, and economics are always shifting, as are technology, methods, and location of service.
There are interesting organisational issues in legal outsourcing. Large corporations and governmental entities rely on their general counsel and internal lawyers for a significant portion of their legal services. But general counsel, their departments, and internal clients, are also clients of external law firms. In this respect, one can think of GCs as the equivalent of both buyer and seller, or user and provider.
Corporate law firms have always been outsourcers, though most don’t think of themselves this way. What’s changed is the industry consolidation, globalisation, digitisation, externalising, fracturing, and disaggregation of both law and business functions, and concomitant restructuring of services nationally and internationally (ie, “globally”) through, for example, offshoring, and the more frequent use of legal services RFPs.
The entity typically responsible for legal services outsourcing in this brave new world is the GC. Depending on his or her compensation model (lowering costs and other considerations), there or may or may not be an incentive to increase or decrease the number or types of internal or external counsel serving internal business clients and the enterprise.
For these reasons, in-house lawyers are in a similar position to that of in-house technology employees, namely, they are subject to being outsourced or “insourced” at different points in the business cycle. Their cost and value must be constantly reaffirmed. Lawyers understand well the concept of a conflict of interest. It is not always easy to fulfil one’s fiduciary role when in-house counsel or technology leaders are in the position of having to decide whether and when to outsource portions of their own departments, jobs, or remuneration.
From an IT or legal client’s perspective, depending on the situation, their in-house and outside service providers can be seen as sharing, or duplicating, the same tasks. There sometimes is a tendency for inside service providers to buffer their outsourcers (including law firms) from internal clients, which can make an assignment, efficiency and success more difficult.
Offshoring, and the movement of business to the world wide web, adds a new urgency and dimension to these issues, where proximity, costs, proficiency, technological tools, understanding, language and expertise all must be considered and balanced, based on the type of work required, and the needs of the business.
What are some other lessons learned for legal services outsourcing from technology and business process outsourcing?
A significant portion of a law firm’s work in many areas consists of elements of work that are not, per se, law. Examples include the insurance claims arena, antitrust, litigation and M&A, where much of the work revolves around file organisation, imaging, digitisation and analytics beyond legal research, briefing, contract preparation, negotiation, etc.
Insurance litigation provides an example. Should an insurance firm spend resources prepping, analysing and organising complex, large dollar claim files, or should they allow their outside law firm to do so, marking up its work? Who has the greater scale and resources to perform subsidiary support functions, an insurance company or a law firm? From what I’ve observed in the sector, global insurance companies frequently send unorganised, large dollar claims files “over the transom” to their preferred law firm litigators, who then perform a mixture of high-value legal work, combined with lower-value work that could have been more efficiently performed on the files before sending them to law firms for resolution.
Corporations face these and other issues for technology and business process outsourcing, having constantly to decide how many outside parties to work with, and what to include in the scope of an outsourcing.
IT and business process outsourcing, and private equity restructurings, teach that if a business process (like law) can be deconstructed, with sub-elements outsourced to lower cost providers – without disrupting – and perhaps even improving – the higher-value functions, there will be a strong business imperative to do so. In the digital age we live in, more elements in a work stream are being deconstructed and parcelled out in this way.
Outsourcing transactions frequently run into trouble as in-house operations seek to baseline their operations, and then measure outsourcers against historical benchmarks. Objective baselining can be difficult due to lack of reliable data, bias, and for other reasons. In any case, businesses change rapidly, and the question is: what value – through, for example, better technology, apps, methods, and more focused expertise – outsiders can bring to the table versus in-house resources (including capital investment and retraining requirements) across a range of future scenarios.
Law firms are realising that to protect their margins, like any other global firm, they must continue to invest in technology and training and reduce expenses to increase productivity and remain competitive. The same is true for in-house operations. This takes us well beyond the issues of lowering headcount, hourly and blended rates, and fixed pricing.
In this environment, general counsel and CIOs, faced with tremendous expense pressure for services that are frequently viewed as being non-revenue-generating, have both greater challenges and opportunities to bring value to the organisation. Management skills – in addition to subject matter expertise – are ever more important.
Where do you see outsourcing headed in the future for global organisations?
Outsourcing is just another word for companies working together to serve customers, and that’s only going to become more widespread. No one company, no matter how large, can focus and be best in every aspect of technology and business process. The differentiator, as I see it, is companies that learn how to work across every possible type of boundary, and that’s a function of leaders understanding what types of knowledge, skills and training are required to do that best in this global, hyper-connected age.
We see how difficult collaboration is within our governmental bodies and politics, let alone in our own organisations. The alternative to working cooperatively outside one’s own perspective, organisation, expertise, experience, political party, etc is to try to do it all ourselves. We know where that leads.
I think Tom Friedman said it best in his book, The World is Flat, when he wrote: “The best companies are the best collaborators. In the flat world, more and more business will be done through collaborations within and between companies, for a very simple reason: The next layers of value creation – whether in technology, marketing, biomedicine, or manufacturing – are becoming so complex that no single firm or department is going to be able to master them alone.”
If you would like to explore any of these issues further with Harry Glasspiegel, you may reach him through Glasspiegel Consulting in Chicago via e-mail at email@example.com or via telephone at +1 773 909 6022 (mobile).