Legal IT Insider spoke to EY director Jessica Lazarus and legal business development leader Chris Pullen to find out about the launch of EY’s flexible legal managed services offering Core Law, which is targeted at SMEs but is finding traction among bigger financial services companies that are attracted by its ‘pay as you go’ approach.
EY in November launched Core Law, which has seen it redesign the scope and pricing of its existing legal managed services offering to make it more flexible and accessible to corporates of any size.
The Big Four company, which in April 2019 acquired LMS provider Pangea3 from Thomson Reuters, has for around six months been working with beta clients to bring the new offering to market.
The person behind the venture is director Jessica Lazarus, who was previously engagement manager at LOD, and joined EY in September 2020. Lazarus, who is a lawyer and has worked as a solicitor at organisations including Royal Bank of Scotland, Lloyds Banking Group, Addleshaw Goddard and BNY Mellon, told Legal IT Insider: “EY works with large banks and financial institutions with legal managed services, but I noticed that smaller businesses and other bigger companies were not used to working in that way. They want the benefits of legal managed services without the multi-year contracts and high volume which was on offer. I thought, ‘How can we take all the learning and redesign the scope, the pricing and delivery so it works in a much more flexible way, so clients can trial it and increase what they are doing, and we can grow with them over time?’”
EY did some market testing of the service before entering its six-month beta testing, and there are four main areas in Core Law’s scope:
- Contract management – taking business as usual and routine commercial contracts and providing an end-to-end service, reviewing, negotiating and drafting the contract – sending it back ready for signing;
- Regulatory support – helping clients who are expanding into different jurisdictions to understand the regulatory environment and map that to their business functions to help them to understand their various obligations;
- Governance and operations – includes cosec support and helping clients to get a handle on what work they have; what they want to send out. It includes a fundraising/IPO readiness workshop where EY works with the client to get their business ready for due diligence with a view to an exit;
- Data privacy – EY has been building out its data privacy team so it can put some of its services into the core law model.
Business development leader Chris Pullen says: “What is interesting is that we started off with startups in fintech in mind, but this is a service we’re also talking about with global banks and large financial institutions. A lot of organisations like the idea of legal managed services but are reluctant in terms of cost – this way it’s a low risk, low maintenance set up where you can pick a very small service. We thought we’d start in one sector but across financial services we’re seeing huge interest.”
Lazarus adds: “Enormous global banks and payment providers are interested in that way of working – they don’t need to commit to a volume, we’re able to flex in terms of pricing, volume, and scope of services. They can pick and mix depending on their legal needs.”
There are two different costs structures for Core Law:
- Pay as you go – there is a menu of services, and each has a fixed fee. You pay for what you consume.
- Minimum spend – there are two different brackets: £25,000 a year and £50,000 a year.
Lazarus is candid that these brackets will evolve once EY better understands how clients are using the service. She says: “They have the fixed up-front price but pay less because they are committing to an amount. Clients can move from pay as you go to a minimum spend agreement once they work out what they need.”
Pullen adds: “It goes back to clients who don’t know what they need, and this is a way of working out if legal managed services makes sense.”
Delivering LMS at scale
Given this flexibility, how will EY ensure that Core Law is profitable?
Lazarus says: “We’ve got the infrastructure from working in legal managed services for a while. We use a combination of people process and technology and the teams vary. We use a combination of our teams within the UK offices which are partner led; to trainees and our onshore team in the Wirral; to our global offshore delivery services, depending on the type of contract or client. If they are German, for example, we use our team in Argentina, which have the language capability. If its ISDA work, we use the team with experience of that in Poland. In India they are used to working with commercial contracts.”
The process will involve helping clients to build their playbooks and Lazarus says: “A lot of clients have previously used secondees or people like that to help them with overflow. The trouble is that all the knowledge goes out the door with them. We are trying to help them keep that knowledge and build out the playbook and templates that they can then use to self-serve.”
Pullen said: “One of the master strokes of EY strategy was when we acquire Pangea3. They knew how to do it and how to make money and we are just saying ‘how do we apply that across the industry.’”
EY has a number of advantages in providing this service, not least that it is not competing against a billable hour culture. The amount it charges is based on experience and Pullen says: “We know how much a piece of work costs. If the client wants a break down, we provide it, but the starting point is what we will bill you unless you change the scope.”
In terms of the platform, Core Law is tech-agnostic, and Pullen says: “We have always been tech agonist, but the feedback is ‘we don’t want any more technology, we have plenty. We want you to work with our technology and integrate with that.’
Lazarus says: “We’re keen to make it as easy as possible. Some clients want us to integrate with their system – one has HighQ and we’ve been able to integrate with that. They are sending a percentage of transactions to us and keeping other strategic ones. But for clients that don’t have that capability or inhouse technology, we have our legal operations platform based on KIM. The client can instruct us through that, and it has a workflow tool to ensure that work is allocated to the right person and data insights that we can feed back to the client. And then we can do everything through email if that’s what the client wants.”
While technology is adding efficiency Lazarus says: “This is isn’t a technology solution, it’s a technology-enabled solution.”
Standardisation and automation
Inevitably, EY is looking towards standardisation and automation to enable it to offer the Core Law service cost effectively. Lazarus is developing automated playbooks, where clients can instruct EY through dynamic forms that automatically populate the first draft of a contract, for example. However, Lazarus says: “It will never be fully automated.” She adds: “We can go a long way through KIM but we are always looking at what technology allows us to provide the best service and that is continuously evolving.
EY has a workshop kick off where it ascertains what is driving the client, what they are hoping to achieve and what it means for how they contract and Lazarus says: “With these playbooks, the rationale is as important as the output.”
One area they are actively working on is marketing material that need to pass through a legal lens to ensure that it’s compliant in different jurisdictions. Lazarus said: “Lots of teams have legal copy clearance where all the marketing material needs to pass through a legal lens to make sure it’s compliant. Legal teams are swamped with it but it can be standardised very easily and that is something they can send to us.”
Cannibalising existing revenue
Given that Core Law looks to be attractive to EY’s existing client base, how can the accounting giant ensure that the new offering doesn’t effectively cannibalise their existing offering?
Lazarus says: “That’s a question we had internally as well, which is why the scope of services is important. If it’s advisory led, we wouldn’t take it on as part of Core Law. Anything that would need a more senior lawyer, or a specific piece of work, wouldn’t come through Core Law.”
Pullen adds: “The larger legal managed services contract are often event driven such as due to a change in regulation like IBOR, but a lot of what Jess is talking about is business as usual. They need to outsource but it’s not top of mind so they can try before they commit, and Core Law just builds up over time.”
Lazarus is focused on working with SMEs – regardless of whether they turn into the next unicorn – and says: “It would be lovely to see them grow but the gap is in this space.”
EY has discovered that many clients don’t have a legal managed services panel and Pullen says: “Clients are still trying to work out how to divide legal work. You would think large banks are all using legal managed services but they aren’t.”
The ultimate goal is to ensure that a lot of these contracts are self-serviced, and Lazarus said: “That’s where we want to help them get to but it’s the final step and we can help them get to that. It’s why the playbook is so important: we need that to help the businesses self serve.”