Reducing legal spend is an arduous task for many in-house counsel that face increasing pressure to manage cost efficiency. But, in a demonstration of the increasing cost pressures facing firms, such a feat has been substantially achieved by the UK arm of telecoms giant Telefonica which has reduced its external legal spend by 66% since 2012.
Led by high profile general counsel Edward Smith (pictured), the team made cost reductions for the 2013 financial year of approximately £1.5m (or 33%), and reduced 2014 expenditure by 47% (or £1.4m), totalling £2.9m (66%) over two years.
According to Telefonica UK’s head of legal Kent Dreadon, the body of work undertaken during the period has been ‘no less significant to prior years’ but instead reflects ‘the fact that our processes for competitively tendering external work are effective and working well’ and that, ‘standing back and reflecting, our headline achievement has been managing to transform our external legal spend.’
Major mandates in 2014 included handling exclusive deals with Amazon for its first phone; responding to and shaping Ofcom’s proposed guidance on mid-contract price rises, which related to the business’s ability to levy annual RPI increases to monthly subscriptions; and ongoing work for the UK government’s £1.2bn procurement involving the Emergency Services Network. While in 2013, the company arranged a £1.2bn outsourcing deal with Capita which Simmons & Simmons advised on.
Dreadon points towards multiple other factors, including possessing a team who are ‘conscientious, want to do great work, and solve the problems that matter themselves rather than farm work out and rely on external lawyers’. He further cites Telefonica’s internal liaison programme of matching team leaders with directors of the business in an effort to become part of senior leadership teams which, says Dreadon, means issues are ‘cut off before they become difficult ones because we have a great line of sight into what is happening or about to happen.’
‘The movement of team members around teams including in our top line means that many more people in the team better understand the wider business which makes them more efficient at doing their jobs because their knowledge base and networks are so much more extensive.’
Dreadon also notes the company’s flexible working model as not only helping morale and recruitment, but increased efficiency as staff spend less time commuting to its UK headquarters in Slough.
In raising its game to deliver cost efficiency, Telefonica resonates with Legal Business’s in-house survey 2014, which showed that 76% of respondents held a policy of retaining work in-house while a number of GCs noted an increased willingness to discuss flexible fee arrangements and move away from the standard hourly rate.
For more on the in-house survey, see Managing counsel – getting with the programme