One of the things procurement folks with time on their hands should be assessing is the potential impact of technology upon supplier cost stacks. And this is particularly true for services procurement.
There is a lot of technology that is reaching a point where the work it does is superior to that of its human equivalent. Anything that can be put into some sort of a process is now fair game and the Business Process (Re)Engineering boom of the 1980s and the 1990s have guaranteed most activities in businesses today are part a well-defined process. This includes service providers that rely on human capital for their incomes, not just traditional manufacturing organisations.
Management consultancies and law firms are two service categories that I think stand to benefit most from increasing their use of technology and AI in particular. As so-called “grunt work” is replaced by a tireless machine, so margins can improve. The question is whether any of that improved margin position can be passed onto buying organisations.
Dennis Garcia, an Assistant General Counsel for Microsoft based in Chicago, has published a comprehensive set of use cases for AI in the legal profession in an article on LexisNexis:
- Conducting Legal Research
- Administrative Legal Support
- Legal Document Generation and Review
- Performing Due Diligence
- Promoting a Stronger Compliance Culture
- Building More Robust Cybersecurity
- Complying with e-Discovery Requirements
- Enhanced Self-Help Legal Resources
Each of these will use less humans to deliver the same outcome in potentially less time. As the entire legal services model within business has been built up around billable hours of a human, legal service buyers and in-house counsel should make it their business to better understand the potential impact technology will have on total cost and start imagining alternative commercial models that could apply when the grunters are no longer working. There are now many emerging niche vendors targeting this lucrative opportunity in the legal services sector: the NYT cites CB Insight’s research as showing that “(m)ore than 280 legal technology start-ups have raised $757 million since 2012.” It’s early days still but now is the time for savvy services procurement practitioners to do the research into implications for their firms.