Strategies for Sourcing of Legal Services: Sector Study of Bulgarian Top 100 Non-Financial Corporations

On the background of an evolving legal market there is a debate in both theory and practice about the role of in-house general counsels (GCs). This paper aims to contribute to the discussion by studying the organization of legal departments in large Bulgarian non-financial corporations and their modes of collaboration with external providers of legal services. The research seeks to establish how Bulgarian GCs take decisions about ‘making’ or ‘buying’ legal services, to examine the factors that determine the strategic choice of sourcing and collaboration and to provide a framework for its analysis. Semi-structured interviews were conducted with GCs selected by convenience in terms of accessibility from the ‘K100’ ranking of the Bulgarian business weekly ‘Capital’ (2017 version). The panel comprises 14 respondents but due to presence of interrelations and shared service centres the sample covers over 20 companies. The analysis shows that ‘making’ is preferred over ‘buying’ when it concerns ‘blended advice’ requiring both legal knowledge and organization specific business knowledge. Market dynamics affect the strategy choice and variations in the supplier portfolio design result from the pursuit of two contradicting goals: reduced cost and increased security. Bargaining-based contracting allows better cost management but also isolates the supplier. Close collaboration and investment in relationship development mitigate uncertainty concerns permitting closer integration between legal departments and law firms. A simplified decisional matrix is proposed distinguishing between 4 generic strategies: ‘Open portfolio’, ‘Preferred supplier’, and two ‘Closed panel’ variations – with and without competition.