ROBERT ZAHLER - PILLSBURY-Article-201611100701

Legal Week Intelligence, in association with Fulcrum GT, recently published the first edition of its Top 20 Legal IT Innovators report, which profiles the law firm leaders, in-house lawyers and tech pioneers driving change in the legal profession.

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A partner in Pillsbury's global sourcing practice, Robert Zahler advises international clients on a wide range of work, with particular emphasis on sourcing – both information technology outsourcing and business process outsourcing.

As a young lawyer, Zahler spent four years working on the legal fallout from the Three Mile Island accident, a partial nuclear meltdown that happened in March 1979, in Pennsylvania – the most significant accident ever at a US nuclear power plant. "It was very exciting, very interesting stuff," he says.

In the late 1980s, Zahler began representing customers in large-scale IT outsourcing transactions. In 1990, he advised Texas Air on "what was purported to be a billion-dollar deal over ten years" to sell part of its airline reservation system and turn over all their IT operations to Electronic Data Systems (EDS).

In doing the deal, explains Zahler: "We re-looked at the whole concept of outsourcing and what it meant, and we came up with a model that was fairly different from the original EDS approach." It taught him to be innovative. "These types of relationships were of sufficient value, of sufficient importance and of sufficient length, that it was worth focusing on them as somewhat different."

The problem, he explains, was: "Once you announced a deal and signed the initial contract, the customer lost all leverage. You could not back out of the transaction (that is, refuse to close if implementation details were not to the customer's liking), since you had already destabilised your workforce by telling them they were all going to transfer to this vendor, whom they all feared and many did not like. So we adopted a model that said: we need to work through what would normally be put off as transition after the deal is signed.

"That meant a whole rethinking about what the contracts were and the type of skillsets that lawyers need to bring to such a transaction. We wanted to work through all the details before signing the agreement. That's what we did and, after the Texas Air deal, the practice throughout the 1990s just exploded: I could not get enough bodies to do this stuff." Expanding internationally, he recruited several lawyers from a number of English law firms in order to open a London office and that too "flourished beyond imagination", he says.

But innovation also came at a cost. "We created more legal competition for ourselves because you couldn't always keep the contracts behind the veil," he says. Boutique consultants also entered the marketplace.

We decided if consultants were going to compete with us, we'll compete head on

Zahler's next innovation was to fight on their territory: "We decided if consultants were going to compete with us, we'll compete head on," he says. "So we went about recruiting a set of high level consultants to join us. They were not a subsidiary or a separate standalone company that we were in a relationship with, they were us. Because of legal constraints in the US, we couldn't call them partners; we called them principals [and] they were compensated at levels equivalent to partners in the firm."

In creating a consulting group capability within the firm, the objective was to integrate. "Our product offering changed," says Zahler, "in that we explicitly said: we offer both legal and consulting services within the framework of a law firm. It continues today and accounts for much of the net new business. We almost always market jointly: lawyers and consultants offering a spectrum of professional services that are relevant to outsourcing."

Innovation through simplicity was integral to its success. Zahler and his team wanted to simplify the paperwork – documents that might be 1,000 pages in length, describing the services, service levels, pricing methodologies, and terms and conditions – into a straightforward visual model.

"We developed a visual methodology in the form of a matrix; we called it the ValueChain," he says. "One axis lists slightly more than 100 standard IT processes, each with a thoughtful description of what is involved. The other axis is bespoke, uniquely created for each client: a description of their organisation from an IT perspective – by geography, or by line of business. Having created a matrix with two axes, the intersection can then be coloured in: one colour says the supplier does it and another colour says the client or customer does it. If there are multiple suppliers, we use multiple colours for each."

As a visual tool, it then becomes immediately comprehensible by everyone involved. "We just wrote some contractual wrappers around it and that goes in as part of the contract. Our clients love it, we love it and to this day, we're the only people who do this type of thing."

Zahler suggests the outsourcing industry is "almost unique", explaining: "For the size and the number of deals that go on, the amount of litigation with respect to these deals is trivial, particularly in the US where everyone sues everyone. There's hardly any litigation. The reason for that is because whether it is my clients who want to sue, or the supplier who might want to sue us, I say to them: what is it you want to achieve? And whatever they want to achieve, we can almost always achieve it in a negotiated settlement."

To remain innovative 41 years after leaving Harvard Law School, Zahler reads a lot: "I've always been a geek. Technology interests me, so I read things whether they're relevant or not." And he continues to do rainmaking: "I sell deals and what I've focused on is what I call pathological deals – the transactions that are in trouble, they need to be renegotiated, restructured, something done with it. I pick and choose and I get involved because I think I add real value."