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Outsouring: M&A in Drag

"Marriage, a.k.a. outsourcing, is significantly different from a one-night stand," says Richard Austin, chief legal counsel of EDS Canada Inc. Obvious? There are a few Bay Street lawyers who disagree. Sure, for the latter, once "the deed" is done, you go your separate ways and never have to call, while for the former (i.e., in-house counsel) the wedding night-if we may be so old-fashioned-is just the beginning of a long-term relationship (one hopes). But the skills you acquire during those one-offs, according to corporate dealmakers in private practice, teach you all you need to know to execute that big commitment.

At information technology (IT) departments and boutiques across the country, IT lawyers beg to differ. Not that they deny it takes a certain je ne sais quoi to close each type of deal, but claiming that one-night stands prepare you for marriage? Puh-leease. Just try running that one by your significant other.

But that's exactly what's going on in outsourcing, the site of the newest turf war in the ongoing power struggle between corporate and technology departments (see "Getting IT," Lexpert, October 2003). Initially the exclusive domain of IT lawyers, outsourcing transactions-the farming out by a "customer" of an internal activity to an external "service provider"-have grown in frequency, size, sophistication and, for lawyers, profitability. Add to that the economic downturn that has deal-making corporate lawyers twiddling their thumbs while their clients search for cost-saving measures, and it's no wonder outsourcing is, as Austin calls it, "the flavour du jour."

"There's a huge interest in outsourcing by our clients, and there is also a huge interest in outsourcing by lawyers," says Richard Coleman, a senior practitioner in the field who leads the technology practice at Osler, Hoskin & Harcourt LLP in Toronto. "It's a function of the fact that outsourcings are becoming bigger, more complex, and more profitable for a law firm to do."

"Every law firm wants to do it," Coleman continues. "Mergers and acquisitions [M&A] as a practice area is down, and there are excellent lawyers looking for transactions they can move to in which they can apply their M&A skills."

Outsourcing seems to fit the bill. A counter-cyclical practice area, which booms during a bust, it clearly has an M&A component. Just as clearly, both as a practice area and as a business practice, outsourcing owes its very existence to IT. But as M&A and IT lawyers argue over who does outsourcing deals best, they both may end up doing nothing at all-if the leading U.S. outsourcing firms have their way.

More fun than a one-night stand

Virtually every major corporation has either taken the outsourcing plunge, or is trying to work up the nerve to do it. Continuing to form the vanguard of outsourcing service providers are IBM, Montreal-based CGI Group Inc. and EDS-the successor to Ross Perot's Electronic Data Systems Corporation.

Richard Austin, now in-house at EDS, used to be an M&A lawyer, and he thinks of outsourcing as "M&A in motion." Many corporate lawyers in private practice characterize it as "M&A in drag" (one practitioner, aptly calls it "M&A that drags"); IT lawyers sometimes call it "M&A in reverse." For Judy Wilson at Blake, Cassels & Graydon LLP, outsourcing is the art of "rolling up the pieces of a puzzle," while John Godber, a partner with Borden Ladner Gervais LLP (BLG) in Montreal, prefers the metaphor of "crystal ball gazing." Representing a diversity of legal backgrounds, each lawyer tends to see outsourcing from a unique angle. Their only consensus: outsourcing is not easy (or cheap).


Think about it. You're outsourcing your IT-or some other business process partially or wholly dependent on IT-on a 10-year contract. In 1993, the World Wide Web did not exist. In 1995, hardly anyone had an e-mail address, and in 2000, "wireless" was still an old-fashioned word for the radio. Care to guess what the industry standards will be in 2013? "It's hard to think IT and think long-term," says Patrice Martin, also a partner with BLG in Montreal. "It's hard to know what's going to be there two years down the line, let alone 10."

For both Godber and Martin, it's this forward-looking element of outsourcing deals that attracts. Says Martin, "When you are working on a typical M&A transaction, you're typically looking at the past. You're looking at the target company and how it performed in the past. An outsourcing is more like a joint venture-you're looking a bit at the past, but you are also looking to shape the future."

"It's building a long-term relationship between the two parties, for five or ten years, you are sitting at day one trying to figure out all that could happen," agrees Godber. It doesn't get much more challenging than that, and there are very few lawyers-and other outsourcing consultants-who can do that sort of forecasting well. There is a significant premium attached to knowing what you're doing. The downside costs can be high, as well as career threatening. Around 50 per cent of outsourcing agreements in the U.S. are in dispute (comparable Canadian numbers are not available), and industry observers believe that number is too low.

"An outsourcing is a living deal," stresses Jay Safer, IBM Canada's general counsel and secretary. Lawyers never just paper a transaction-they build the architecture of a long-term relationship, and even the best relationships have the occasional disagreement. "Before the company outsourced," Safer explains, "there would have been continuing discussion in-house on how to provide better service, to get more money in the budget, to solve certain problems. Do these concerns go away when the service is outsourced? Of course not. With a good service provider and a good agreement, they are minimized, but there are always questions that come up."

Good outsourcing agreements don't include all the answers, but they should provide a methodology through which conflicts are resolved. "Good paper isn't a substitution for co-operation, but it does provide guiding posts," says Wilson. "Throughout the process, both parties are seeking very hard to have, preserve and keep a good working relationship." And that's what ultimately separates outsourcing deals from your run-of-the-mill M&A: "You will be together for a good number of years," says Safer, and that knowledge should govern the behaviour of all parties, and their advisors, through the negotiation process and beyond. Divorce is expensive.

"Fundamentally, an outsourcing is a strategic trust between the parties," says Daniel Logan, an associate with Oslers. And, sums up Alison Youngman, a partner and outsourcing lawyer extraordinaire with Stikeman Elliott LLP, "Where there is a relationship of trust, you can work out problems."


According to Raymond Picard, vice-president of information technology law at CGI, it is that attitude that differentiates between an outsourcing and a merger or acquisition. "You must relay to the customer that this is not like an M&A, where you dump into the other guy's lap all your problems and then run away," he says. "There's ongoing participation and discussion-you cannot just transfer your problems over and then disappear."

But that doesn't mean M&A lawyers can't figure out how to do it. Right?


Chasing the Big O

"Like anything, if you do enough outsourcing deals, you'll get good at it," says Barry Sookman, one of the marquee names at the technology practice of McCarthy Tétrault LLP, and one of the most active outsourcing lawyers in Canada. "What I don't think works is a guy who's done 47 M&A deals, and then wants to do an outsourcing deal. You need to know what the risks are, and how to structure them most effectively.... I've been on the other side of M&A lawyers who try to do it. It's not a type of transaction an M&A lawyer can do effectively."

Duncan Card, who leads the technology practice at Ogilvy Renault in Toronto, is even more blunt. "If you're an experienced technology lawyer, you have been at the forefront of outsourcing from the outset. Business lawyers who have not had the benefit of developing outsourcing experience early on in the technology sector may not have the depth of experience that an IT outsourcing lawyer will have." For Card, that holds true even for non-IT business process outsourcing (BPO) transactions. "IT is so integral to every business operation that you would be hard-pressed to find a BPO transaction that is not IT-intensive.

"I see non-IT lawyers doing outsourcing transactions all the time," Card continues. "Nothing makes me happier than to see them on the other side of the transaction." Occasionally, though, he's pleasantly surprised. "Inexperienced corporate lawyers who insert themselves into an outsourcing transaction can really bog down a deal, but on the other hand, there are many complex outsourcing transactions that require innovative corporate structures and corporate lawyers can really add value in those deals." What it comes down to, as always, says Card, is expertise and experience. But if a lawyer just re-packages himself or herself as an outsourcing lawyer just because M&A work is down-"buyer beware."

If the IT lawyers sound a bit touchy, it's because they are. After all, they were here first. As Alan Gahtan at Gahtan Law Office in Toronto explains, "The early outsourcings were IT-related, so IT lawyers got earlier experience in outsourcing. Over the last five years, we've seen a move to BPO transactions, which require non-IT support and a broader scope of services. As a result, outsourcings must involve corporate lawyers, and are more likely to require the involvement of employment lawyers, tax lawyers, and others."

An IT lawyer himself, Gahtan is philosophical about the evolution. "Corporate lawyers can do a good job, and are needed on many outsourcings. But you still need us for the IT component," he says.

"If there was more M&A work, corporate lawyers would not be chasing outsourcing," notes Amy-Lynne Williams, one of the founding partners of intellectual property/IT boutique Deeth Williams Wall LLP in Toronto. She's probably right. It's not the M&A component to outsourcing that's new, it's the dealmakers' interest in it-even though today's outsourcings are further removed from M&A transactions than their forerunners of 10 and 15 years ago.

"Lately, outsourcing has been ballyhooed as a type of M&A. People latch on to this M&A comparison, and write and talk about it as if it's something new. It's been like M&A all along," says John Halvey, a senior partner with Milbank, Tweed, Hadley & McCloy LLP in New York, and arguably one of the highest-profile outsourcing lawyers in the U.S. "Outsourcing deals used to be much more like M&A in 1992 than they are now. We used to see a lot of $250 million asset sales 10 years ago. Today, there are fewer and fewer big ticket asset sales. Those elements have changed."

Judy Wilson at Blakes is neither an IT lawyer nor an M&A lawyer-she's a commercial lawyer, so it's little wonder that for her outsourcings are, really, just very big commercial contracts. "It's important for us not to fool ourselves," she says. "At the heart of the matter, these are just good commercial contracts that are service contracts. There is a skill set involved, but it's a skill set a good commercial lawyer will have."


Similarly, Halvey sees outsourcing as a "hybrid between M&A, financing, and very, very complex commercial contracts." The definition isn't important-the important thing is, regardless of whether the economic pendulum swings up or down, it's a growth area. A recent McKinsey & Company survey suggests that despite the increase and legitimization of outsourcing in recent years, only 10 per cent of what could be outsourced is. So there will be more deals-and they will get bigger.

"In the early 1990s, I remember we were chasing a $180 million transaction, and it was the largest deal at the time," recalls Richard Austin. "A whole bunch of deals that size were done last year." Deals on either side of the billion dollar mark are not uncommon-such as the outsourcing agreements between CIBC and Hewlett-Packard, Ontario Power Generation Inc. and Business Transformation Services Inc. (a subsidiary of Cap Gemini Ernst & Young), Hydro One Networks Inc., Inergi LP (a CGEY affiliate) and Vertex Customer Management (Canada), PricewaterhouseCoopers and Nortel Networks Corporation, National Bank of Canada and IBM, Bombardier Transportation's arrangements with CGI Group Inc. and Computer Sciences Corporation, respectively, as well as the well-known, Canadian-content-lite deals between Scotiabank and Symcor, and Air Canada and IBM.

They get bigger still. Canada Post's outsourcing of its IT services to CGI clocks in at a whopping $3.5 billion, while CIBC's IT outsourcing to Hewlett-Packard is valued at $2 billion. If you add up the various deals Berl Nadler at Davies Ward Phillips & Vineberg LLP has facilitated between Toronto service provider Celestica Inc. and various Canadian and U.S. customers, they hit 11 digits. No wonder everyone wants to be an outsourcing lawyer-especially in this year of no deals.

"It's one of the biggest transactions available. Any firm that wants to do IT would be nuts not to focus on it," says Barry Sookman. "In March 2002, I closed two $2 billion outsourcing transactions on the same day, one for a large Canadian public utility, the other for a large Canadian financial institution. Right now, I have five outsourcings going on at the same time."


Outsourcing also provides the perfect sweet spot for the transaction-hungry firm. In a year of comparatively paltry M&A deals, Stikeman Elliott and Oslers have each handled more than $8 billion in outsourcing deals.

"Outsourcing will be to the year 2005 what M&A was to 1985," predicts Halvey. Cool. But for Canadian lawyers, there's a fly in the ointment: our American cousins.

The border matters

"If you look at the major deals, the largest deals, we have many more deals done here by U.S. consultants and lawyers than by Canadians," says one lawyer. "We are starting to see some more Canadians, but it's still mostly U.S. firms on the largest deals."

The one that hurt the most may well have been 2002's Scotiabank deal with Symcor, valued at more than $1 billion. A Stikeman Elliott team led by Youngman assisted Symcor's in-house team, but Scotiabank turned to Milbank, with Canadian firms (McCarthy Tétrault and Fraser Milner Casgrain LLP) filling the role of powder monkey. A team from Milbank also made an appearance on Bombardier's billion dollar deal with CSC, although Montreal super-boutique Brouillette Charpentier Fortin took the lead on that transaction. And, while Stikeman Elliott represented Air Canada in its seven-year, $1.4 billion outsourcing deal with IBM, when the airline needed to restructure the agreement, it turned to U.S. law firm Shaw Pittman LLP. (Stikeman Elliott still "assisted Air Canada with certain aspects of the outsourcing.")

Outsourcing has had a considerable head start south of the border, both as a business practice and as an area of legal specialization. "U.S. firms recognized how big outsourcing was going to be much earlier," says George Atis, who is the founder of Outsourcing-Canada, a legal and consulting services firm. Atis returned to Toronto in 2000, after a stint with Shaw Pittman, a U.S. outsourcing powerhouse. Washington, D.C.-based Shaw Pittman and New York-based Milbank, Tweed are considered the go-to law firms in the U.S. for outsourcing deals. No Canadian firm has anywhere close to this recognition-indeed, until recently, few bothered to market their outsourcing capabilities.

"In Canada, there is still room to exploit this, it's a smaller market," says Atis. "Most large law firms have so much work, they expect clients to give them their technology and outsourcing work." As a result, despite the fact they have expertise in-house, they don't flaunt it-and they lose deals, and, as Air Canada and Scotiabank show, not just cross-border ones. "Canadian companies shouldn't consider New York or Washington firms as go-to firms for outsourcings. We should be able to repatriate the deals we lost," Atis argues.

"U.S. law firms are increasingly active in the Canadian market, and as a Canadian lawyer, it's difficult to accept this," agrees Alan Gahtan. "They're unregulated by Canadian law societies. They're not necessarily familiar with Canadian law. And," he adds, "they occasionally break immigration laws," in spirit if not in practice. (They do, after all, generally obtain TN-1 visas, and call themselves consultants, not legal advisors.)

The Americans have even managed to penetrate Quebec, muscling in on Air Canada and Bombardier, although, says André Vautour, one of the leading outsourcing lawyers in Quebec and managing partner of Montreal-based Desjardins Ducharme Stein Monast, you're more likely to see Toronto lawyers than U.S. lawyers on Quebec outsourcing deals. And, for the most part, he says, "You mostly do see Quebec-based lawyers."

On this issue, i.e., Canadian vs. U.S. expertise, indignity and tempers ratchet up. At McCarthys, Barry Sookman doesn't think Canadian firms are losing work to their savvier U.S. counterparts. "That's a grossly distorted view," he says. "Some Canadian customers have used American lawyers and U.S. consultants, but it would be extremely inaccurate to say Canadian firms are being bypassed. We're actually beating U.S. law firms doing outsourcings in the U.S. We're getting the work and they're not.

"There are three outsourcings I've recently done in the U.S. where the work was given to us over a prominent U.S. firm," Sookman continues. He's acted on a complex build/run transaction between a leading U.S. outsourcing firm and a large U.S. logistics company, as well as on several deals between a large U.S. outsourcing company and various U.S. financial services companies. "It's just not true Canadian firms can't compete on an international basis."

Atis agrees-at least as far as the quality of the Canadian outsourcing bar is concerned. "The Canadian outsourcing bar is fairly small, but our lawyers would rival any of the U.S. lawyers I've come in contact with," he says. Whether coming at outsourcings from IT backgrounds, like Gabe Takach at Torys LLP, Duncan Card at Ogilvy Renault, Richard Coleman at Oslers, Richard Corley at Blakes, Barry Sookman at McCarthys, or corporate/commercial backgrounds like Alison Youngman at Stikeman Elliott, Judy Wilson at Blakes, and André Vautour at Desjardin Ducharme, Canada has some very fine outsourcing lawyers. As good as their U.S. counterparts. Maybe better. And...uh...not as mean.

The big bad

For many Canadian practitioners, outsourcing is a "quiet art." As Coleman at Oslers explains, "Lawyers have three degrees of comportment: litigation, which is highly combative, M&A, which is not combative, but highly polarized, and third, the kind of comportment you need in an outsourcing. In an outsourcing, you need a relationship approach. You have to work on a more facilitative basis."

For the Americans, outsourcing, to paraphrase business guru Tom Richardson, is a contact sport. "The American lawyers' perspective is completely different than that of Canadian lawyers. The American lawyers think toughness, or being a bully, is the only way to get things done. They throw out ultimatums as a matter of fact-'my client wants this or the deal is off.' You'll hear that half a dozen times during a negotiation," says one lawyer with considerable experience on cross-border outsourcing deals.

"In the U.S., some lawyers still have quite a polar approach to outsourcing," says Coleman, more diplomatically.

"The U.S. is much more aggressive, and they don't know the Canadian marketplace half as well as they think they do," stresses another Toronto lawyer who's worked with a variety of Canadian and American law firms on dozens of outsourcing deals. And there's more to it than "cultural disconnect." The larger U.S. market offers more choices and more competition. If an overly adversarial negotiation process results in a deal-breaker, each party has a number of other options. The Canadian marketplace offers a smaller pool of potential partners, thus fewer choices. That means negotiations have to be more civil.

"I've seen adversarial negotiations here in Canada, but I've also seen deals, deals in which the customer has hired consultants from New York or Europe, on which the consultants were very surprised to see the negotiation process as a friendly one," says Patrice Martin at BLG. "One consultant even used the analogy of the Helsinki syndrome to describe the relationship between the customer and the service provider and their counsel. You guys are too close, he kept on saying." But for Martin, a friendly negotiation process does not mean the victim is starting to identify with the kidnappers. "When parties are determined to close very fast, they have to have co-operation from the start."

The larger U.S. market also has led to the emergence of customer-side only law firms, such as Shaw Pittman and Milbank. Service provider-side law firms also exist, but, as service providers usually have excellent outsourcing expertise in their in-house legal departments, these firms do not have the same profile.

Such a split works to heighten polarization. Both Shaw Pittman and Milbank, says one service provider-side lawyer, have a reputation for being extremely tough on service providers, and it's a reputation they deserve. "The reputation is that Shaw Pittman beats up suppliers," he says. "But in our experience, both of them are about the same." That reputation ensures they keep on showing up on files, north and south of the border. "Some customers like that," shrugs Amy-Lynne Williams at Deeth Williams. Scotiabank-and Air Canada-obviously did.

By comparison, the outsourcing group at Oslers has acted both for customers, such as Hydro One, Purolator Courier Ltd., and OMERS, and service providers such as CGI, Symcor and Serco DES Inc. The client lists of Stikeman Elliott, Blakes, McCarthys and McMillan Binch reveal a similar duality.

For Corley, who leads the technology practice at Blakes in Toronto, the key problem with U.S. lawyers muscling in on Canadian deals is that their tactics aren't necessarily appropriate north of the border. "Some methods used in big U.S. outsourcings are unsuitable for the Canadian market," he explains. "They were developed for multi-million and billion dollar U.S. transactions, and therefore are very involved and use costly negotiating tactics, such as parallel track negotiations (negotiating with two service providers simultaneously). In Canada, we deal with the realities of a smaller marketplace. Some things just don't work here."

Some Canadian lawyers believe the trend is reversing; others are less sanguine. But one thing's certain. Canadian lawyers have bigger challenges in the outsourcing arena than squabbling amongst themselves about whether M&A lawyers or IT lawyers do outsourcings better. That's because most major outsourcing transactions begin not so much as a two-party courtship, but as a ménage à trois-and the third party has a "thing" for American lawyers.

Three's a crowd

"We've handled some really major, high-profile outsourcing transactions, and we've handled them very well. We are building a good reputation in this area. Clients know this, and Canadian corporate counsel recognize it. Where you see us dropped from the equation is where the client retains U.S. consultants, and the U.S. consultants retain a U.S. law firm." So says one Toronto lawyer. He's a little bitter, and he wants to stay anonymous, because the U.S. outsourcing consultants he's raving against-the Everest group, TPI and others-are at the top of his firm's new business development efforts.

For companies that venture into the great outsourcing adventure for the very first time, these consultants are "God." They shepherd the company through the outsourcing process, from RFP through to the selection of legal and other advisors and beyond. If you're a frustrated lawyer looking for someone to blame for not getting that last Big O (i.e., outsourcing deal) look no further.

"When the process works as it should, the legal department of the company selects Canadian lawyers," explains Wendy Gross, a partner with Torys and a member of the firm's technology group. "But sometimes these deals take on a life of their own. The chief information officer or the technology people go to a U.S. consultant, and the U.S. consultant leads them to a U.S. law firm."

For many companies we are, literally, talking "valley of the shadow of death." That's why the consultants are "God". For all the logic of decreasing costs and increasing quality of service, an outsourcing, for the customer, is about giving up control. And that's scary. "Some companies are so terrified at the beginning of the process-it's their first outsourcing, there are so many things that can go wrong-they are terrified, and they run to consultants," says John Godber. "The consultants get them going all over again. The consultants get them all revved up.... Sometimes U.S. consultants take them in the wrong direction, at an astronomical cost."

Because outsourcings can be unnerving for customers, they really like consultants-however high the cost. In the 10-year customer care outsourcing agreement between ENMAX, the City of Calgary's utility company, and Accenture Business Services for Utilities, Deloitte & Touche provided consulting services to ENMAX. "The consultant played a very significant role in helping to manage the process," says Kenneth M. Bateman, vice-president, legal, and assistant corporate secretary of ENMAX. "There was Canadian and U.S. expertise involved, and they made sure we left no stone unturned. We greatly valued their contribution."

"Of course, there's a price tag that comes along with that," acknowledges Bateman. But, he says, it was worth it to "do it right." And, despite its reliance on consultants, ENMAX used Canadian counsel (a Blakes team from Calgary and Toronto led by Judy Wilson) as did Accenture (Ronald Deyholos at McCarthys in Calgary). So perhaps the tide is turning.

In the U.S., law firms don't complain about the role of consultants-they accept it, and they exploit it. "The consultants certainly play a significant part," says John Halvey at Milbank, Tweed. "Their role is evolving as customers get more sophisticated, but they're still on most deals." Because of the influence they have in the selection of a customer's law firm, outsourcing consultants are an important part of Milbank's business development efforts, on the same level as bankers, venture capitalists and other major players. Most Canadian firms, unfortunately, are a step behind-realizing the role consultants play, but uncertain how domestic outsourcing lawyers can work their way onto those coveted short lists.

It takes two, baby

For Alison Youngman at Stikeman Elliott, outsourcing has always been a global business. "You can't be a player unless you're in touch with the world," she says. And that doesn't mean just the U.S. "You're seeing now more and more pressure for offshore outsourcing from service providers," says one lawyer. "Customers are driving to lower costs, and in response, outsourcers are seeking the freedom to do business in the lowest-cost environment."

The offshore solution may be cost-effective, but, politically, it's a hard sell. "If that is what the customer wants, we can do that. But it would depend very much on the customer," André Bourque, senior vice-president, legal affairs, of CGI Group Inc., says obliquely. "Some don't want to hear about it-they want their service provider to be close, and they are afraid of the risks abroad. Others are more willing to take those risks."

It's a difficult scenario, as the recent anti-offshore outsourcing protests in Silicon Valley and elsewhere in the U.S. amply illustrate. Some analysts predict upwards of 3.3 million U.S. IT jobs may be lost over the next 15 years to low-cost offshore centres such as Mexico, India, Russia and China. And, while the raison d'être for outsourcing is to save money-most outsourcing agreements result in 10 to 30 per cent savings for the customer-corporations don't want to be identified as pursuing domestic job loss policies. "Frequently, outsourcing is not a topic a client wants to discuss publicly," says Charles-André Tessier, a senior partner with Montreal's Brouillette Charpentier Fortin, and leader of the firm's information technology committee and outsourcing sector. "Traditionally, there has been a loss of jobs to the outsourcing company, and today, on the largest transactions, suppliers transfer many of these jobs offshore."

As outsourcing deals get bigger and more international, clients look for their outsourcing lawyers to perform in that global arena. "For the largest transactions, clients believe there is no such expertise in Toronto or Montreal," says Tessier. They see the Canadian firms as "good enough" for the domestic transactions, but do not perceive them in the same league as a firm like Milbank, with offices and outsourcing capabilities in North America, Asia and Europe.

Tessier makes these comments in a somewhat ironic fashion in that he was interviewed for this article in Brussels, where he has spent the last six months working for an important corporate outsourcing client.

Against that backdrop, any tug of war between IT and corporate lawyers is basically irrelevant. "As outsourcings get bigger and broader, they get so big and complicated, no single lawyer can do them," says Judy Wilson at Blakes. It takes two-or three, or four, or twelve.

In-house counsel at service providers have always known this. "We make sure our lawyers are educated in IT, so they understand the equipment and the services, and we ensure that they understand corporate organization and participate in at least one or two M&A transactions so they see how that happens in practice. We also ensure they have some accounting education so they understand how changes in terms affects pricing," says Jay Safer at IBM. "A true outsourcing lawyer has a combination of all these skills-the financial understanding especially is a true value add to the company."

This requirement for depth and breadth, whether in one person or in the outsourcing team, cuts across any other differences customers and service providers may have. "You require a lawyer with a very broad range of abilities, not just someone who papers transactions," echoes Kenneth M. Bateman at ENMAX. "The decision to outsource is a difficult one for companies...and that leads to a very sensitive selection regarding legal counsel. Selection of the right counsel is vital."

"It's who's got the reputation, and where that reputation came from," sums up John Godber at BLG. Customers don't care whether they're dealing with an IT lawyer or an M&A lawyer. They want a good outsourcing lawyer-and they don't care whether they honed their skills in New York or Toronto, within the sanctity of marriage or on a string of one-night stands. They just want him-or her-to be good. Period.

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