Alternative Legal Service Providers – the New Player
Alternative Legal Service Providers (ALSPs) are legal service businesses that take on legal processes from law firms and organizations, perform them at a lower cost, and often with increased efficiency, flexibility, and speed .
More and more companies are routinely transferring their legal services to ALSPs, while law firms are outsourcing expensive and time-consuming projects to them. According to a recent survey by Thomson Reuters, ~51% of law firms and 60% of corporate legal departments use ALSP services. While cost-effectiveness is one of the reasons ALSPs are gaining popularity, another is that these businesses often have expertise that is not available in-house in many law practices.
ALSPs usually specialize in high-demand legal services such as Document Review, Discovery, Contract Lifecycle Management, Compliance, Litigation, IP management etc. (refer Chart 1).
Chart 1: Law firm and Corporate use of ALSPs. Source: Thomson Reuters.
Law firms as well as legal departments did express reluctance to use ALSP services for legal strategy work; they preferred to use them for labor-intensive work so their own practice could be freed up to focus on core competencies. Their goal is to obtain an “efficient and profitable service model and cost-effective scalability for temporary, high-volume workflows.2” The survey helps develop a clearer understanding of why and when to use ALSPs (refer Chart 2)2.
Chart 2: Why and When to Use an ALSP. Source: Thomson Reuters.
ALSPs – Benefits and Opportunities
Changing the ‘business of law’
Being businesses, ALSPs are shaking up the legal service delivery model, reevaluating processes, and eliminating redundancies. They break down legal processes into finer, unambiguous workflows, use the expertise of an interdisciplinary staff2, and reexamine the ‘business of law’. While law firms increase their marketing budgets and focus on what they sell, ALSPs conduct in-depth market research to understand their client’s business, risk profile, culture, competition, challenges, and future.
ALSPs are innovative mainly because of their versatility, non-conformity to traditional law firm structures, business-savviness, and use of state-of-the-art technology. Most ALSPs are keen to adapt to changing client demands and employ “off-shore outsourcing, web-based services, and IT automation”1.
Range of ALSPs in the market
Thomson Reuters’ survey categorized mainly five types of ALSPs:
- Captive LPOs: Businesses run by captive operations, predominantly located in low-cost areas, which focus on excess volume work.
- Accounting and audit firms: Businesses that hold big revenue in legal services, that align with processes similar to accounting/audit work, and focus on excess volume projects.
- Staffing/In-sourcing/Contract lawyers: Businesses that provide lawyers to companies on a contract basis.
- Managed Legal Services Providers: Businesses that work with the in-house team to handle all or part of a project.
- Independent LPOs: Legal Process Outsourcing companies that carry out outsourced legal tasks, e-Discovery, and Document Review, supervised by the law firm or legal department.
ALSPs – Soon to Be a Market Staple
Deloitte’s survey of legal service purchasers revealed that one in three customers expressed dissatisfaction with law firm know-how on global data and cybersecurity, and proactiveness in knowledge-sharing across jurisdictions. They also stated that they expect industry, commercial, and non-legal expertise from their legal service provider. Unsurprisingly, the ALSP market has grown by leaps and bounds, amounting to $8.4 billion annually2, and the market that they sell to is predicted to grow to $55 billion by 2025.
Alternative Legal Service Providers are to be seen as allies than enemies. Law firms and legal departments can work with these avant-garde companies for their technology, business expertise, client needs, and legal knowledge. With their firm grasp on the legal industry, ALSPs will soon be less alternative and more mainstream.
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