Legal Tech v. Legal Outsourcing and ALSP

by | May 10, 2022 | Insights

Legal tech, legal outsourcing, and alternative legal service providers (ALSP) are the new buzzwords being thrown around the legal and business startup industries. Does anyone truly know what they mean? Although these phrases do have definitions, these phrases are placeholders for evolving concepts. Concepts that have unclear boundaries, overlap with each other and will continue to change for the foreseeable future.

The term legal technology must be understood in terms of general technology first. Legal tech is the term that refers to the innovations and advancements that specifically apply to the legal industry that, and results in improved capabilities. General technology advancements also explains innovations but refers to innovations that have applications throughout multiple industries. For example, humankind’s general knowledge about audio recording equipment has significantly advanced over the past fifty years. These general advancements have led to audio (and sometimes visual) recording technology being used in courtrooms. The advancement in audio recording technology has been a general technological advancement, but one that also applies within the legal industry. Similar to how computers are a general technological advancement that has also significantly benefited the legal industry.

Therefore, legal tech strictly refers to technological innovations that have primary or sole applications within the legal industry. Such as computer software technology that helps the legal industry operate law firms more efficiently, manage litigation discovery more easily, or handle client billing/invoicing more quickly. Legal tech often comes to market through companies offering these services directly to law firms. Predominately through software as a service (SaaS) business models, and by companies such as: Clio; Smokeball; Lawgeex; and LitiGate (to only name a few). The trouble with using this strict definition is that it does not quite capture the true breadth of services these companies provide. Many companies that create and sell legal tech also offer legal outsourcing and might even qualify as an ALSP.

Legal outsourcing is the process of using external labor to maximize business efficiencies. In other words, legal outsourcing is when law firms hire other lawyers (or qualified legal professionals) to complete certain aspects of legal industry work. Meaning that if law firms want to better serve clients while saving money, they can utilize external labor organized through staffing/legal tech companies, such as Lawflex. Legal outsourcing companies eliminate the headache of hiring additional employees while providing law firms the opportunity to free up their valuable time to focus on other important work. In addition to law firms, private companies can also use legal outsourcing to assist their in-house legal department. Instead of the in-house legal department for a private company entering into an expensive and inflexible relationship with a traditional law firm, the company can employ freelance attorneys through a legal outsourcing agency that provides expert lawyers who efficiently resolve problems.

Legal outsourcing can take on many forms. Such as a freelance attorney who makes court appearances on behalf of busy law firms that run into scheduling conflicts. Using artificial intelligence such as chatbots to streamline client intake at law firms. Although the use of artificial intelligence within a law firm is not technically outsourcing, the actual job function is being automated/outsourced away from internal labor resources. Using a legal staffing agency to secure top-notch assistance with complicated e-discovery, contract review, corporate compliance document review, etc. Legal outsourcing can be done by standalone outsourcing companies but often it is done by an ALSP company.

An ALSP is simply a business that provides legal-related services as an alternative to traditional law firms. The differences between ALSPs and legal outsourcing companies are quite hard to distinguish. Primarily because when a legal outsourcing company is providing freelance lawyers to a client needing legal services, they are acting as an ALSP. Providing legal-related services through a corporate entity that is not a traditional law firm. Of course, the distinction is between legal outsourcing companies and ALSPs is important for licensure and regulatory purposes, but in practice, these entities are extremely similar. Most legal tech companies are not only legal tech companies but could also be considered legal outsourcing companies and ALSP companies due to the wide variety of services they offer clients.

Having taken a look at the strict definitions of legal tech, legal outsourcing, and ALSP companies, we must also consider how these companies blend into one another. Let’s think back to the chatbot example for new client intake at a law firm. Assume we have a growing law firm that wishes to grow its practice by serving more clients. Their reputation is growing, and their services are in such high demand that they are declining potential clients due to concerns about not being able to service an increased caseload. The traditional solution is to simply hire more lawyers and staff to scale their business. However, thanks to companies such as Lawflex, Hire an Esquire, and Mitratech, the growing law firm can employ a combination of flexible staffing and legal tech solutions to scale their practice. This can take the form of using freelance attorneys for particularly complex and time-intensive cases/clients; it can also be the result of using artificial intelligence to more efficiently review client documents for relevant information and using automatically generated templates for documents are commonplace in this firm’s practice area.

As a result, the legal tech companies, legal outsourcing companies, and ALSPs all provide similar solutions to the legal industry and their respective boundaries are murky. Deciding what type of help a law firm or private company wants to have with these different legal service providers depends upon what problems they are facing and what types of solutions they desire. As each law firm or company faces different problems, the solutions they choose to pursue will be equally as individualized. Automating new client intake with artificial intelligence; hiring elite attorneys on a contract basis to meet the ever-changing demands of providing legal services to clients; or seeking SaaS solutions to improve business efficiencies and simplify legal processes. No matter where your company or law firm is in its journey, contact Lawflex today to discuss how we can help you take the next step.