Weathering Recession: How ALSPs will survive and thrive through upcoming economic uncertainty

by | Jul 7, 2022 | Insights


The public health emergency of March 2020 led to unprecedented shocks in the global economy and caused drastic shifts in spending throughout the world. Not a single enterprise was excluded from the ramifications of the pandemic.
With no prior incidents to compare, the global community was forced to adapt and reinvent long-established practices in the wake of Covid-19. Campaigns for economic stimulus, such as the United States’ Economic Security Act, were launched in an effort to salvage the economy’s stability. Despite the colossal efforts, although immediate relief was achieved, the ripple effects are now apparent.

Bloomberg reports that by the end of 2022, as a result of the US Federal Reserve’s current trends, economic recession will be unavoidable. To mitigate costs, businesses will seek to reduce labor expenses; however, because a considerable adjustment period is needed to adapt to lower wages, businesses will instead opt to invest less and employ fewer workers. In a note obtained by CNBC, Elon Musk, CEO of Tesla, informed his employees that “Tesla will be reducing salaried headcount by 10%”- a trend present throughout major tech companies and other prominent businesses.
At first glance, it seems that no business model will be able to thrive under these harsh conditions, but because of the NewLaw model- contract-based, short-term hiring meant to streamline costs and improve internal efficiency- the sector will likely thrive under these seemingly negative circumstances.

The notion of “first in first out” remains acutely true during times of financial vulnerability. When firms are looking to reduce spending, the most obvious initial tactic would be to let go of out-sourced hires- professionals with weaker ties to the company. The nature of out-sourced services provides for extreme flexibility, so there will likely be a few slower months in the ALSP world- a period of time where out-sourced lawyers will be subjected to firms’ unavoidable budget reductions.

However, once a recession kicks in, and the remainder of in-house staff falls victim to the consequences of budgetary pressures, firms will be forced to return to the most cost-effective short-term solution: contract based legal outsourcing. The specialized approach and project-based structure of NewLaw legal operations will perfectly suit the needs of any firm or company struggling to maintain their business while undergoing the pressures of the recession.

Once introduced to legal outsourcing, it will be hard to go back to anything else. The cost efficiency of hiring on a contract basis allows for fees to be spent only on the firm’s most crucial needs with a plan tailor-made to their specifications and resource availability. Because hiring is done on a project-based cycle, legal outsourcing better equips its clients for future unpredictable market instability.
Rather than having to restructure internal counsel and struggle to allocate salaries, outsourced legal assistance comes at a designated short-term fee, alleviating any sporadic financial pressures. If and when such events occur, having outsourced legal assistance will allow in-house departments to focus on their more critical, high-value projects while legal ops. handles the burdensome and time-consuming details.

The advantages of outsourcing legal work, specifically under the circumstances of economic unpredictability, capitalize on both time and resources, transforming in-house counsels and firms alike into entities capable of withstanding even the most tumultuous periods.