Law firms are the historical gatekeepers of the legal industry, rarely looking to make new friends. ALSPs are the new kids on the block, radically transforming the delivery of legal services. For every client gained by an ALSP, a law firm loses out, and vice versa – at least that’s how the issue is commonly framed.
However, the reality is that many law firms are beginning to see the value proposition that ALSPs offer their firm and their clients and are shifting to a collaborative not competitive model. In today’s increasingly competitive market, not only are law firms and ALSPs co-existing, but the healthy competition is providing much-needed impetus for all participants in the legal ecosystem to offer better, faster and more innovative services.
Part of the reason for this evolution is that firms are looking for better ways to deliver value and manage increasingly complex issues. ALSPs may be disrupting the legal industry but they are doing so in a way that helps rather than hinders traditional law firms.
This article will discuss the multitude of reasons why law firms and ALSPs are the latest dynamic duo to emerge from the legal services industry.
1. What does the Thomson Reuters Report say?
According to the Alternative Legal Services Providers 2023 Report, published by the Thomson Reuters Institute, the Center on Ethics, the Legal Profession at Georgetown Law, and the Saïd Business School at the University of Oxford, overhead and payroll costs are a growing concern for traditional law firms and driving them to look to ALSPs to provide value, meet demand and plug into new technology.
ALSPs have grown into a $20.6 billion legal market segment, with rapid expansion expected for the foreseeable future. The Report notes the increase in partnerships with law firms has been and will continue to be an important factor in the growth of certain categories of alternative legal service providers. Among the large law firms surveyed, more than a quarter plan to increase their spending on ALSPs, compared to just 3% who foresee decreased use, “both law firms and corporate legal departments are realizing the value of ALSPs, citing their specialised expertise, cost-efficiency, and ability to help manage headcount”.
2. Access to specialised, highly qualified talent
Law firms are constantly in a race against time when it comes to meeting talent demands. In an increasingly difficult economic climate firms are grappling with the reality of lawyer layoffs. However, through a partnership with a robust ALSP, law firms are able to quickly and efficiently staff project with highly qualified talent without crippling the firm’s bottom line.
Law firms no longer see ALSP utilisation as an either/or proposition. Law firm partners and GCs are using ALSPs as a “virtual bench” of flexible, fully vetted and deeply qualified talent that can be tapped into on an ad hoc basis. Clients are increasingly demanding innovative and bespoke solutions to their legal problems, such problems require a diversity of skillset and workforce. The most common reason law firms say they use ALSPs is their access to experienced professionals, particularly in litigation and investigation support. LawFlex CEO, Jackie Donner, notes that “ALSPs allow law firms to expand their offering to their clients. This is especially true for boutique firms that can now take on work they wouldn’t have otherwise been able to”.
James W. Jones of Georgetown University and Mari Sako of Oxford University noted that ALSPs have access to intellectual property and technology, expertise in process mapping, project management and data science, investment capital to continuously upgrade technology and attract talent, a problem-solving approach that cuts across practices, and a management structure designed for making rapid business decisions. Working with an ALSP, a law firm is thus able to access talent, technology, and processes that can enhance rather than endanger their ability to do what they do best – solving critical legal issues for their clients.
3. Innovation, technology and efficiency
When law firms partner with an ALSP they are often gaining access to enhanced technologies, not available within the firm. This may include automating document discovery, chatbots that can handle routine legal inquiries or AI-powered tools that analyse data related to intellectual property and patent applications.
The desire to better deploy technology and processes is typically the primary driver for ALSPs. All the work can be done by law firms under traditional models however, much of it is cost-prohibitive compared to work delivered by process experts who know how to leverage technology. Access to advanced technologies and utilising ALSPs as technology consultants gives law firm leaders the ability to increase operational efficiency and lawyer productivity naturally increasing the mainstay of the traditional law firm, the billable hour.
By increasing billable hours, a law firm is able to more effectively scale and expand their business. Two years ago, when Thomson Reuters conducted a previous survey of the ALSP market, 50% of large firms said working with ALSPs would help them grow their businesses. Now, 69% of large firms see ALSP relationships as a path to growth. Among midsize law firms, the numbers have gone from 35% two years ago to 49% today, the survey found.
The litigation department in most law firms is ripe for collaboration with ALSPs. Document review and E-Discovery provides the groundwork for substantial litigation. Beyond collating relevant and irrelevant documents, ALSPs can provide law firms with more detailed and accurate analysis, early case assessment and intelligence so lawyers can decide on how to dispose of a case. This partnership approach, while reducing costs for the end-client, also reduces risk, as the knowledge from documents is typically leveraged for consistency.
Conclusion
The business case for collaboration between ALSPs and law firms has been well and truly made. ALSPs help not hinder the ability of law firms to do what they do best, which is solving the difficult legal questions of their clients.
By leveraging the processes, systems, and technological capabilities of ALSPs, law firms can provide better, more effective legal services for clients and continue to grow. Indeed, ALSPs and law firms are not competing in a zero-sum game. Collaboration, not competition, will categorise this burgeoning relationship.
Once regarded as last-minute stand-ins for overflow commodity work, ALSPs are now a strategic partner of many traditional law firms with their finger on the pulse. As ALSPs continue to mature and their service-offering becomes more sophisticated, their ability to implement technology and drive efficiency enables them to carve out a unique role in the legal services marketplace.