SPAIN: An Introduction to Alternative Legal Service Providers
As an alternative legal service provider (ALSP), the sector in which Afiens operates presents a significant opportunity for growth. It is a highly active sector that has seen rapid growth in recent years, where the barriers between the different legal players have been reduced. In this article, we analyse the current situation and trends that are affecting the sector and our territory.
It could be said that there are five large categories into which ALSPs fall: those pertaining to auditing firms; legal process outsourcers; independent legal process outsourcers; managed services providers; and staffing solution providers. Thomson Reuters estimates the market size of ALSPs at around USD21 billion, with independent ALSPs as leaders with regard to revenue, with an estimated value of USD18 billion, compared to other categories like law firm captives or the Big Four.
While the way in which ALSPs operate varies from type to type, they all provide solutions for those areas in which legal firms cannot, or are not able, to operate. True ALSPs appear as market leaders when it comes to turnover (Thomson Reuters, 2023), however, companies like the Big Four are beginning to implement ALSP services within their scope in order to compete in this growing sector. This highlights the importance of showing a clear value proposition to clients, communicating the benefits in terms of productivity and agility of processes, and how specialised companies like Afiens are the best players in the sector to do this.
The document, “Alternative Legal Service Providers”, presented by Thomson Reuters early in 2023, suggests a 47% increase in business compared to the previous two years, accounting for a figure of USD20.5 billion. This number is representative of the important development these types of firms have been achieving in recent years and how demand keeps increasing.
In spite of this, the disparities between countries are quite visible; while firms in the US or the UK have seen an important development, in Spain things seem to be developing at a slower rate. The US presents well-defined regulation regarding the capabilities of these types of companies, while in Spain, this is more lax, and complicates things in terms of differentiation and value proposition.
In addition, Spanish culture regarding law firms is different to that in other countries. In Spain, clients tend to be quite loyal to the firms they employ, and even if ALSP fees are reduced, clients prefer to employ the brands they already know.
Notwithstanding this, in Spain, there are still considerable possibilities to expand. Larger companies appear to be knowledgeable about the advantages of these services, such as the impact they have on organisational productivity. On the other hand, smaller companies seem to exhibit more reluctance towards hiring such services.
The one thing that is indisputable, is the key role that technology is taking in all aspects of our life, and as a result it is also having and effect in the legal sector.
According to the “Future Ready Lawyer Survey, 2022” by Wolters Kluwer, the investment and demand for legal tech solutions is expected to increase. Now more than ever, technology advantage is of extreme importance. Looking at the data, 91% of legal departments expect their firms to fully leverage technology and 80% of lawyers consider it essential to work in a firm that is up to date with technological trends.
The way in which legal work gets done is also changing which, as a result, contributes to the increase in demand for of ALSPs by corporate legal firms.
The development in digitalisation that we are experiencing in the sector presents a really good opportunity for firms such as Afiens to show their leadership and strength in terms of digital transformation and process automation.
Some of the challenges faced by ALSPs reside in the lack of confidence some companies may have about using these types of services. In the study by Thomson Reuters, when questioned why companies do not hire ALSPs, 81% of participants in 2020 communicated their preference for “in-house” work instead of externalising to other firms. By 2022 this number was reduced to 52%. Nevertheless, 29% of respondents still mentioned their concern for quality of work. It is then clear how communication and commercialisation of the firms should be a top priority for the near future.
If we echo the recent article published by Pedro del Rosal entitled, “Do clients already trust ALSPs? Some do... but many still don’t even know they exist”, Afiens points out that their objective is to convey to law firms that “they are not competitors, but collaborators”.
As we have stated on several occasions, the key is to convey to the market the differences between the services of ALSPs and those of traditional law firms. Afiens is specialised in LPO (legal process outsourcing) and expert in applying legal project management and the best technology, with the aim of standardised legal and paralegal processes. The outsourcing of legal processes allows the market to convert fixed costs, “sometimes unbearable”, into variable costs, improving the quality and time of execution.
Although ALSPs are becoming better known and accepted in the Spanish market, there is still a long way to go. The most important thing is that it is understood that LPOs are service firms that help improve legal processes, allowing traditional law firms and in-house legal departments to focus on what really generates value.