Spain: Emerging Market Spotlight
The term Alternative Legal Services Providers (ALSP) in Spain has been rarely used until relatively recently. There has been a lack of comprehension about the usefulness of this type of provider, as well as how they are different from other legal players within the market.
Economic and cultural globalization has made the legal market more flexible and is at the root of the increasingly rapid proliferation of such firms, whose business models came from the Anglo-Saxon market, and who are becoming increasingly influential and are increasingly considered a fundamental part in the legal sector.
According to a recent survey conducted by Thomson Reuters' Legal Executive Institute in collaboration with Georgetown University's Law Center for the Study of the Legal Profession and Oxford University's Saïd Business School (hereinafter referred as “the ALSP Report”), ALSPs can be categorised into 5 large groups:
1. The Big Four refers to the largest accounting and audit firms, which derive a large amount of revenue from legal services.
2. Captive LPOs are law firms’ wholly-owned captive legal services units, often located in lower-cost regions.
3. Independent LPOs perform legal work on behalf of corporate legal departments and law firms, often via matter- or project-based engagements.
4. Managed services providers contract for all or part of the function of an in-house legal team, typically ongoing work.
5. Contract and staffing services provide lawyers on a temporary basis to companies and law firms, ranging from entry-level document review to highly skilled specialists.
Although it is a study based on responses from more than 500 decision-makers at law firms and in corporate legal departments located in the United States, the United Kingdom, Australia and Canada, as well as different ALSPs operating in those countries, the findings concerning the ALSP market can be extrapolated to the Spanish market and its trends.
Such is the impact that ALSPs are having on the Spanish market that the General Council of the Spanish Legal Profession has also devoted a special section within its recent report "Future Lawyer 2021: Emerging Business Prospective", published in November 2020, stating that "in an increasingly segmented market that demands flexibility and transparency, ALSPs are born with the aim of optimizing costs and results", allowing legal departments and law firms to be released from the recurrent and high volume work in order to be focused on value-added tasks, identifying them as one of the trends in the legal sector.
Within the Spanish market, ALSPs are gaining strength. Proof thereof is that we find different ALSPs in Spain belonging to the aforementioned categories.
We find ALSP divisions within the Big Four, as well as the increasing creation of captive ALSPs from law firms; independent firms providing staffing legal services; independent firms of managed services as well as independent LPO firms that provide services to both law firms and corporate legal departments.
This is the case of AFIENS LEGAL, which, since it was founded in 2012, combines a high technical legal level with the innovation and technological developments necessary to provide efficient solutions in outsourcing legal processes. Companies in this model are responsible for providing standardized legal services, helping law firms and corporate legal departments to improve their processes and manage their legal projects, by incorporating the best technological tools that allow active collaboration between all parties involved in a project, document and knowledge management as well as standardization and automation of documents and workflows.
Ally of Law Firms
Increasingly, law firms are considering outsourcing some of their own tasks to ALSP firms. We see that active collaboration and the joint proposal of services between a law firm and an ALSP is becoming more popular in Spain. The reason is mainly because law firms are more confident in outsourcing legal matters not within their own specialization, customers are increasingly reluctant to pay the same prices for services that are not considered to have the same value of specialization, and because many independent ALSPs that are emerging in Spanish legal markets are specialized in a specific area of legal practice, which provides confidence to all project stakeholders.
Most traditional law firms, irrespective of their size, have highly qualified personnel to solve problems requiring a high level of knowledge and performance, but the truth is that within a project with a high degree of specialization, there are issues that, although necessary for the benefit of the client, should not be measured economically with the same standard. That is why law firms refer matters of their own clients to ALSPs to provide them with solutions that they are themselves either unwilling or unable to provide.
Through the outsourcing of legal services, law firms achieve a considerable reduction in execution times in aspects necessary within a project. Firms often prefer to delegate to LPO firms given their lack of specialization in more routine tasks which, by their nature, should be less expensive and more efficient for their clients.
There is a growing trend for active collaboration between different service providers, always putting the client at the heart of the collaboration. This focus is what leads to firms such as AFIENS intervening in high-level operations led by the large national and international law firms, who rely on ALSPs in one of the links of the production chain of the service, supervised by that law firm. Thus, for example, for M&A operations within the Spanish market, AFIENS provides SPVs to the law firm's clients, adapting them to the needs of the client based on law firm requests, as well as the provision of all those legal and paralegal matters necessary to achieve the aim of the investment project. In this context, AFIENS provides related services, such as company secretariat, AML and GDPR services to the law firm's clients who request that more routine work is not economically valued as a grey hair service.
Ally for Corporate Legal Departments
As among the law firms, corporate legal departments are increasingly considering the need to improve efficiency and productivity of their teams.
Such is the trend that according to the aforementioned ALSP Report, companies are increasingly using ALSPs to get access to expertise they lack, as well as to use their existing resources more efficiently and strategically.
Those who have engaged ALSPs for specialized legal services have done so primarily to free the burdens of their teams due to work peaks and, being able to focus on more strategic or value-added work, trying to meet maximum projects demand without having to permanently increase their workforce. About 25% of companies say they will spend more on ALSP compared to 16% several years ago.
For these types of clients, legal project providers are very useful in preventing collapse in corporate legal departments when faced with one-off projects. Similarly, ALSPs dedicated to the outsourcing of legal services provide more routine legal services, allowing legal departments to retain control of their affairs while actively collaborating with a legal provider to free them from those routine tasks. The key point of these type of services is the technology applied to the provision of these type of services.
The legal departments continue to have control of all their issues, but work with flexible outsourcing teams to cover routine work and unanticipated peaks.
In the case of ALSPs such as AFIENS, they are able to use their technology and the methodologies of Legal Design and LPM, to provide to their clients efficient solutions based on their specific needs. They design, jointly with the client, the best solution after analysing their needs in order to standardize their internal processes and subsequently automate processes and legal documents with their automation software solution. The COVID pandemic has encouraged legal departments to seriously consider engaging ALSPs that are more experienced in improving legal processes using the appropriate technology due to the nature of their business model.
In this case, AFIENS has been an ally for those legal departments that needed to speed up the signing of legal documents, being drafted within a sole technological platform in which any stakeholder could intervene during a project, making remote work the best approach to the needs of the situation. The COVID pandemic has accelerated the process of introducing Legaltech solutions to legal departments and rethinking the way things were being done. This is especially true in Spain due to the fact that the disruptive model of ALSPs has been implemented in Spain in a soft line until 2020, when the use of these technologies became a necessity.
Technology and LPM, key parts of an ALSP
If something differentiates ALSPs from traditional law firms, it is not the service itself but rather the way ALSPs provide them to the market.
According to the abovementioned ALSP Report, technology is one of the pillars of ALSP business models, being the catalyst for upwards migration in the value chain of legal services. As of 2018, ALSPs considered document management and process mapping tools as the most widely used technologies. Until a few years ago, there were hardly any Legaltech firms in Spain. The sector has over time become increasingly modernized and understanding of the fact that technology is our great ally in simplifying processes and improving yields and costs.
Such has been the interest in Legaltech that we can say that currently the Legaltech map within the Spanish market covers more than 100 solutions.
As with technology, ALSPs rely on the Legal Project Management methodology to create their business models. Current market demands are seeing the LPM methodology increasingly implemented in the sector, providing a clear roadmap with defined processes that help improve the efficiency and performance of the legal teams involved.
In addition, in accordance to Altman Weil's latest 2020 Law Firms in Transition Report, the companies surveyed declare the improvement of processes as the most important aspect of legal practice. In addition, Wolters Kluwer's 2020 Legal Sector Innovation and Trends Report states that the legal profession is rethinking itself and is becoming aware of the need to change business models, ways of interacting with clients and other stakeholders, as well as the use of information and technological tools in settings marked by the massive exploitation of data.
By combining technology, project management and talent, ALSPs seek the standardization of their processes, being more agile and transparent in client affairs.
In Spain there are more and more companies and law firms that are becoming aware of the desirability of making business with ALSPs. The ALSP sector is growing at double digit rates and has a very promising growth potential.
Spain is becoming an emergent market for ALSPs, which are here to stay in the legal sector.