LAW FIRM LPO: An Introduction to Global-wide
View firm profile
ALSPs are the vanguard of legal services innovation
The legal industry has been undergoing a substantial change over the past few years and the speed of this transformation has been further expedited by the COVID-19 pandemic. Legal teams can no longer escape corporate efficiency drives and must be seen to be doing their bit. Clients are demanding more for less from their providers and the skills required to create new delivery models are many and varied. Work can be (and often now is) completed remotely. Hours are flexible, as long as the work gets done, and the war on talent is intense.
The legal industry is dominated by four main groups: law firms, internal legal departments, Alternative Legal Service Providers and law schools. The ALSPs are the disruptors and the driving force in bringing change to the legal industry by providing career paths for attorneys and non-attorneys outside the traditional model. This has prompted law firms and inhouse teams to reflect and refine their ways of work and law schools to review their curriculum and offer more practical courses on subjects such as data analytics, design thinking, process engineering and technology.
As all groups learn how to operate to meet the new challenges of increased cost of talent and workloads, they will have to re-evaluate their delivery and business models and learn how to effectively work differently. Many are choosing to collaborate with ALSPs - either through partnerships with independent ALSPs or by creating their own captive functions in order to stay ahead of the game. As law firms are finding out, many sophisticated procurers of legal work are expecting them to collaborate with alternative providers such as legal tech vendors and low cost operations which can perform process efficiencies at scale.
Models for Alternative Legal Service Providers
There are three main models in which ALSPs operate: Independent, Captive and Non-Traditional providers. The Independent ALSPs are just that: independent. They maintain their own client relationships, pursue their own work and operate individually or as an autonomous subsidiary. This is the largest segment of the ALSP industry and they have usually been developed by lawyers who were to an extent embarrassed by the way the rest of the profession operated. As Mindcrest's own Commercial Director (previously a traditional lawyer) has observed:
"Historically the law firms owned the delivery model and could to an extent determine how legal services are delivered and, to an extent, at what price. The disruptors in the market, the Alternatives, are helping clients take back control in terms of how the work is resourced and performed. Everything still needs to be of the right quality and underpinned by a deep understanding of law, but not everything needs to be performed by a qualified lawyer based in London and checked by a partner – no one starting afresh would design the service that way."
Captive ALSPs are another innovation within this group. They are ALSPs owned and operated by law firms and produce work for the clients of the firm. This is a way for law firms to get in on the game while still maintaining control. However, the costs associated with starting and operating this spin-off can be substantial and take time to recoup through increased work. Arguably a better model is for ALSPs to have a captive law firm to escalate matters to and to support the build of the service in the first place. The law firm lawyers can help frame the advice and design what needs to be done with the ALSP controlling the production line and quality checks.
Additionally, the Non-Traditional providers such as the accounting firms have also started to provide a wide range of ALSP-type services. As established entities through accounting and consulting practices, they have been able to make quick inroads into the ALSP market over the past few years (according to a Thomson Reuters report, 2022 State of the UK Legal Market). The general thinking is that if they make material investments into lawyers and legal teams then they will be a real threat to both law firms and ALSPs despite the fact that legal services is still not a core service for them. Whether the conflicts they encounter prohibit that kind of growth to a greater or lesser extent is yet to be fully appreciated.
While previously an innovation originally driven from the United States (due to the regulatory backdrop there), other regions of the world have started to embrace the ALSP model. The United Kingdom, Canada and Australia have seen significant growth recently in law firms and other organisations partnering with ALSPs. These services have also started to grow in EU countries such as Germany, Spain and France, and many other regions are employing ALSPs to manage cross-border litigation, regulatory review and other ALSP services.
Increase in Sophistication
By creating a niche in the legal industry, ALSPs have often been at the forefront of legal technology innovations. For ALSPs specialising in compliance or contracts management matters, using legal tech to increase efficiency and production levels also drives down total costs and delivery times. This has already happened in litigation where eDiscovery platforms reduce the number of documents requiring review through de-duplication and de-threading and the deletion of irrelevant materials before making it very easy for low cost teams of managed document review professions to perform their task. It is very normal now for the first pass of any document review to be performed entirely by non-lawyers in a different geographical location with documents being tagged, commented on and redacted as required for the lawyers running the case.
This type of technology has grown far more sophisticated in the past decade. Supercharged by digital support, legal professionals using these tools are now able to operate far more efficiently than ever before while maintaining or enhancing the quality levels necessary for the job. From a labour perspective, this also prevents burnout as lawyers are able to operate at a higher level of review, and are able to apply their skills on more critical matters.
Like many businesses around the globe, law firms are struggling to retain their talent, particularly non-partner talent. A report issued by the Center on Ethics and the Legal Profession at the Georgetown University Law Center and the Thomson Reuters Institute found that on average US law firms lost nearly a quarter of their associates in 2021 and similar levels of attrition have been identified in the UK and Australia.
For traditional firms, retaining talent is going to mean more than simply offering larger salaries and signing bonuses. The report highlighted that simply showering talent with increased compensation has not stemmed the tide of attrition. Lawyers, particularly junior talent, are more focused on other career factors such as work/life balance, non-compensatory recognition and appreciation, as well as overall better physical and mental well-being. Whilst this is refreshing it is causing a huge headache for those still practising the "old law" in the old ways with long hours and personal sacrifice expected as a matter of course.
ALSPs are again able to influence change by freeing up associate time to allow them and legal team members to focus on what is "important" and valued. The services offered by ALSPs largely alleviate time-consuming and therefore costly work previously performed by lawyers. Growth in usage of ALSPs allows firms and legal departments to focus on more strategic matters while assisting clients and other stakeholders. When lawyers are able to focus on high-value matters instead of being bogged down in "the weeds" (lower value, lower risk work that could be completed by a non-lawyer following a process with appropriate guardrails), there is an increase in productivity all around which the Georgetown report records as a key factor in employee retention.
Law firms and legal departments are quickly finding out that ALSPs are not the enemy but rather they are potential partners and collaborators in delivering results to clients. ALSPs have shown that there is room for flexibility and innovation in the legal industry, and firms have benefited from these partnerships with increased efficiency and labour costs without compromising on the quality of the outputs. As lawyers are demanding flexibility within their working environments and firms are looking to attract the next generation of law students, partnering with ALSPs can be the saving grace to retaining talent and improving the way things are done.