The Rise of Alternative Legal Service Providers
As the business of law continues to change, Alternative Legal Service Providers (ALSP) are becoming a more integral part of the legal industry. Law firm clients continue to investigate the best solutions to suit their needs. In today’s competitive environment, it is important that all businesses use the most competent and cost-effective provider to service them.
Many businesses are now providing services that lawyers traditionally provided. They include: Litigation Support, Litigation/Legal Research, Document Review, E-Discovery, Regulatory Risk, and Compliance.
ALSPs come in many forms, but most law firms are familiar with the large accounting firms competing with them. Recently, alternative organizations have evolved. While many ALSPs are not law firms, some law firms recognize the potential of new business models to transform the industry and have established their own in-house ALSPs. Technology plays an integral part in all ALSP organizations. It is critical that data is secure and adaptable as needed. What was historically done by humans is now being replaced by artificial intelligence – this currently includes discovery and some document review. By properly using available technology, work can be performed more accurately and more affordably.
The Rise of ALSPs
ALSP is now a multibillion-dollar industry with expectations for double-digit growth. In the United States, it is expected that ALSPs will experience at least a 25% growth rate in the next five years, if not more due to the current pandemic. ALSPs are positioned to provide sophisticated services and to invest in the appropriate technology. Most law firms and corporations may not even recognize the need to provide such services. Only the larger law firms and corporations should consider providing these services internally since it would be difficult to compete with ALSPs. The large accounting firms have a unique advantage with many of their corporate clients: they already have a long-term relationship, have invested in the technology, and can provide a quality product at a competitive price.
Some larger corporations are instructing law firms to use ALSPs on their matters, often directing which ALSPs the law firms should use. Traditional law firms can incorporate ALSP departments within their firms. However, most firms probably are not in a position to incorporate such departments internally and will look outside of the firm for such services. Large companies can incorporate ALSP departments within their legal departments, but may choose to outsource these services as well.
Some ALSPs are international. Depending on the various needs of a law firm’s clients, it may make sense for a law firm to outsource outside of the United States. Data security and confidentiality are key in making these decisions – not just pricing.
The use of ALSPs by law firms can make sense economically. Once PPP (Payroll Protection Act) loans are forgiven, law firms will re-examine their payroll costs. It may make sense for them to outsource several in-house functions. For outsourced functions, a firm will only have to pay for services provided – not employee training or other non-billable employee expenses. Such outsourcing arrangements have been used by many firms for mailroom, copying, and document management functions. It may make sense to outsource an ALSP as well.
The bottom line is that the law firm that provides all services at a reasonable price in a reasonable time and produces a quality product will thrive. If that means outsourcing some traditional services/tasks to non-legal entities that are in a better position to provide the service, then that may be a prudent way to proceed.
This ALSP issue exists because of the “billable hour.” Many attorneys and their clients are too attached to the billable hour, making it difficult for them to measure production and service without it. Attorneys measure their internal performance and compensation by the billable hour. Many legal clients are attorneys themselves and embrace the billable hour. But, if somehow, the billable hour was to become obsolete, professionals would be forced to work more efficiently.
The current prevailing mindset makes it difficult for attorneys to justify a technology expense or an outsourced expense when the result is less billable hours. The thought process behind such thinking is tactical in nature. However, it is the law firms that continually think strategically that will survive and thrive.
Embracing Alternate Solutions
Smaller law firms are more likely to embrace alternative legal solutions because they do not have the bench strength that the larger firms have. Considering the current environment, an ever-growing younger workforce is more inclined to embrace alternative solutions and technology, including artificial intelligence. Younger clients will also be more inclined to accept the use of alternative solutions. Ultimately, less lawyers and less human involvement will be needed to perform traditional tasks.
Large companies who employ in-house lawyers are more inclined to pursue alternative legal services. Their legal departments are considered overhead, so any efficiency and cost reduction is encouraged.
In summary, all professionals should embrace current technology and leverage it to their advantage, and for the advantage of their clients. They should consider outsourcing, other ways of working more efficiently, and become less attached to the billable hour mentality as a means of generating revenue.
With so many professionals working remotely and dealing with cybersecurity and technology challenges, ALSPs are now in a more favorable position to offer relevant, quality, and affordable services. Providing ALSP services, in addition to the traditional legal services a law firm can provide its clients, is a good strategy for firms, even if the ALSP services are outsourced.