Data from a survey on ‘Alternative Legal Services Providers’ (ALSPs) shows that law firms need these so-called alternatives to traditional legal providers as much as the clients do, and in some cases even more.
The survey (which this site covered part of last month), and which was led by Thomson Reuters, provides a series of revealing findings that ironically show that these organisations that have been branded as somehow ‘outside the norm’ are in fact sometimes essential to the operation of many ‘traditional law firms’. Moreover the demand is growing.
The table above shows that US law firms use a greater number of services from ‘ALSPs’ (see below re. definition) than corporates, at 3.7 to 2.9. And, as you can see, the number for law firms is increasing rapidly, from 2.4 service lines in 2016 to 3.7 in 2020.
In terms of what law firms are using these often process focused businesses for, the greatest needs are around legal research and eDiscovery. The eDiscovery part makes sense, as that has long been externalised for many firms. The bit about legal research is perhaps more surprising given how large and well-developed many law firms’ internal KM and research services are.
M&A due diligence support was fairly low down the list, but in the UK, for example, this came in at 11% of firms seeking help there – which is still very notable. Given that M&A due diligence has long been seen as a regular part of commercial law firm revenue generation this is significant. If this keeps growing year on year then it really would become an important change.
Also, the table above shows (see the two columns on the right) that large US law firms are expecting greater demand for ALSPs than corporations, with a 16% net increase in expected demand. This compares to a 11% net increase for the clients.
And finally, where is this growth most likely to take place? For US law firms (and the US may have a different demand profile to the UK and other markets) the expected need around eDiscovery and disputes is there, but also at the top of the list is ‘legal tech consulting’.
15% of firms said they expected to use an ALSP to help them with legal tech issues in the next year, with 22% in addition expecting this in the longer term.
For M&A due diligence work the expected additional demand was 7% this year and 15% more over the long term. Or, 22% that don’t already use ALSPs for M&A process work now expect to do so in the immediate or longer-term future. For Artificial Lawyer that is a significant change in ‘output allocation’, i.e. where a legal activity is assigned as part of a work process.
For a long time, ALSPs…..(AL really can’t stand that term – see below), have been seen by….guess who….law firms as somehow not the ‘real thing’ when it comes to being part of the legal services market. They have been regarded as ‘other’.
Clearly what this data shows is that many law firms rely upon ALSPs, not just for eDiscovery, which is a well-known area, but for multiple aspects of what they do for their clients.
And that raises the question: how long before law firms become the alternative to the Alternative Legal Services Providers in multiple areas of work…?
The other point is that it has long been the assumption that ALSPs are there as a result of direct client engagement, i.e. a corporate needs X done, so it goes to an ALSP. In reality it would appear that it’s very often the corporate needs X done, it goes to its regular supplier of legal services, e.g. law firm Y, which looks at what needs to be done and says: ‘We’re going to need someone else to help us do this: on time, or on budget, or with the sufficient resources or specialised expertise to do this.’ So, they then bring in ALSP Z.
One could argue that all demand is ultimately from the clients, and that is true. What’s interesting here is that law firms are in effect having to admit they increasingly cannot handle a growing amount of work for their clients, and now – in a modest, but growing number of cases – really need ALSPs.
It’s another sign of how the means of legal production are changing.
ALSPs or Legal Process Providers
It would be better to say legal process provider (LPP) than ALSP. Now, LPPs may also provide consulting services, lawyers on demand and more, but at their heart they are selling process capabilities just as in the same way a ‘law firm’ is essentially selling advisory services to the clients, along with a host of other services that includes process work.
I.e. the magnetic pole of that type of entity is process, hence LPP. Meanwhile it’s advisory work as the pole for law firms. There is plenty of blurring in the middle and overlap, but pushed to the limit of what each is about, one is centred on process outputs, while the other’s core value is made possible by its advisory capabilities and the long-term knowledge capital related to that type of output. I.e. you may offer tech consulting, but if the majority of your revenue comes from LMS and process-driven review work, then you’re a LPP.
The report by Thomson Reuters, ‘Alternative Legal Service Providers 2021’, is really a gift that keeps on giving. Georgetown Law, Center on Ethics and the Legal Profession and Saïd Business School, Oxford University, also contributed.