It’s no secret the legal profession has changed drastically in the last past year. Despite initial hesitation, lawyers have been forced to embrace technology and new ways of practicing law, many of which have cut costs and increased efficiency. However, pandemic aside, the profession has been exploring new ways of doing business for some time now. An example is the growing role of alternative legal service providers (ALSP) in the legal landscape.
ALSPs offer clients specialized expertise that enables law firms and corporate law departments to reduce their costs and free up their attorneys’ time. Law firms and corporations are increasingly turning to these providers for tasks like litigation support, contract management, eDiscovery, and legal research assistance.
In fact, ALSPs grew their global market share to $13.9 billion at the end of 2019, up $3.2 billion since the end of 2017, according to the Alternative Legal Service Providers 2021 report from the Thomson Reuters Institute, the Center on Ethics and the Legal Profession at the Georgetown University Law Center, and the Saïd Business School at the University of Oxford.
“Firms are also coming to understand that certain tasks, if performed by in-house attorneys, are probably always going to be loss-leaders – and that by outsourcing those to ALSPs, they can do a better job both of preserving their margins and pleasing their clients,” the report says.
Top Drivers & Barriers to ALSP Usage
Last year, Thomson Reuters surveyed 586 decision-makers at law firms and in corporate legal departments to benchmark the progress of the ALSP market. The survey was followed by telephone interviews with leaders at 26 ALSPs. The survey found that 79% of U.S. law firms and 71% of U.S. corporations used ALSPs in 2020, up from 51% and 61%, respectively, in 2016.
Access to specialized expertise was the top driver for usage in both firms and corporations. Law firms were more likely to tap this specialized expertise for eDiscovery, litigation support, and research assistance; in-house teams were more likely to use ALSPs for regulatory risk and compliance services or litigation and investigation support. Cost-savings were cited as a significant motivator for ALSP usage by both firms and corporations.
For the 21% of law firms that don’t use ALSPs, the reasoning behind their decision has stayed consistent over the years, according to the survey. The top reasons for avoiding ALSPs include: a desire to retain the work, ALSPs were not requested by the client, skepticism that these services would actually save money (despite cost-savings being the second-most popular driver of usage), and service quality concerns. These were the same barriers law firms cited in 2018.
Corporations reported similar apprehensions, with a preference for using in-house resources and quality and cost concerns cited as top barriers for ALSP usage.
While ALSPs certainly provide needed relief and support for many legal organizations, some law firms say their traditional business models are being challenged by the increasing use of technology (46%) and competition from ALSPs (41%). In response, some firms have begun creating in-house services modeled after ALSPs.
The future of ALSPs
Given the greater acceptance of ALSPs, the growing use of legal technology, and a widening array of service offerings, ALSPs are positioned to rapidly scale their market share in the coming years.
The data “reveals a picture of an industry which has reached a point of maturity, showing how ALSPs are moving from a simple cost-saving proposition to a true partner than can be counted on for expertise, tech-enabled solutions, and new ways of doing business, especially during the ongoing pandemic crisis,” the report says.
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