Alternative Legal Service Providers (ALSPs)

A decade ago, the legal industry came across various challenges compelling attorneys and lawyers to think out of the box about their legal business. However, organizations that are more focused on driving value to their business growth have been gradually stretching their buying ability, and law firms are feeling the same constraint in adopting this technique for their business growth. This sea change gave birth to a new set of legal service providers, The Alternative Legal Service Provider.

The study about Alternative Legal Service Providers reveals frightening stats that already 57% of law firms and 60% of corporate legal departments are using ALS Providers for at least one type of service. And these numbers are likely to grow in the near future.

But what is ALSP? Is it another term used for Legal Process Outsourcing (LPO) service providers?

Alternative Legal Service Providers (ALSPs) – An Overview

Well, Legal Process Outsourcing is delegating of non-core legal tasks to offshore countries, with its cost advantages and quick turnaround time that mostly include data entry tasks or document coding for law firms. However, the LPO trend was fueled more by many aspects, including:

• The rising cost of legal services
• Globalization
• The evolution of the Internet
• Advances in data security
• Augmented automation of legal processes

But the emergence of Alternative legal service provider services, similar to the LPO trend, seems to be powered by corporate law departments fascinated with providing built software precisely for their legal and compliance needs.

According to the 2017 ALSP service study, this global report clarifies, after surveying more than 800 law firms and corporations and the outcome was the growing use of a new generation of ALSPs is essentially about expertise, not lower costs, which is often anticipated.

Other aspects of the rising use of ALSPs distinguished in the study involved client demand for global solutions, scalability, and greater access to technological advances. To understand this new generation ALSPs, firstly, you need to understand how ALSP is defined.

Commonly, ALSPs are companies that majorly provide high-demand legal services such as:

• IT Services
• Contract Management
• Documents Review
• Litigation Support
• Human Resources
• Analytics
• ECA
• IP Management
• Contract Lawyers and Staffing
• Discovery and Electronic Discovery
• Investigation Support and Legal Research
• Due Diligence

30 years back, the banking sector started outsourcing IT services to reduce operational costs. And now, many businesses and law firms are undertaking the same task by moving towards these new Alternative Legal Service Provider companies for even performing daily scheduled tasks, which are time-consuming to manage in-house and expensive.

The recent report released by Thompson-Reuters Legal Executive Institute, there are basically 5 categories of ALSPs:

1. Captive LPOs are owned entirely by captive operations and are usually located in low-priced regions focusing more on excessive volume process work.
2. Accounting and Audit firms that have a large amount of revenue in legal services and tend to focus on excessive volume align with processes that are equivalent to accounting-audit work.
3. Contract Lawyers, In-sourcing, and staffing services are providers of lawyers to companies on a contract basis, from support entry-level document review to highly skilled experts.
4. Managed Legal Services Providers contract for all or certain parts of the task of an in-house team and are normally involved in ongoing work within possibility and proactively managed.
5. Independent LPOs, eDiscovery, and Document Review Providers perform outsourced legal work under the guidance of corporate legal departments and law firms.

Thus, defining Alternative Legal Service Providers in simple terms can be difficult as it is an intricate grouping of services.

Moreover, the faces of ASLP does not limit to being staffed by lawyers, or they need to be certain law firms as they have paralegals, technical staff, and legal assistants with accurate legal expertise, which are in demand at the new generation ALSP to manage their work.

Besides this, an article in ABA Journal, published in October 2013, describes that employment at law firms peaked in 2004 and has declined moderately since then. During the same time period, employment at ALSPs has increased.

In addition, litigation and investigation support ALSPs are the third most-used category of ALSPs for law firms; as per the report, they are used by just 28% of firms. Whereas 26% of firms use ALSPs for non-legal factual research, and 24% of firms use them for specialized legal services.

Now the question arises: Who is using an ALSP, and why?

According to research by Thomas Reuters Legal Executive Institute reports, more than half of the law firms and corporations already use ALSP services, of which 51% are law firms and 60% are corporate legal departments, using at least one service group.

Besides this report, John Munro, Vice President of National Markets at Blackstone Discovery, he noted that traditional document review work was once 75% of the LPO market. Still, now it may be no more than 30% of the ALSP market. ALSPs are playing very crucial in providing legal services.

And many law departments are using ALSPs in focused areas ranging from regulatory risk & compliance services to focused legal IP managers and legal researchers. Law firms are most likely using litigation support, eDiscovery, document review, and pre-litigation investigation of ALSPs.

But why?

ALSPs are preferred as a viable outsourcing solution because of reasonable prices for handling tasks and various legal processes. In 2005, ALSPs were only about cost-saving and employment arbitrage. This case is still the same, according to Thomson Reuters’ reports for tasks such as document review, as 85% of law firms used ALSPs for their document review to save cost, and 52% said they use them to meet the highest document review demand.

So cost saving still remains the key factor; the report also approves how ALSPs today are dispersing legal processes by providing legal expertise that is not available in-house and helping law firms with access to the latest technology.

Moreover, according to the survey, about two-thirds of law firms reported the reason for using litigation and investigation support is to get access to specialized expertise, which is not available in-house, and only for one-third of law firms, the reason was cost-saving. Even for non-core legal tasks, ALSPs were close to the same: 63% expertise-focused and 38% cost-driven, respectively.

As the ALSPs companies have the ability to manage high-volume tasks with the help of their in-house expert team and allow law firms and corporate legal departments to focus more on core competencies.

What is the future of Alternative Legal Service Providers (ALSPs)?

As per the report of Thomson Reuters, alternative legal services providers are likely to expand as the complexity and specialization of legal services grow. Furthermore, we can expect that even more parts of the ALSP specialty will develop in the near future. Some of the AM law 50 and Fortune 50 may still prefer to keep their work in-house due to their eminent internal resources of troubles underwent in the past with ALSPs, but the global market for ALSP services in the rest of the legal profession should stay expanding.

Who is the biggest teamster for the growth of ALSPs? Technology. Firms and companies were interviewed for the report that identified a number of different technologies they expected ALSPs would use in the future, including:

• Workflow Technology
• Process Mapping
• Contract Management
• Artificial Intelligence

Will this growth impact law firms? Undeniably. The Thomas Reuters report mentions several parts that law firms and corporations would like simplified understanding before embracing alternative legal solutions, including:

• 59% of law firms cited that they do not use ALSPs due to data security reasons
• 43% of corporate users quoted the quality of service as negative
• 54% of law firms cited quality of services as an inhibitor
• 43% of corporate users mentioned the failure actually to reduce costs as the most negative factor.

So evermore, ALSPs are becoming partners in legal work more than hired vendors. Similar to partners in the legal process, the bond will be ongoing and not just focused on one deliverable task.

So, while the future seems bright for alternative legal services, the future also seems to be now.

If you are looking for Alternative Legal Service Providers (ALSPs), your search ends here at Cogneesol! For more information, call us at +1 646 688 2821 or email us at [email protected]