As the market for alternative legal services providers matures, both law firms and corporate law departments are seeing the advantages to enlisting ALSPs as strategic partners
Once regarded as last-minute stand-ins for overflow commodity work, alternative legal services providers (ALSPs) have quickly become strategic partners to both law firms and corporate law departments. And as ALSPs continue to mature, their outside perspective, ability to select and implement technology to drive efficiency, and commitment to improving outcomes by improving processes has helped them carve out a unique role in the legal services marketplace.
This growing trend was highlighted recently published Alternative Legal Services Providers 2023 Report, a data-driven report produced every two years by the Thomson Reuters Institute in partnership with The Center on Ethics and the Legal Profession at Georgetown Law and the Saïd Business School at the University of Oxford.
And the growth message wasn’t lost on the report’s survey respondents. As one U.S.-based CEO and co-founder of an independent ALSP says: “We’re probably at literally 10 times the number of conversations from a year ago about, how do you mature your legal department? How do you adopt the next tech? How do you do a three-year tech plan? How do you do the organizational change? How do you transform your services?”
Interviews with more than a dozen additional ALSP leaders found that more strategic considerations are becoming a routine part of ALSP discussions across multiple service areas. For example, concerning using ALSPs to fill secondment arrangements, one partner in a law firm ALSP explains: “It has become much less of an emergency service — it always used to be, ‘Someone’s left, we’ve got a gap.’ Now it has become built into the way that large clients manage talent.”
You can download a copy of the Thomson Reuters Institute’s Alternative Legal Services Providers 2023 Report here.
In other service areas, this ALSP leader says client requests “are far less ad hoc in their nature, and clients are increasingly looking to explore how they can do things differently.” Once clients use the ALSP’s services in one area, they’re quick to see the ALSP’s applicability to others, and they’re putting their other partners on notice. “Some of them are very clear,” notes one survey respondent. “They are preparing the market and their suppliers. They are saying, ‘This is coming. We are going to shift work and we want it delivered in a different, more cost-effective way, and you need to start getting ready for that.’”
Data strategy is another opportunity for both ALSPs and their clients. “I’ve met with a few [General Counsel] (GCs) over the years and one of my questions was, ‘Tell me about your data strategy’ — and five, six years ago, they looked at you funny,” says the chief innovation officer of a U.S.-based law firm ALSP. “Now they understand they’re sitting on a mountain of data.”
Indeed, some ALSPs are helping clients with work related to the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Others are giving GCs better visibility into the activities of their teams, both internal and external. “It’s a one-pane-of-glass view for a general counsel of what’s going on in their organization which, believe it or not, a lot of general counsels don’t have,” says the sales director of an independent U.S.-based ALSP.
The influence of procurement & legal operations teams
This newfound reliance on ALSPs as both business and legal partners has several causes, according to the interviews. First is the maturation of the ALSP market itself. As ALSPs have grown, law firms and corporate GCs see them as more stable partners, less likely to run out of funding or be bought by a bigger player that may not be a good fit. Corporate clients are increasingly requesting that their law firms perform more efficiently, and ALSPs can present a good long-term solution to that request.
However, larger factors in the rise of ALSPs seem to be the increasing importance of legal operations and procurement teams within corporate law departments themselves, as well as ALSPs’ standing as experts in legal technology and processes.
No longer does a GC rely only on relationships to find outside legal partners. With procurement and legal operations teams joining in the decision-making, efficiency and cost become more important. The result, says one founder of a U.S.-based independent ALSP, is that “now we’re able to sit down at the table with them and talk about utilization of contract lawyers as a strategy — not to replace your outside counsel.”
“We’re probably at literally 10 times the number of conversations from a year ago about…”
More tech-forward ALSPs use similar meetings “to help customers design what their strategy should be, their target operating model, their technology strategy, their key performance indicators (KPIs), their sourcing, their spending, and their supply management,” says the founder, chairman, and CEO of a U.S.-based independent ALSP.
In these cases, ALSPs benefit from offering a more integrated solution. “We’re definitely past the part of the movie where the CIO or CFO buys discrete parts for the IP management group and the litigation group and the commercial and contracting group and the antitrust and legal ops group,” says the CEO and co-founder of an independent U.S.-based ALSP.
Instead, corporate clients and law firms are looking for a holistic solution with a true partner that has both business and legal expertise — and in an increasing number of cases that means an ALSP.