At the recent Legalweek gathering, one session dove into the growing ALSP market and how both corporate clients and their outside law firms are taking notice
NEW YORK — The alternative legal services provider (ALSP) market may be a 21st century revelation, but it’s clear that ALSPs have integrated themselves into client matters and deal teams in a short amount of time.
In fact, law firms that use ALSPs are doing so for more than 40% of their intellectual property management work and more than 20% of their legal drafting and legal research, according to the Thomson Reuters Institute’s recently published ALSP 2023 Report. Corporate law departments that use ALSPs, meanwhile, are tapping them for more than one-third of their regulatory risk & compliance matters and contract management tasks.
Yet, despite ALSPs’ rising prominence, the report also reveals that law firms and corporate law departments alike don’t yet fully trust ALSPs. Almost two-thirds (62%) of law firms indicated that concerns about quality affects their willingness to use ALSPs; and 46% of corporate clients said the same. Meanwhile, more than half of law firms had concerns about turning over confidential client information to ALSPs, and firms also felt their traditional business model was challenged by ALSPs’ use of technology. Further, 38% of corporate law departments indicated they would rather have their outside law firms deal with ALSPs rather than deal with ALSPs directly themselves.
So where is the disconnect? At a recent Legalweek session, Changing Nature of Legal Practice: Impact of ALSPs, Tech Companies, and the Big 4, panelists explored not only how ALSPs are increasingly entering legal matters, but what they will need to do to keep their place at the table. No surprisingly, it all starts with the relationship, said panelist Vedika Mehera, Director of Orrick Labs at Orrick, Herrington & Sutcliffe. “We can’t overemphasize how important trust is, and it begins with constant communication,” Mehera said, adding that many view this as constant communication of problems.
“We don’t get to fail more than once [in the legal industry],” she explained, noting that there is a flip side to that — proactively explaining how ALSPs can help. “When you have a success, share it. When you have a challenge that you’re running up against, communicate it. …I think that really helps build trust.”
Showing clients the value
Of course, this can mean communicating positive return-on-investment for a matter as well. However, as panelist David O’Hara, Director of Legal Business Solutions at Big 4 firm PwC, added: “It’s not just about the dollars and cents.”
O’Hara noted that PwC has worked to bring in diverse teams to matters, in some cases pairing legal experts with IT, bringing in regulatory experts into a cross-border matter, or even identifying internal skills “that helps us build trust with clients, to say we have a world of resources” to tackle different jobs.
“The more [we] can ease that [concern] and create different ways of working for them, that’s the intangible value we always need to remember,” he noted.
Of course, this can be easier said than done. Often, clients may not even know the different jobs that an ALSP can do. Indeed, 33% of global corporations within the ALSP Report said that not being aware of services or where to find them was a factor in not using ALSPs.
To help solve for this, O’Hara recommended approaching the problem with more than just a technology solution. “Attorneys are going to forever be skeptical of technology, and that’s good,” he explained, adding that by centering the human and casting the ALSP’s offerings as part of a wider team’s efforts, ALSPs can help ease client fears of trying something new.
“We can’t overemphasize how important trust is, and it begins with constant communication.”
“As we integrate all of these different elements, that’s where I’ve seen the most success,” O’Hara said. “I’ve seen that be the best delivery of the best combination and use case for how to leverage these teams.”
Mehera added that identifying the client’s culture is important when approaching those conversations — as is reflecting how a team with diverse skills can supplement that culture. For example, some corporate law departments may be more tech-savvy than others. “All of these clients are using AI in their business. Can we be reflective of that as well?” Mehera asked.
Finally, O’Hara noted that it’s important to be realistic when talking about what an ALSP can do. “We realize that driving a lot of these changes takes an investment. We’re pragmatic” and not guaranteeing immediate return-on-investment if it’s a long-term project, he explained.
O’Hara also said that rather than looking for new tools, lawyers often take the mentality that “we need more hammers to break more rocks.” However, for those that take the plunge to try a new path, ALSPs can supercharge a matter — a value that law firms and corporate law departments alike are beginning to see. More than two-thirds of law firms (69%), in fact, believed that using ALSPs can help them scale and expand their own business.
“I think there’s all sorts of different ways that you can partner with vendors and providers in the industry to accomplish what you need to,” Mehera added. “I think it’s in our best interest that everyone succeeds. If you succeed, we succeed.”