Business of Law

Study finds law firms and corporations increasingly turning to alternative legal service providers

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A majority of law firms and corporations are already using alternative legal service providers (ALSP) in at least one service category, and more intend to do so in the coming year.

That was the main finding in a study released Tuesday by the Thomson Reuters Legal Executive Institute, in partnership with the Georgetown University Law Center for the Study of the Legal Profession and the University of Oxford Said Business School. According to a press release, more than 800 law firms and corporations participated in the study, which endeavored to determine the extent to how respondents used ALSPs and the future outlook for ALPSs in the legal market. The study found that 51 percent of law firms and 60 percent of corporations are already using ALSP’s, which are defined in the study as non-law firm entities that provide legal services outside of the typical law firm model. Meanwhile, an additional 21 percent of law firms and 14 percent of corporations are planning to use an ALSP in the coming year.

“The legal ecosystem is rapidly evolving to the point where alternative legal service providers are no longer the new kids on the block, they now play an accepted and expanding role for legal departments and for law firms,” said Eric Laughlin, managing director of Thomson Reuters Legal Managed Services, in a press release.

Much of this increase is being fueled by the need for the kind of specialized expertise that ALSPs provide. According to the study, the most commonly cited reason for ALSP use from both law firms and corporations was to gain access to specialized expertise not available in-house. “Our study highlights the change in narrative around ALSPs: clients are no longer driven by cost savings alone, they are looking to ALSPs to bring technology, process and legal expertise,” said Laughlin in the press release. “The report shows there are tremendous opportunities for growth not only for ALSPs, but also for law firms, who can use—and are using—ALSPs as partners to expand their business.”

The study found that corporations are mainly using ALSPs for help with compliance and regulatory requirements, while law firms are mainly using ALSPs for help with litigation-related tasks like e-discovery, document review and investigative support.

Of course, cost still plays an important role. According to the study, 55 percent of law firms see ALSPs as a way of bringing down fees in accordance with client demands. Additionally, law firms and corporations are both looking at tools that can help them reduce the costs of high-volume transactional processes, and are turning to ALSPs.

“ALSPs are not just about lower cost, but also about access to specialized expertise and alternative modes of delivery,” said report co-author Mari Sako, professor of Management Studies at Said Business School at the University of Oxford, in a press release. “Our study indicates that some corporate legal departments and law firms are responding by setting up, or considering setting up, ALSPs themselves.”

Even though some respondents remain concerned over the quality of service from an ALSP, especially from a data security and cost-benefit point of view, the study sees a bright future for ALSPs within the legal industry. “While their use today is primarily centered around standardized tasks, increasing sophistication on the part of the ALSPs, as well as better technology and growing familiarity and comfort on the part of law firms and corporations could lead to ALSPs playing a greater role in increasingly complex services and tasks,” the report states.

The report recommended that law firms can better utilize ALSPs to grow and retain business, either by partnering with an ALSP and acting as a client’s general contractor instead of as a one-stop shop, or by creating an affiliated entity to perform specialized services for clients.

Updated on Feb 1 to correct a link to the study and press release.

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