When I joined Pangea3 12 years ago, it was just a start-up. Little did I realize the scale of the forces of disruption being brought to the legal industry. Today, Thomson Reuters Legal Managed Services and fellow alternative legal services providers (ALSPs) – part of an $8.4bn ALSP industry – are hired by the world’s largest, highly regulated and demanding corporate law departments and the law firms supporting them through their most complex matters.
This is one of the main findings of a major study released last week by the Thomson Reuters Legal Executive Institute, in partnership with the Georgetown University Law Centre for the Study of the Legal Profession and the University of Oxford Saïd Business School: ‘The 2017 Alternative Legal Service Study – understanding the growth and benefits of these new legal providers’. It’s eye-catching that this is a truly global industry report; more than 800 law firms and corporate law departments from all over the globe participated in the study which helped to explore the use cases for ALSPs, as well as what the future is likely to have in store.
Some 51 per cent of law firms and 60 per cent of law departments already use ALSPs in at least one service category, dispelling the image of ALSPs as start-up newcomers. As confirmed by this study, as an ALSP we gained momentum by providing support for high-volume transactional tasks such as contract management, compliance and regulatory requirements, litigation-related tasks like e-discovery, document review and investigative support. As GCs became familiar with ALSP models, law firms viewed us as complementary (not competitive), and as law tech continues to evolve, we provide increasingly complex services and tasks, support process design and provide tech-enabled services. Growth is likely to continue over the coming years from those end-users yet to make use of an ALSP, with 21 per cent of law firms and 14 per cent of law departments planning to engage with an ALSP in the next year. But why?
“ALSPs are not just about lower cost, but also about access to specialized expertise and alternative modes of delivery,” says report co-author Mari Sako, Professor of Management Studies at Saïd 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.”
In 2005, it was purely about the cost savings and the labour arbitrage. While that still remains a driver, this study confirms how ALSPs are disaggregating legal processes, providing legal expertise (which is otherwise not available in-house) and helping enable lawtech. The opportunity here is not only for the ALSP but also for the law firms, who can be consumers of specialized legal services and offer cost-effective models for their clients. Given that most in-house legal departments are looking to insource, thereby forcing their law firm panels to reduce cost, partnerships (where traditional law firm services are combined with innovation-as-a-service offered by ALSPs) will now be seen more than ever before.
Building this specialized legal expertise involves gathering internal expertise that reflects well on external partners. Timing, perseverance and decades of really hard work eventually make ALSPs look like an overnight success, but as this report shows, ALSPs are ingrained in the legal workflow and set to improve service levels for clients for the years to come.