U.S. law firms are not realistic if they think they can compete with technology firms and alternative legal services providers, according to Richard Rosenbaum, executive chairman of Greenberg Traurig.

One of the biggest reasons why is their inability to raise outside capital to invest in new technology or staffing models, Rosenbaum told Bloomberg Law.

But Greenberg Traurig believes it has a solution. It launched a subsidiary this week that it hopes will help Big Law firms take on their new competitors by borrowing a page out of their playbook. The subsidiary, called Recurve, will not practice law, and it will receive outside investment, including potentially from other law firms.

“For a U.S. law firm to say we are going to keep up with public companies, private equity-backed companies and other major technology players that have access to greater amounts of capital for technology and other major capital outlays is not realistic,” Rosenbaum told Bloomberg Law. “And by the way, nobody is doing it.”

Greenberg Traurig is positioning the new entity as a cheaper way for firms to offer ALSP-like services while retaining greater control over client relationships and avoiding the cost that comes with buying and building tech on their own.

By investing in Recurve’s “shared services” model, law firms would receive access to services offered by strategic partners in the technology, real estate and staffing industries that Rosenbaum said will be announced at a later date. That will help law firms focus on what Rosenbaum said is their core business: carving out practice groups where they are known to deliver “real excellence.”

“Instead of law firms focusing on what they are best at— which is being great law firms— they are spending time trying to keep up with innovation,” Rosenbaum said. “And that isn’t even the business they’re in.”

Other Models

Large law firms are still formulating strategies to compete with ALSPs, which Thomson Reuters says took in $10.7 billion in revenue in 2017, up from $8.4 billion in 2015. These providers are not allowed to practice law inside the U.S., due to bar rules on firm ownership, but have still become tough competitors with firms for elements of client business.

Some large firms have developed branches that sell services traditionally provided by ALSPs.

Orrick Herrington & Sutcliffe, for instance, has focused on mastering legal tasks like due diligence and document review in a West Virginia operation. Reed Smith’s GravityStack sells proprietary legal technology through a software-as-a-service model. Bryan Cave Leighton Paisner’s Cantilever division sells legal operations consulting services to clients. Wilson Sonsini Goodrich & Rosati has a document automation subsidiary.

“Law firms for years thought they could control their own destiny, and that’s just not true anymore,” said Janet Stanton, a business consultant for law firms at Adam Smith Esq. “So I’m glad that law firms are exploring the alternative service provider market. It’s happening. Some will fail, and some will succeed. But that’s kind of life in business land.”

Rather than building technology, staffing or legal process outsourcing services itself, Recurve’s strategy envisions partnerships with existing businesses in those spaces.

Recurve’s expertise, Rosenbaum said, is knowing what types of services would solve specific client problems. Recurve’s staff of what it calls “architects” would build solutions to those problems without being tied to a specific firm.

“Today, when a client goes to a company or a law firm, they end up getting sold what that firm or that company owns,” Rosenbaum said. “Here, we are saying our job at Recurve, where people are independent of Greenberg Traurig, is to find the best solution to your problem, working closely with your trusted legal advisors.”