The Rise of Alternative Legal Service Providers

Over the past decade, Alternative Legal Service Providers (ALSPs) have emerged as a growing force in the legal industry. The rise of ALSPs has been driven a profound shift in client expectations – clients are demanding greater transparency and predictability around legal fees, efficiencies in service and cost reduction measures. This, in turn, has forced practitioners to rethink how they operate their business. As a result, law firms and in-house legal departments are under more pressure to adapt to the changing landscape and make the best possible use of ALSPs.

What are ALSPs?
ALSPs are niche companies specializing in providing high-demand legal services including document review, contract management, litigation support, eDiscovery legal research and IP management outside of the traditional law firm model. These companies operate by breaking down a specific element of the legal process and finding ways to make it work more efficiently. They market themselves as businesses providing services traditionally offered by a law firm, but usually at a lower cost. Because ALSPs don’t need to fit into the typical structure and hierarchy of a traditional law firm, they have found more latitude to change their business practices to increase efficiency using technology or other innovative practices.

Who’s using ALSPs?
ALSPs are viewed as a viable choice for outsourcing, because they offer affordable options for businesses and law firms looking to complete certain legal tasks at a lower cost. However, many are also gaining traction as a source of specialized expertise that exceeds what is expected from the average law firm due to their experience in a particular area. Law firms, which once viewed ALSPs as the competition, now utilize these companies as a form of subcontracting, allowing them to focus on less mundane tasks, while at the same time saving money and providing better service to their clients. Companies are also taking advantage of ALSPs, particularly for managing IP issues or dealing with minor contract issues where hiring a traditional law firm would be too expensive.

It’s not just about cost
It’s conventional wisdom that cost savings is the primary driver in this space, but that opinion is beginning to change. While cost is still a major driver with some of the more routine services like document review, many organizations are also looking for expertise when deciding on more complex services such as eDiscovery. Law firms often take advantage of this expertise to meet peak demand without having to increase the firm’s permanent headcount. Corporations, on the other hand, will use ALSPs to fill gaps in expertise within their in-house teams.

Technology will push future innovation
Since ALSPs frequently have to work with sizable data-sets and large-scale, repeatable processes, many have begun to incorporate technology into their workflows. Technology is already being used heavily in eDiscovery, as well as in contract management and risk and compliance. With the rise of AI in the industry many firms and corporations will utilize the services of ALSPs to provide them with the resources, process improvements and technological expertise that would otherwise be absent in their organization.

An eye on the future
We expect ALSPs to make further advances – in both breadth of services provided and market share – facilitated by the continued disaggregation of legal services, changes in the legal labor market and advances in data analytics. Some firms are even entering the ALSP market themselves, via alternative brands or formal business ventures, and there may be more opportunities for firms and corporate legal departments to gain a competitive advantage through savvy understanding of the space and deployment strategies.

This legal market briefing was created by the analysts at ShiftCentral and is presented through an exclusive news and analysis partnership with Big Law Business. ShiftCentral’s team helps law firms, practice groups, and legal departments keep up with fast-changing developments in the business of law. Learn more here.