What are alternative legal service providers?
Breaking up with outside counsel can be tough, especially if the deal breaker is cost. While recent economic challenges have prompted general counsel to tighten legal budgets, many law firms have increased their rates to offset rising associate salaries and the record number of partner promotions. As a result, cost-conscious GCs are turning to alternative legal service providers (ALSPs).
And data shows that these law firm competitors are here to stay. Chambers now ranks ALSPs in its renowned legal industry directory, and CLOC found that 21% of respondents shifted more work to ALSPs than law firms in 2021. With lower costs and more advanced technology use than traditional law firms, ALSPs are strategic options for companies looking to reduce outside legal spend without reducing quality.
How are ALSPs different from law firms?
While ALSPs have attorneys on their payroll, these businesses handle the routine tasks that support the successful execution of legal matters, not the legal matters themselves.
Services
When you partner with law firms, they’re generally responsible for executing the matter from start to finish — your in-house attorneys don’t do the heavy lifting. In contrast, corporate counsel is still in charge of legal decision-making when working with ALSPs, whose primary job is to help in-house counsel by taking over tasks that don’t require a JD to complete.
Typical ALSP offerings include:
- Document review
- Contract management
- E-discovery
- Due diligence
- Compliance
- Legal research
- Litigation and investigation support
- Intellectual property portfolio management
There’s also a growing number of ALSPs that offer temporary staffing solutions and consultations on legal technology.
Role structure
Law firms operate in a set hierarchy, with job titles essentially dictating what type of work individuals will handle — and how much you’ll pay for that work. ALSPs don’t have this rigid structure, so they don’t have to give X kinds of assignments to an associate or partner. They can be more thoughtful and allocate work based on who has the best blend of experience and interest, which results in higher-quality deliverables. This flexibility also drives better collaboration, as team members of all seniorities can freely partner together to solve problems without worrying that they’re driving up your final bill.
Billing models
While more law firms are offering alternative fee arrangements, like flat fee models, this upfront pricing is the cost-effective norm for ALSPs. Unlike traditional law firms, ALSPs don’t bill based on hours or timekeeper positions — you’ll never have to pay more just because a more experienced paralegal is handling your work.
Ownership
In most states, Model Rules of Professional Conduct for the legal profession prohibit law firms from being owned by non-attorneys. This is meant to prevent outside influences from affecting lawyers’ professional judgment. ALSPs, however, can be owned by anyone, even if they don’t have a law background.
As Greenberg Traurig chair Richard Rosenbaum notes, this flexible ownership model gives ALSPs a lot of competitive ground. Unlike public ALSPs or ones backed by private equity, law firms can’t “raise outside capital to invest in new technology or staffing models.” So it’s much easier (and faster) for ALSPs to adopt innovative digital tools and processes that add more business value for clients.
What are the benefits of alternative legal service providers?
Whether you previously outsourced legal support services or kept them in-house, ALSPs can save you money, time, and stress.
Specialization leads to high-quality work from engaged employees
The core business of an ALSP is legal support services. So the people who work there have specialized expertise in that type of high-volume work. This is different from law firms, where support services are just one part of completing a matter.
Additionally, attorneys and paralegals who voluntarily work at ALSPs will most likely have more of an interest in the work than, say, associates who are counting the days until they become counsel and can leave tasks like research behind them.
Less legal spending and more cost certainty
Because ALSPs don’t bill based on the time they spend on work, you don’t have to worry about bill padding or extra hours costing you more money. This departure from the hourly model is also helpful for keeping your budgets on track. Since you know what you’re paying upfront, you won’t get derailed by unexpectedly high accruals.
Faster turnaround times from advanced technology use
As Stella Peterson, head of legal operations at ALSP Kalexius, notes, the lack of the billable hour gives ALSPs something that law firms don’t have: “the incentive to optimize their productivity.” This is most apparent in the integration of advanced technology into the ALSP business model, which saves clients time and money.
For example, as noted in Lawyer Monthly, Ernst & Young (EY) used artificial intelligence (AI) software to complete “a due diligence review of over 6,000 documents 50 times faster … than it would have taken them manually.” Additionally, with a tagline stating they’re “powered by technology,” ALSP Percipient saved an insurance client nearly $400,000 over 18 months.
Because ALSPs leverage all kinds of innovative technologies, these partnerships are especially beneficial for corporate legal departments that don’t have the budget for legal management software yet.
Standardized workflows create greater quality control
Besides the use of automation and AI to streamline work, ALSPs take a systematic approach to execute similar projects. Applying project management skills to the delivery of legal services isn’t something usually found in “a lawyer’s core competence,” according to ALSP Solvaire president Christian Farmakis. This innovative strategy results in more organized processes, which then result in higher-quality work and more work finished on time.
More time for in-house teams to focus on strategic priorities
When they aren’t saddled with admin-level work, your in-house team is freed up to concentrate on thoughtful analysis that adds more value to the business, like optimizing legal cost control. Sending work off to ALSPs also helps relieve the strain on understaffed corporate law departments, preventing costly burnout and turnover.
4 major types of ALSPs
While ALSPs provide many different legal support service offerings, you can generally group businesses in the ALSP market into one of four categories:
1. The big four
This group refers to the four largest global accounting firms: EY, PricewaterhouseCoopers (PwC), Deloitte, and Klynveld Peat Marwick Goerdeler (KPMG). According to Harvard Law School’s David Wilkins, these business giants tried to break into the legal market in the ’90s, but their positioning of “we’re just like law firms only bigger” didn’t generate significant work. Now, they’ve seen success by intentionally differentiating themselves from law firms, offering a wide variety of critical legal support services.
Best for: Large global companies that need consistent access to a deep bench of talent and services
2. Independent ALSPs
These types of companies are the standard ALSPs: businesses wholly dedicated to legal support services. You can use them for specific projects or on an ongoing basis.
Best for: Small and medium-sized businesses
3. Captive legal process outsourcings (LPOs)
To try and get ahead of ALSP competition, some law firms have formed their own subsidiary companies or captive legal process outsourcings (LPOs). Excluding legal tech consultations and staffing, they offer the same services as independent ALSPs.
Best for: Companies that have established, positive relationships with the parent vendor
4. Contract staffing agencies
Think of these ALSPs as temp agencies. Whether you’re dealing with the impact of the Great Resignation and subsequent in-house burnout or just have multiple employees out of the office at once, ALSP staffing companies are a great option for filling in coverage gaps on legal teams.
Best for: Companies struggling with turnover or full-time hiring freezes or that have employees on temporary leave
Legal spend management software can help you determine when to use an ALSP
If you find your budget or your in-house team drained by low-level, high-volume legal tasks, it’s time to consider alternative legal service providers. Use your legal spend data to objectively identify what work takes up the most time and money and start researching ALSPs that provide those services.
Then maintain this data-driven approach by comparing the costs of ALSPs on your shortlist to current vendor costs. This will give you clear insights to make the best financial moves.
Check out how our legal spend management platform makes this process a breeze, housing all of your relevant legal analytics in one place, so you can generate spend reports with the click of a button.