COVID-19 spurs growth for ALSPs
Level Legal Chief Strategy and Innovation Officer Leigh Vickery offers insight into how COVID-19 accelerated growth for alternative legal service providers, not unlike the recession of 2008. This time, these short-term shifts have transformed into long-term strategies.
In the spring, we expected no more than a few months of COVID-19 restrictions and adjusted our strategies accordingly. Today we’re looking at several more seasons defined by the pandemic. Short-term adjustments have been transformed into long-term strategies. Remote working is almost universal and for many is here to stay, business opportunities have shifted or disappeared altogether, and staffing levels and budgets are leaner.
Even before COVID-19 struck, we saw a growing trend for legal departments and law firms to investigate new ways to operate more efficiently. More sophisticated law firms and legal departments had already turned to alternative legal service providers (ALSPs) to help contain the costs of more mundane, high-volume areas of legal process. Many ALSPs have been able to take advantage of these initial projects to prove their mettle in other areas including technology, process workflow, and subject-matter expertise and build deeper relationships with the law firms and legal departments who had given them an opening.
Today, ALSPs are viewed by an increasing number of in-house counsel and law firms as a go-to choice for processing work around eDiscovery, contract review, intellectual property litigation, and due diligence.
COVID-19 has thrust ALSPS into an even greater degree of prominence. Pre-pandemic, a legal department might turn over a litigation matter to their outside counsel and let the law firm handle everything. The law firm’s decision to use an ALSP or not was usually dictated by their judgement as to the best way to handle a matter rather than the client’s preference.
Mid-pandemic, in-house legal departments are feeling the effects of budget and staffing cuts alongside the challenges of remote working. As a result, they are increasingly calling directly on ALSPs to work on projects like digital transformation, high volume transaction management, privacy questionnaires, or litigation and document review. (Which ALSP they choose depends on their area of specialization: Today’s ALSPs come in many different flavors.)
As a result, as in-house legal teams gain confidence in the level and quality of services offered by their ALSPs–as well as the efficiencies achieved by not using law firms for more mundane and commoditized areas of law–they are also trusting their ALSPs to undertake more specialized and sensitive work. What we’re seeing today is a growth in the number of ALSPs acting as an extension of the team within corporate legal departments, rather than as an adjunctive service offered by their external law firm. It’s a significant shift.
The complexity of evaluating advanced AI tools and the expertise required to administer them have been barriers to in house legal departments or law firms using sophisticated AI–for example, multi-lingual eDiscovery tools. ALSPs, on the other hand, are not only conversant with the most advanced legal technologies but also maintain an arsenal of trusted options and are constantly testing newer offerings.
This is key to ALSPs’ maintaining their value in this changing market. Here at Level Legal, we decided to formalize our efforts to stay ahead of the curve by developing a Technology Working Group. This is dedicated to researching and identifying best-in-class legal technology tools as the infrastructure evolves to incorporate cloud computing, AI, and data analytics.
Another dynamic of ALSPs, highlighted by a recent EY survey, is one we’ve experienced first-hand. Just as an internal legal department’s experience leveraging ALSPs grows over time into a trusted relationship where value is continuously demonstrated and disruption is minimized, in the case of law firms, the same type of trusted relationship will lead them to recommend an ALSP for appropriate client needs.
As an example, we were called in to a recent investigation by an AmLaw 10 firm whose client faced an inflexible two-week deadline. We provided both the technology and the administrative skills to deliver the project ahead of schedule and substantially under budget–a win for us, the law firm, and the client. The key here was trust, which combined with cost advantages and expertise proved a compelling proposition.
Thinking ahead to 2021
As we head to the end of 2020, offloading work to ALSPs has and will become more commonly considered, especially given the more intense scrutiny of budgets and search for greater cost efficiencies caused by COVID-19. Recent Utah and Arizona legislation enabling non-lawyers to undertake more legal services and share fees with lawyers illustrates a wider national readiness to move to different business models and approaches.
While we can confidently predict that ALSPs will be a bigger part of the ecosystem in the coming years, it’s difficult to predict to what extent that will be and how long it will take. It’s important to recognize how difficult it is for legal departments to shift vendors quickly at few firms would make the switch mid-year. But there’s still work to be done on explaining the true intrinsic value of the ALSP as it relates to the dynamics of the legal market.
At the beginning of this year there was some debate about whether providers should drop the term ‘ALSP’ in favor of ‘New Law’. We see ALSP as a broad umbrella term under which a variety of services can be provided, not in competition with Big Law (as ‘New Law’ might imply), but in partnership with them acting as an extension of their legal services to corporate legal departments. In fact, law firms that have existing relationships with ALSPs are in a better position to leverage the value proposition of this model as a counterbalance to the effects of the pandemic. It's also not beyond the bounds of possibility that, as outside services become better at managing processes like eDiscovery and also hold their own in competitive pricing, many law firms will come around to the viewpoint that ALSPs are an essential part of their ecosystem.
That said, we can also act as a partner to legal departments who are looking for services that their law firms wouldn’t or shouldn’t handle—areas like internal investigations, privacy questionnaires, litigation and compliance as well as subject matter, technology and multi-lingual expertise.
And as the category grows, we will see further fragmentation and specialization with the ALSP market based on areas of expertise or by type of client base—law firm or legal department. Our view is that, at this point in the evolution of ALSPs, there’s not one term that’s perfect for every situation. The label matters less than the ongoing demonstration of quality and value in the services we provide.
Regardless of whether a legal department uses an ALSP through a law firm or as a direct services provider, the aim of the game is to achieve higher levels of efficiency, quality, service, timeliness and budget-friendliness–all valuable traits in an era of increasing legal fees and decreasing law department budgets. The trajectory of ALSPs is still upwards.