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It is estimated that the total size of the Alternative Legal Service Providers (ALSP) market , an increase of 30% over the previous two years. In this blog, we will take a look at the continued growth in ALSPs over recent years and consider whether traditional law firms can learn a few tricks from these new disruptors.

Growth of ALSP market

As mentioned above, the by the end of 2019. Breaking this down further into the different “types” of ALSP, we get the following figures:

• Independent ALSPs have experienced a surge in the value of their share of the legal market, from $7.35 billion in 2015 to $12 billion in 2019.
• ALSPs controlled by law firms are the smallest but fastest growing subset of the Alternative Legal Service Provider sector, increasing in value from an estimated $150 million in 2015 to $480 million in 2019.
• The legal divisions of the Big Four steadily grew from $900 million in 2015 to $1.2 billion in 2017 and $1.4 billion in 2019.

Although these are global figures, it is likely that ALSPs are experiencing similar levels of growth in the UK, albeit on a smaller scale compared to the US.

What are the benefits of Alternative Legal Service Providers?

Technology

Technology driven processes are typically a defining feature of ALSPs. Indeed many ALSPs are primarily considered to be technology companies, with their legal service offerings often constituting software products. For example, provides tools for building legal documents but does not actually offer legal advice. Meanwhile, Riverview Law, which has now been subsumed within , had for many years straddled the line between being a technology business and legal consultancy. Agile working, independence and results based work are more common features of ALSPs compared to traditional firms which rely on billable hours and a partnership model of career progression.

Specialisation

ALSPs often focus on specific legal services - sometimes just one - and aim to optimise efficiency. Some areas of specialisation include:

• Predictive coding (electronic disclosure)
• Intellectual property management
• Document review and contract management
• Legal document assembly
• Legal research
• Due diligence
• Litigation support
• Legal software design and production

Since they are able to concentrate their skills on niche areas of expertise, this allows them to improve processes, increase speed of delivery and reduce costs. This enhanced efficiency means that ALSPs are increasingly chosen by corporate in-house counsel over traditional law firms for assistance with specific legal services. Law firms themselves often sub-contract out certain elements of project work to ALSPs, although this is more common in America than the UK.

Other ALSPs are more traditional in terms of their offerings, providing legal advice from human lawyers, as opposed to automated legal solutions. However, they still usually focus on specific areas of law or procedure, which means they tend to be more niche compared to full service law firms.

Overall, the benefit of Alternative Legal Service Providers lies in their specialisation and consequent increased efficiency in performing niche legal tasks. Since technology often plays a more integral part in ALSPs compared to traditional law firms, their services can be more innovative and process-driven.

What can law firms do to compete with ALSPs?

Traditional law firms have access to similar technology as ALSPs and can use software tools to automate many of their processes and increase efficiency. Innovation and digital transformation sometimes face more resistance in an established firm, but ultimately they have the potential to streamline routine tasks and reduce costs to compete with ALSPs. Technology which can be harnessed by traditional firms includes:

• Automated billing - automated time recording and billing software can be integrated with the case management system, automatically calculating the time spent on dealing with each individual client matter and generating invoices at the end of the month.
• Legal document automation - automated document building software can streamline the process of creating bespoke contracts.
• Document review - AI software can be implemented to scan contracts or other legal documents, looking for any wording which needs to be updated in light of new legislation etc.
• Predictive coding - sophisticated technology assisted review products can assess the relevance of high volumes of documents for purposes of electronic disclosure.

Aside from adopting the latest technology solutions, law firms can bring in outside expertise to help them adapt their business models to the disruption in the legal market being caused by ALSPs and the Big Four. This may involve converting to an ABS and bringing on board non-lawyer partners who will have different ways of managing competitive threats. Enabling internal junior staff to have more influence over management decisions can also bring a useful fresh perspective.

Several law firms have already taken steps to compete with ALSPs:

• Womble Bond Dickinson - its has been designed to consider technology-led new approaches for improving legal processes
• Clifford Chance - it has also created an which aims to embrace fresh ways of thinking and clever use of technology
• Norton Rose - it has created , described as a “global change and innovation program”

Aside from setting up innovation hubs or subsidiary legal tech companies, many firms have been creating new roles within their existing practices to reflect some of the specialisms of ALSPs:

• Innovation manager - someone who oversees the adoption of technology or changes to workflow or business process, often they will provide a bridge between the IT team and practice managers
• L&D officers - learning and development officers are being employed to train lawyers and other staff to use new technology products or improve their knowledge management processes
• Business operations - law firms are increasingly bringing on board business professionals to oversee projects, reduce costs and optimise efficiency

Are ALSPs more attractive to new talent?

Junior lawyers have been pushing for change in the legal sector for many years. A found that 39% of young lawyers felt that the partnership model was out of step with the 21st Century, with a similar number saying flexible working was crucial to their future career. Around a third claimed the sector was not making sufficient use of technology.

The nature of ALSPs lends itself to more flexible working opportunities. This is partly due to their adoption of technology (which enables remote working) and also their tendency to offer fixed fees, which means staff are more likely to be measured on targets as opposed to billable hours. The culture of innovation and disruption associated with ALSPs can also make them seem more exciting and “revolutionary” compared to traditional law firms - and this can help to attract new talent.

But it’s worth noting that the entire legal sector has been forced to . As such, many traditional firms which were resistant to flexible working have undergone a digital transformation and seen the benefits of agile working. Firms are increasingly to their lawyers. So the gap between ALSPs and traditional law firms may be narrowing.

What does the future hold?

It is likely that more law firms will decide to set up legal technology arms or collaborate with technology companies to improve their processes and increase efficiency. Rather than competing with ALSPs, traditional firms may decide to try and differentiate themselves by focusing on certain niche areas of law. Many more will acquire or merge with ALSPs, so it is possible we could see a lot of market consolidation over the next few years.

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