There are myriad versions of what's being called "New Law" or "Alternative Legal Service Providers (ALSPs)."
According to the LAC Group, it is a $10.7 billion niche and is expected to grow at a 25% rate during the next 5 vears.
Essentially, that umbrella term refers to a different way of delivering legal services.
The traditional way is the client-facing relationship in which the elite law firm provides all the services in a high-value way. The fee for that, of course, is high. And the client demand for lower fees is a major reason why ALSPs are on a growth trajectory.
One version of New Law that isn't well understood is what is known as "The Captive ALSP." That is why LegalSpeak chose to focus on that space within the overall topic of ALSPs.
Essentially the captive ALSP is the creation of this non-traditional model for delivering services within the law firm per se. It might surprise those who haven't been following ALSP developments that it's a growth industry in the law firm sector. 35 of the AmLaw 100 have installed such a unit.
It differs from "back office operations" in that it is client-facing. It also indicates that the law firm sector is not slouch in innovation. Like just about every other industry, it must embrace change to survive. Refer to BigLaw as "tradition-bound" and you will tip off others that you lack an insider perspective on where large law firms are at currently.
Setting up the captive ALSP requires a financial investment. It also mandates members of the law firm learn new ways to work. For example, instead of doing all the tasks involved in the case in a high-value way, law firms will have the captive ALSP handle some of them in ways that will not bill at such a high rate. Those tasks could include technology applications, process re-engineering, document review and creation of contracts. For some firms, there has not yet been a pay off in ROI.
Among the drivers for forming an internal ALSP are:
- Competition from external ALSPs as well as the 4 Big Accounting firms. Law firms want to hold on to the business they still have and win back business they have lost to the ALSPs. Meanwhile, in-house legal departments are outsourcing fewer assignments to law firms. They have to align with the overall corporate model of doing more with less.
- Client demand for lower fees. Yet, simultaneously there is the reality that clients prefer for their legal work to be done by a law firm. That is a relationship they feel comfortable with. Therefore, if law firms siphon off some tasks that can be performed in a lower value way they can prevent client churn and reintroduce themselves to former clients who balked at the invoices.
- A new revenue stream, once the operation is up and going. This can make up for the revenue they have already lost to ALSPs.
- A mode of differentiation. By having a captive AFSP, they can showcase how they differ from law firms which do not. Overall, BigLaw is no longer a monolith. Evidence of that breaking away from the herd ranges from some firms awarding COVID appreciation bonuses and some not to policies on lawyer layoffs.
This all circles back to the macro issue of The Future of Work.
Research by management consulting firms and think tanks are all chasing the same question: How can businesses approach work in ways that simultaneously increase efficiency and unlock new value. Unfortunately, part of the answer could be robotic automation. McKinsey and Company projects that will eliminate 800 million jobs worldwide by 2030.
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