ALSPs Best Business Practices
Law firms have complicated relationships with alternative legal service providers. In some cases, the ALSPs are serious competitors. In other cases, ALSPs help law firms to improve and expand law firm services to their clients. Let’s talk about the major ALSP offerings, and how law firms can be confident in choosing the right service providers.
Thomson Reuters partnered with Oxford University and Georgetown Law School to produce a comprehensive report on the state of the ALSP industry in 2017. The report divides the ALSP industry into five major categories. Highly specialized ALSPs might offer just one or two of the areas, while a larger organization will offer more. Most of these companies serve both law firm and corporate clients. Accounting and audit firms are the exception, as their legal services groups are direct competitors to law firms’ practice areas.
|Area of Service
|Accounting and Audit Firms
||The bigger accounting firms, especially the Big 4, spend heavily on providing legal services to their corporate accounting clients.
|Captive Legal Process Outsourcing (LPO)
||Wholly owned high-volume legal operations, usually operating in areas with lower employment costs. Corporations, law firms, and 3rd party providers operate captive LPOs.
||These LPOs can range from highly specialized solo practitioners to organizations with thousands of employees, who offer a broad range of legal services.
|Managed Legal Services
||These ALSPs manage legal services for a client. Teams may replace any or all in-house legal functions and may include dedicated attorneys, operations managers, and support staff.
|Contract Lawyers and Staffing Services
||These providers assign contract attorneys and staff to multiple projects or clients as needed.
Top Areas of Concern
Now that we know common ALSP categories, let’s look at the biggest areas of concern when a law firm considers an ALSP. (The exception is the accounting firms, which are in direct competition with the law firms.)
In the Thompson Reuters study, three issues came up which law firm respondents were most concerned about: data security, quality of service, and cost concerns.
- 59% of law firms do not use ALSPs because they are concerned about inadequate data security. Law firms are becoming more sensitive to the dangers of poor data security, and many of them have updated their computer systems and company policies to improve security. ALSPs access this sensitive data, and law firms need them to demonstrate network intrusion detection, updated malware defenses, anti-phishing policies, and download security.
- 54% of the law firm respondents were concerned about services quality. Quality of service is critical to hiring an ALSP, and some law firm respondents were not convinced that any ALSP could offer enough value over traditional law firm practice. Successful ALSPs pointed to satisfied clients and strings of successes, and to the quantifiable processes and expert personnel who enabled them to achieve success.
- Reducing and justifying cost. Reducing costs was a much stronger concern on the corporate side than it was for the law firms. However, client pricing pressure on law firms is growing. When law firms use ALSPs, clients appreciate passing on lower costs. (By “appreciate”, I mean they are less likely to walk out the door.) In fact, over 55% of law firm respondents reported that their ALSPs helped to relieve client price pressure.
Law firms can strongly benefit from partnering with ALSPs, who allow enable firms to add profitable services, or who deliver existing services faster, better, and more economically. But in order to achieve a successful partnership, the law firm should do its own due diligence into prospective ALSP partners.