The Rise of the ALSP: Law Firms suffer from the Creep of the Niche

April 4, 2020

2 min read

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What's going on here?

In a recent report, Thomson Reuters has hinted at disruptive changes that could affect the structure of the legal market as we know it, highlighting the rapid growth of alternative legal service providers (ALSPs).

What does this mean?

Alternative legal service provider, or ALSP, is an umbrella term encompassing any business providing legal services without being a law firm. These range from firms offering e-discovery and document firms processing to the Big 4 accounting companies (Deloitte, EY, KPMG and PwC) which are more or less providing similar services to a traditional law firm. Their market share reached 4.4% last year and it is projected to grow by another 12.9% this year, with the ALSPs themselves expecting to grow on average 24% per year. 

The reasons for the increased pull of ALSPs for corporate clients are threefold. Firstly, there is the flexibility and agility of accessing legal services for specific, niche tasks. These can be integrated into the corporation’s existing in-house structure, enabling them to retain control of the process, rather than to completely outsource the tasks to a law firm. Money is another big factor. Outsourcing tasks and smaller projects also carry smaller bills

However, perhaps the most significant reason is the increased effectiveness of making use of ALSPs. Outsourcing to ALSPs frees in-house legal talent from routine, low-value and repetitive tasks and enables them to focus on the complex legal issues and add-value. 

ALSPs are arguably the most tech-driven companies in the market. They see legal tech as their leverage for moving up the value chain in the market. It is no wonder, then, that ALSPs’ services are sought after for their cutting-edge, “low-latency” services. In fact, being able to tap into the ALSPs’ resources is a welcomed opportunity even for law firms, who work closely with ALSPs for their expertise and resources in certain areas.

What's the big picture effect?

As the report concludes, the next decade clearly is not going to be plain sailing for UK law firms”. Confronted with the rise of ALSPs and the increased rate of lateral hires (poaching the best lawyers from competitors) made by US firms (last year around 30 of the 100 Star Lawyers who switched firms moved to US ones), UK firms will need to make significant changes to retain their relevance in the market. 

Many have already created their own subsidiaries for legal-related services to try and combat the new entrants to the market. In the UK, notably, A&O has launched several subsidiaries, including A&O Consulting, aosphere, as well as  Fuse and Peerpoint. All of their services are offered under the firm’s “Advanced Delivery Solutions”. Yet, the issue runs deeper and will likely require more significant changes to the business model of law firms in order to maintain their market share. 

The emphasis of “New Law” is on multidisciplinary, technology-led legal services, seen as an integrated part of the business. Gone are the days when legal issues were solved in a vacuum and firms will need to adapt accordingly. If they do not, they will risk losing their relevance.

Report written by Bogdan Ciacli

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