ALSPs are no longer a risky bet

We hire law firms regularly to support our in-house legal team’s need to service our in-house business clients. The law firm expects that our assignment needs an A-plus level of effort, an A-plus level of talent staffing it, and of course, A-plus results. On the face of it, that’s reasonable. Who doesn’t want the very best?

But when we think about how to resource an in-house legal matter, we can generally put the matter into one of three buckets. Some work is complicated and requires deep expertise, judgement, attention to detail, experience, and in some cases connections. Other legal work is more routine, but still requires the specialized knowledge and experience of an attorney. Work in the last bucket doesn’t necessarily have to be done by a lawyer at all. In all three cases, the level of quality we need may vary from A-plus to B — and even, on occasion, C (i.e. just get it done quickly and don’t make a major mistake).

We would theoretically love to have A-plus quality and expert talent on every legal assignment we send to an outside firm. But that expectation and way of working died out at least 10 years ago. The truth about A-plus work is that we can’t afford it all the time. And so-called expert talent is not always the best at completing some types of work, such as document review and NDA review. Velocity is the new currency in running our business. We need to get the work done at an adequate level, but we also need speed and efficiency. In-house teams need the right quality of work at the right price and the right time. That means that the level of quality needed can vary dramatically from project to project.

You’d think all this would be obvious, but for many law firms, it’s not. That’s a big problem. It’s a cultural problem and a problem that is slow to change.

ALSPs Can Do the Work

These days, there are many places we can get legal work done instead of using a law firm. Law firms often perceive these competitors as not being at the very top of the field. They don’t see them as serious competition, or as partners to help bring down costs. Alternative legal service providers, (ALSPs), often fall into this category. Here, law firms’ perceptions are misplaced. The quality of work done by ALSPs is often is very good, even on specialized matters. More important, the work is good enough, given the risk profile of the company and the project, and is priced right.

In addition, ALSPs often provide value in other ways that are equally important to in-house teams, but not by law firms. Law firms only look at quality. That’s a miss. ALSPs can be great collaborators, have technologies that provide big advantages or provide great value by handling high volumes at attractive price points.

Yet many law firms see ALSPs as producing B-level results, and therefore won’t consider them. Some 59% of small and midsize law firms cited quality as an issue preventing the use of ALSPs, as did 79% of large firms, according to a study, Alternative Legal Service Providers 2019: Fast Growth, Expanding Use and Increasing Opportunity. The report, released in January, was produced by Thomson Reuters Legal Executive Institute, the Center on Ethics and the Legal Profession at Georgetown University Law, the Saïd Business School at the University of Oxford, and Acritas, a UK-based research firm. That same study found that a much smaller share of corporations — about half of them — also have quality concerns when it comes to the use of ALSPs.

The quality of work done by ALSPs is often is very good, even on specialized matters. More important, the work is good enough, given the risk profile of the company and the project, and is priced right.

Even though some law firms and some corporations share quality concerns about ALSPs, there’s a big difference in attitudes. Corporations are willing to use ALSPs because of cost constraints and increasing demand for legal support — legal support that does not require tip-top talent or quality. As such, corporations’ eyes are wide open when it comes to their choices. Even if they see ALSPs as providing B-level work, they’re very likely to use them on appropriate projects.

But here’s the thing. Often, an ALSP lawyer or other resource turns out to be really good at supporting a particular type of matter, because it’s all they do. They’re specialists. The ALSP lawyer is relatively inexpensive, and maybe they’ve done hundreds of that matter type this year alone — all with in-house quality review — which allows the ALSP to fine-tune the quality. Meanwhile, the $1,000-an-hour law lawyer does only a few of those each year. Oddly, in the end, the law firm lawyer is not as good at it, or as efficient as the ALSP. Either way, the law firm lawyer is way more expensive.

Moving the Work Upstream

Moreover, when an ALSP does great work on a project, in-house legal teams invariably look for ways for them to take on more significant work. Even though the work becomes more significant, the risk does not. That’s because ALSPs don’t come in with pre-conceived notions of how to do business. They provide in-house attorneys with data that lets their client track the work every step of the way. With an ALSP, we can keep tabs on the work in a way that the traditional law firm relationship just doesn’t allow.

These days, legal teams — especially those with legal ops functions — are much more collaborative. If an ALSP did good work for us, we’re very likely to tell our colleagues at other in-house legal teams about it. It’s good for in-house legal teams to have viable options, since law firms continue to raise rates with no end in sight. In-house legal teams that are actively trying to change the way they do legal work — and the way they pay for it — typically find that working with an ALSP is easier than trying to get their law firms to work in a new way. And they spread the word.

As a result of this dynamic, in-house legal teams start taking their ALSP providers up the value chain toward more sophisticated and profitable work. It’s not just about the individual matters — it’s also about the infrastructure around them. ALSPs have the resources and the technological know-how to help in-house counsel with project management. They can help develop dashboards that can help track progress and the use of resources, and they can provide data analytics.

From there, it’s a short step to helping out with more complex matters. We’ve found is that in many cases, an ALSP can drop in someone with 20 years of experience, just as a law firm can, but at a radically different price point.

On more sophisticated work, ALSP’s have become a safe option. Law firms are slowly becoming the backup — our first-choice resource only when we are willing to pay a premium and must have A-quality work. The ALSP is no longer a risky bet.

This article was originally published by Legal Executive Institute.