Law firms and ALSPs

A fight to the death or a budding partnership on the rise?

Chances are a couple of years down the line – especially with the proliferation and advancement of technology – that law firms and alternative legal service providers (ALSPs) will be sitting on the same side of the fence.

We know. It’s hard to imagine.

But coming off the back of the LegalTechTalk 2024 and witnessing how eager the legal professionals who attended the events were at future proofing their firms, we started to think – if law firms are so eager to incorporate advanced legal tech into their practice, is there still a need for ALSPs?

With tech at the centre of the thought process, it started us on a quest – want to join?

First things first.

A brief overview (and recap) of ALSPs

By now most legal professionals have come across the term ALSP. But for sake of clarity let’s have a little recap –

ALSPs are – as their name suggests – an alternative option outside of the traditional law firm model, where lawyers can be found working in senior roles alongside legal technologists, analysts, and project managers. They are often seen as “niche companies”, specialising in providing high-demand, high-impact, and highly repetitive legal services.

Once seen as direct competition against traditional law firms (for corporate clients), that view has all but fallen by the wayside as even law firms now contract with or create their own ALSPs to offer more legal services at better prices.

While traditional law firms are critical for handling high-stakes and complex matters, ALSPs fit into a cost-conscious legal department’s overall engagement strategy. ALSPs can be extremely efficient at doing certain kinds of work and are deployed at a much lower cost than law firms. With the help of process automation tools, ALSPs can manage repetitive and labour-intensive tasks more efficiently, with fewer errors, and at a reduced cost. Many ALSPs also offer a flat fee billing structure for projects so that legal teams can benefit from a more predictable cost structure.

ALSPs offer unparalleled scalability. In-house legal teams can engage with ALSPs for specific, short-term projects or they can enter a long-standing relationship to manage ongoing repetitive or labour-intensive legal tasks. This adaptability allows in-house teams to scale their capacity when workloads surge without adding headcount that may not be required at a later stage.

ALSPs are agile early adopters and innovators for cutting-edge technologies such as artificial intelligence, block chain, predictive analytics, and smart contracts. They are therefore in the perfect position to utilise legal tech in a way that best serves their clients – for example for e-discovery, legal research, regulatory risk and compliance services, areas where legal tech is needed the most.

ALSPs are on the rise

It’s the fast-paced environment we live in today where bang for your buck carries so much weight that has contributed to the rise of ALSPs. So, clients that need to reduce costs but improve work output with the improvisation of technology that have contributed to the rapid and ongoing growth of the ALSPs in the legal market.

But in-house legal departments are not just looking for cheap legal services, they are looking for legal service providers that are a blend of lawyers and those that possess effective project management, technology, and process optimisation expertise. And ALSPs are perfectly poised to assist clients leverage technology to automate their legal workflow, whilst keeping costs low. What’s more, because ALSPs can integrate new and up and coming technologies seamlessly into their product offerings and delivery models, they are able to rapidly scale up and down to meet the changing needs of a client’s business – customisation at its very core.

And it seems – especially following the LegalTechTalk – that as law firms continue to move towards becoming more tech-enabled, partnering as opposed to competing with ALSPs in adopting advanced, innovative tech, it’s far more cost effective than taking on the full investment themselves.

The added bonus here? ALSPs understand the rapid pace of technological advancement, which is reflected in how they approach the practical aspects of technology implementation: more client-centric cost models, increased client feedback cycles, and an emphasis on the user experience.

The advancement of legal tech

Generative Artificial Intelligence (“AI”) which creates algorithm-based content and Large Language Models (“LLMs”), are AI systems that read and create human-like content (like text and images). It’s a hot topic. With a lot of scepticism (especially from those wary of past tech hypes like Blockchain and the Metaverse).

But all by its itty bitty lonesome, Generative AI appears to be a novelty. However, in the legal field, early adopters are achieving remarkable results.

Generative AI can turn an hours long manual exercise such as drafting a Non-Disclosure Agreement (NDA) or writing a legal memo into a two-minute exercise with a prompt like “draft a two-page NDA between Company and Client in the same format as this attachment”. So, generative AI has certainly found it’s perfect use case scenario.

However, and despite enormous hype to the contrary, generative AI will only form part of the solution. Processes, data analytics, and workflow automation are just as important, and in certain instances, more important pieces of the tech puzzle. The thing is, because generative AI is advancing at an alarming rate – currently with ChatGPT having a verbal IQ of 155 and increasing rapidly – generative AI will soon be in every legal service provider’s toolkit to enhance the delivery experience desperately needing an infusion of data, metrics, and productivity enhancements.

And who could blame them?

The providers that can balance the potential application of generative AI models with real-world client challenges, will most certainly remain ahead of the curve.

But as legal tech providers ourselves let’s make one thing clear – there are already ways to organise, file, draft, and manage matters using tech. The thing is, there has never before been an automation tool with these kinds of capabilities. We have recently seen computers do what we previously thought could only be performed by a human being. Drafting can be performed in a matter of minutes by a completely autonomous program ingesting millions of human artifacts to predict and create the desired outcome with a remarkably high level of accuracy.

Disruption of existing technology isn’t just an enhancement of what is already out there – it’s a complete paradigm shift of what is possible.

The upside for law firms? They can take on more clients and widen the services delivered for their clients because of this tech. Smaller to mid-size firms can leverage their lack of administrative overhead to find a competitive edge against larger, tech-adverse firms. By collaborating with ALSPs to compete for work previously reserved for the more capacity-rich large firms, the smaller firms can start to see real upside.

And when these future-focused firms partner with ALSPs, the rise of truly scalable delivery collaborations that combine technology, subject matter expertise, and client-focused billing models will truly soar.

Where do traditional law firms and ALSPs converge?

It’s at this point that we believe that the law firms of the future and ALSPs will ultimately converge under a unified ideology that is the adoption and embrace of legal tech – especially as it evolves.

The partners and firms that adapt most quickly will survive and thrive, while the ones that change too slowly, or not at all, risk losing their place at the table. Just as ALSPs have continued to identify routine legal work and build high-efficiency delivery models, law firms must take advantage of legal tech and process improvements to overhaul their existing delivery approach.

It’s clear to us that the rising tide of technological advancement in the legal industry will ultimately tickle a lot of fancies, and the legal innovation leaders of the future will be the ones who can convert the opportunities presented by the proliferation of legal tech into a value-based, outcomes-focused, client-centric business model with law firms and ALSPs working in tandem.

Our conclusion? Law firms and ALSPs are a budding partnership on the rise!

In the meantime, if you are ready to incorporate a new tool into your existing accounting and practice management suite, or if you need to start from scratch, feel free to get in touch with AJS – we have the right combination of systems, resources and business partnerships to assist you with incorporating supportive legal technology into your practice. Effortlessly.

AJS is always here to help you, wherever and whenever possible!

(Sources used and to whom we owe thanks: Brightflag; One Legal; Bigle Legal; Amata and Law.com)

– Written by Alicia Koch on behalf of AJS