Oliver Yandle, CAE, of Chicago, Illinois is the forme  executive director of ALA. Oliver comes to ALA from the Commercial Law League of America in Chicago, Illinois where he served as executive vice president.

     Oliver’s law association experience includes holding the executive director position at the International Association of Defense Counsel, in Chicago, Illinois, and he served as an adjunct instructor of legal analysis and writing at the Washington College of Law at American University.
In addition to his legal experience, Oliver has had a long-standing career in association work, most recently having held the position of executive vice president for Commercial Law League of America. He has held senior director positions at SmithBucklin in Chicago, Illinois, at the International Bridge, Tunnel and Turnpike Association in Washington, D.C., and at the Intelligent Transportation Society of America in Washington D.C.

     He is active in both the American Society of Association Executives (ASAE), where he holds the Certified Association Executive designation and the Association Forum of Chicagoland.      Oliver is a native of Louisiana and holds a B.A. in journalism from Loyola University of the South in New Orleans, and a J.D. from Washington College of Law at The American University in Washington, D.C

Lucy Endel Bassli is a legal industry expert, engaging in thought-leadership projects to drive change and evolution in the delivery of legal services. She is the founder of InnoLegal Services PLLC, a modern solution provider that offers legal advice and consults on operationalizing the practice of law. She works with law departments and law firms on innovating their legal service delivery and consumption models, and trains lawyers in innovative practices. She also serves as deputy general counsel of legal operations, contracting, and corporate G&A for Snowflake Computing. Lucy specializes in all things contracting: resource allocation, automation, process optimization and smart risk-taking. Lucy also is the Chief Legal Strategist for LawGeex, a cutting-edge AI legal tech start-up automating contract review services.

     In her 13 years at Microsoft, where she ran an enterprise contracting solution, Lucy focused on complex and global outsourcing contracts and gained firsthand experience in legal outsourcing to assist her with high-volume contract transactions. She launched an innovative “managed services” engagement with law firms and actively worked on continuously improving the value received.

     Prior to joining Microsoft, Lucy practiced law at Davis Wright Tremaine, LLP in Seattle, WA, focusing on commercial transactions and commercial bankruptcy. Lucy received her J.D and BA from the University of Houston in Houston, Texas, where she grew up, but has been living in the Seattle area since completing law school.

     Lucy is a licensed member of the Washington and Texas state bar associations, and was named to the National Law Journal list of Outstanding Women Lawyers, 2015. She is a frequent speaker on topics of legal services innovation, legal technology, and legal process outsourcing.

     This article was originally published by the Legal Executive Institute on September 10, 2018 and is reproduced here in its entirety.

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 There has been a significant amount of well thought out articles in the legal press on the topic of the entry of “Big 4” accounting firms into legal services. Most recently, the announcement of EY’s acquisition of UK legal service firm Riverview. It is almost impossible to keep up with this whirlwind of change.

Clearly, the Big 4 are entering the legal space in the US as well as globally; and there are many reasons for this, all of which have been explored thoroughly.

I’d like to take a different approach for this article and provide some perspective from personal experience. Setting aside the historical developments, changes in regulatory restrictions outside of the US, and the disaggregation of legal services, I’d like to focus on what it is that makes the Big 4 appealing to commercial legal departments.

Having been in-house at a leading international company, I was a purchaser of legal services for 10-plus years. While the Big 4 were a more recent entrant, it became clear to me that the characteristics of the services they delivered to other parts of the organization would be very applicable to the legal department as well and very useful. There are several attributes of the Big 4 that make their services stand apart from law firms and stand above the alternative service providers.

These firms are many things to many people, including, but not limited to:

1. Experienced Consultants — The Big 4 have extensive business and management consulting practices with arguably the best professionals in the field. They provide a perspective into legal services which will inherently be grounded in business and tend to offer solutions to problems that contemplate the end business goals. They are experts in all kinds of operations and will naturally focus on efficiency and practical application of theory. Even if I would not have known to ask for this perspective, the Big 4 will always provide it. That kind of experience is priceless for the legal experts buying these services, who may not know that they even need such operational insights.

2. Process Engineers — With an expertise in management consulting, these professionals will undoubtedly and inevitably identify process improvements. After all, managing is all about aligning resources and delivering outcomes, isn’t it? In legal, we desperately need to rethink our allocation of resources. Much of what the industry is going through today is about changing engagements with law firms, adding new professionals into our mix, and outsourcing certain legal work. As challenging as that is for legal professionals to consider and implement, it is very easy for management consultants. Similarly, the focus on outcomes is never lost on management consultants, yet is it often lost on lawyers. Too many lawyers think that the outcome is the production of the legal advice, in whatever format. Helping lawyers focus on outcomes is another priceless benefit the Big 4 bring to every engagement.

3. Project Managers — There is no more beautiful deliverable than a piece of work product delivered by a professional project manager. Beyond just the actual deliverable, all work and engagements run smoother with a project manager involved. People are kept on track, timelines are strict, and action items are carefully tracked. The Big 4 are very comfortable with engaging project managers and make it a common practice on many of their consulting engagements.

4. Established Trusted Relationships — The Big 4 know how to deal with big enterprises. They understand the complexities and (well, let’s call it what it is) the politics of working with a matrixed organization with unclear decision-making authority and undefined processes. Beyond just understanding corporate culture, the Big 4 already have deep relationships with most large US and global companies. They likely have very useful contacts within the organization that may prove quite helpful when trying to accomplish a controversial goal or execute on an unpopular plan. Often these “outsiders” have contacts within the client organization at higher levels than those they are engaging with in the client company on any one particular project. Sometimes those connections help get projects over the finish line.

5. Proven Results — The demonstrated success in tax law services has set a foundation for expansion into legal services that is grounded in experience on very complicated legal principles. Surely, if the Big 4 can become experts in tax law, they can deliver just about any other legal service!

6. Scale — The Big 4 have presence in almost every country where there is business conducted by multi-nationals. They can reach a scale that few other providers can compare with. They seem to have connections to experts on every topic of interest to their corporate clients, whether internally within their own employee base, or within an intricate and powerful network of related entities and affiliates.

7. Quality and Reputation — There is an undeniable trust that comes with the Big 4, which is why so many large corporations choose to use them for broad ranges of services. That umbrella of trust seems to cover all the work they do, even in areas that are new to these providers. There is history of high quality, and there are widely accepted expectations of continued quality work from the Big 4. There is little doubt or uncertainty in their ability to deliver on their promises.

8. Technology — The Big 4 know how to invest in technology. They have sizeable R&D departments and are comfortable setting aside resources for the benefit of their future. They have been around a long time and continue to evolve by keeping up with technology advances. They are certainly interested in legal tech, and with their ability to scale and investment resources, will have an easy time catching up to anything that is leading the market, and likely become the industry leader themselves. Those are baskets that many clients would be comfortable placing their eggs in!

9. Predicable Pricing — These are not low-cost service providers, but neither are law firms. One thing the Big 4 has, however, is predictability on pricing. Long gone are their days of pricing by the hour (at least in the Big 4’s world), and instead fixed fees based on the project scope are the norm. More importantly, the Big 4 are accustomed to helping clients define the scope of work during the process and will adjust their pricing accordingly.

10. Sheer Size and Locations — The Big 4 have what seems to be an unlimited number of people located in the most remote corners of the world. It feels like there is no place in the world where they don’t have a presence and no end to the availability of people to put on the task. There is nothing more frustrating than hearing from a service provider that they don’t have the people available when you need them. The Big 4 always have people available.

These are some of the attributes that make me confident about the Big 4 expanding into legal services. There is no question about their potential in this space, and it only makes sense that the law firms and “not-so-alternative anymore” providers would be watching closely and learning.

Indeed, as I reflect on this list, I have to ask, why would a corporate legal department hire anyone else for certain work that is not worthy of law firm rates and is more complex than what the “not-so-alternative” provides deliver today?

Janvi Patel is co-founder of Halebury, and past VP of Elevated Lawyers, focusing on client management and business development as well as team building and management. She started her legal career as an employment solicitor at Charles Russell (now CRS) before moving in-house as a senior employment lawyer at Nortel for EMEA. In 2007, seeing that there was a gap in the market for flexible legal advice provided by experienced in-house lawyers, Ms. Patel decided to set up Halebury – one of the first alternative legal services providers at the time. She is a regular speaker at business and industry forums, Speakers for Schools, and an appointed board member on Thomson Reuters’ In-House Consultation Board. She is a strong supporter and advocate for women’s rights at all levels and is an advisory board member of Equality Now and the Children of War Foundation. She is also a founding committee member of the Cherie Blair Foundation for Women – Mentoring Programme.  

   Denise Nurse is co-founder of Halebury, and a past VP of Elevated Lawyers, focusing on strategy, management, and client service.  She co-founded Halebury as an opportunity to create the kind of firm that she would like to work for. Having started her career as an in-house commercial solicitor at Charles Russell (now CRS), she worked in-house as a commercial and technology lawyer for Sky before helping to develop and shape the Halebury offering. She mentors women in law and tech, as well as young entrepreneurs. She also speaks regularly on diversity and inclusion in business and is a supplier executive committee member for MSDUK, the supplier diversity organisation.

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 The Business of Law

For centuries, the provision of legal advice has been provided through one dominant option: practitioners of law. Like doctors, lawyers as a profession have focused on individual specialties and been licensed to practice or advise the public on legal issues. In order to create efficiencies, groups of individual practitioners formed partnerships to bring resources together, provide a wider selection of practice areas, and pool risk – businesses run by lawyers for lawyers. For recipients of this service, this has been the only option.

The dominant business model has been (and still is) “an organization or economic system where goods and services are exchanged for one another.” The early part of the 21^st century, however, has seen some of the most radical changes in business model options for the provision of legal services. Resourcing options play a major part in this significant evolution.

The last part of the 20^th century saw the steady growth of in-house law departments within businesses. The start of the 21^st century has seen the rise of flexible legal resourcing provided as a subset of services by law companies. These were named “Alternative Legal Service Providers,” or ALSPs, to denote the fact that they are not structured as law firm partnerships or even businesses owned and managed by lawyers. Businesses in this area offering a broader range of services now call themselves “law companies”; at times, the names are interchangeable.

For the purposes of this chapter, we will focus on the relatively new business model of providing flexible legal resourcing options for business legal departments and law firms by ALSPs and law companies, how this works, and its impact on the overall business of law.

Context

The UK legal market was valued at £35.1bn in 2018. The main legal spend is for business and commercial work, and nearly 47 percent of that revenue is with the largest law firms.[1] However, within this, the ALSP market has been growing at a rapid pace. In just two years, it has seen an increase in revenue from $8.4 billion in 2015 to about $10.7 billion in 2017.[2] ASLPs as a subsector are now making a considerable dent in the market, especially as there continues to be a drive for in-house legal teams to monitor and curb their external spend and look for greater efficiencies.

While traditional law firms service customers in industry, ALSPs often service two sets of customers: the in-house legal teams of industry customers and traditional law firms, partnering with both to provide strategic resourcing solutions. The fact that ALSPs support traditional law firms surprises many who might consider the two entities to be competitors, but it should not. Traditional law firms are built on talent and have resourcing requirements just like any other business. However, the way ALSPs deliver to each of those customers is aligned with each operating model.

Legal Services Resourcing Models for Business

In-Source

The first phenomenon in response to the growing needs of business and limited choice in legal service provision was to in-source. Hiring lawyers to work directly for and within a business gave cost certainty and more flexibility. Initially, lawyers were often hired on the basis of the particular practice area with which a business needed the most help at the time: M&A, employment, or commercial contracts, for example. This method has been a success. The continued growth of in-house legal teams over the last decade has been largely driven by cost pressures, as corporate executives look for ways to reduce external legal spend. In fact, in-house legal teams have more than doubled over the last 15 years from nearly 13,000 in 2002 to almost 28,000 in 2017.[3] The scale of growth is considerable.          

There are distinct skillsets that in-house legal teams bring to their internal stakeholders, such as the ability to work with commercial teams on the ground as well as the ability to work with businesses to provide operating and strategic advice. This commercial and operational experience is invaluable, and the training is hard to replicate within a traditional law firm. The benefit of a General Counsel (GC) working within and for a business directly is the added efficiency gained by having a trusted advisor available to support the business and understand the commercial drivers for decisions, the operational realities of a particular course of action or inaction, and the environment in which the business is operating. The GC can become preventative rather than reactive. Helping to organise and prepare business colleagues and navigate a way through the legal framework helps avoid the need for a specialist until absolutely necessary. In an added dimension, the GC can also add value by providing strategic advice on business decisions. The skills gained by in-house lawyers are invaluable, and the cost effectiveness of having a lawyer in the business is evident.

As a result, some in-house legal teams are now bigger than traditional law firms and run as a business unit themselves. The operating model of each in-house team is as varied as the businesses they serve, as most tailor their operating structure to align with their corporate entity and its business goals. This makes a diverse customer base to support from a legal resourcing perspective, each with its own requirements, opportunities, and challenges around recruitment and retention.

Outsourcing

An alternative or addition to the in-source model is to outsource legal services provisions. In its purest form, this is the original model: to instruct an external law firm how to manage legal matters. The last 30 years or so, however, have provided a variety of outsource options where the legal work is unbundled and separated out into its constituent parts. The main areas of growth have been to:

1.     Off-shore, on-shore, or near-shore low-value, low-risk, repetitive work to paralegals or lower-cost legal providers in a systemized process-heavy environment.

2.     Bring in secondees to cover team absences, growth, or gaps, or bring in temporary resources to work with the in-house team.

3.     Move work to a technology solution – for example, contract management and e-signature tools, document creation and automation tools, eDiscovery for document review, and more.

Flexible Legal Resourcing fits all of these categories. As an alternative to a traditional law firm, the ALSP model broadly provides contract lawyers who are able to work on temporary assignments or projects. Often they will also have in-house experience so they are more readily available to hit the ground running when joining a team and understand the commercial aspects of the legal advice to be provided. Costs are usually fixed on a day rate or fixed fee, providing price certainty for buyers. The lawyers will work either on- or off-site and as and when needed, so for short projects or part-time assignments. The overall relationship is managed by the ALSP, so the payment and business management of the flex lawyer is undertaken by the ALSP, reducing the burden on the customer and freeing the lawyer to focus on legal advice rather than admin. 

Managing the cost of resourcing – is in-sourcing the answer?

Cost pressures remain a driving force for the continued growth of the in-house legal team, but budgets for legal spend are still being reduced. However, many GCs have started to realise that in-sourcing is not the long-term solution. GCs looking at innovative ways to manage their resourcing gaps, especially at the mid- to senior-end of the market, have started to lock in deals with ALSPs to resource and manage a pool of senior talent to support their legal and commercial teams on an ad hoc basis. This model provides ongoing flexibility and bespoke outsourcing, which can be aligned with business goals.

No two in-house teams have the same operating model, so each one will generally require a bespoke solution. Here are a few examples of how it works for clients with different requirements.

Example 1: FTSE 250 company would like to reduce their headcount, especially their senior talent pool; currently the total in-house team >400. The company retains an ALSP to provide flexible senior in-house resource on a continuous flexible basis to scale up and down as and when deals come through. The ALSP is able to manage both the projects and junior members of the team. A project manager oversees work allocation / work undertaken by the external team to ensure the pipeline always fits with the business goals and that the external team is working with the customer to ensure efficiencies in delivery of service and, ultimately, cost savings.

Example 2: Company with <5 in-house lawyers use the ALSP as an extension of their in-house legal team.  The ALSP in-house lawyer trains on the company processes and is able to slot in as and when required both to help with the day to day, but also on projects operating as a flexible extension of the internal team.

Example 3: FTSE 500 company with an in-house team of >150 is looking to reduce their external legal spend but would like to continue to work with their existing law firm panel. The ALSP is able to provide consistent senior level support at a competitive AFA (alternative fee arrangement) and at partner / senior in-house lawyer level. They work directly with the law firm’s customers and their in-house legal teams. The ALSP lawyers work with the associates / junior lawyers either within the in-house legal teams or in the traditional law firms for support as required.  This is true collaboration between in-house legal teams, ALSPs and traditional law firms to provide an effective customer solution.

Managing external legal costs – look farther than your panel

The lack of transparency regarding costs is a key concern for in-house teams and a key driver for in-sourcing. 

According to recent statistics, legal budgets being reallocated internally has increased from 37 percent in 2013 to 43 percent in 2017[4], and that increase is expected to continue. This reflects the need for more cost certainty, better commerciality of the legal advice, and the ability to flex and manage resources when you control from within. The ALSP market has grown directly in response to this clear demand, for a type of lawyer and service not previously easily available and to allow the internal teams to manage head count costs at the same time.

Curbing the frustration:

As the table above shows, in-house legal teams are still frustrated by the lack of cost transparency and overall costs, as well as the billable hour system. By effectively managing their own resourcing, traditional law firms have the ability to manage the costs they transfer onto in-house legal teams. Using ALSPs as well as Legal Process Outsourcing (LPO) models has been invaluable for a number of law firms, as ALSPs and LPOs have the ability to offer alternative fee arrangements (AFAs). This enables traditional law firms to scale up and down and manage their bills to in-house legal teams. 

Are AFAs possible?

In that same Thompson Reuters study, 2018 State of Corporate Law Departments, it states that 76 percent of their customers state that controlling outside counsel costs are at the top of their priorities. It also states that implementing alternative fee arrangements are considered most effective to control external counsel costs. 

In-house legal teams have taken charge of this concern. A number of in-house legal teams have a program of legal invoice review to ensure that not only are invoices submitted by law firms in scope and budget, but also to provide visibility on spend. Many in-house legal teams have also implemented e-billing systems to help with spend management. Despite the cottage industry that has developed because of the complexities of billing, the hourly rate remains the predominant way of charging in the legal services industry. 

Providing cost transparency and certainty is core to many ALSPs’ operation model, and for most work is undertaken on fixed fees or day rates to ensure customers have control and transparency over budget.

Although new ways of pricing legal services are important, better integration and collaboration between traditional law firms, ALSPs, and in-house legal teams in general is essential to provide better customer solutions. Increasing collaboration throughout the external legal supply chain is fundamental to providing customers with efficiencies in how they buy their legal services. So how do we all play nicely together?

ALSPs and Traditional Law Firms

Flexible legal resourcing has provided a solution to a gap in the market, and traditional firms are creating their own bespoke versions whilst others are partnering with ALSPs to offer this service to clients. In addition, the ability to offer alumni an alternative pathway to working with the traditional firm has arisen. It is becoming increasingly common for ALSPs to work with traditional law firms’ own alumni to manage the firms’ resourcing challenges and assist in managing costs and profitability. 

How ALSPs work with traditional firms

The provision of flexible legal resourcing from ALSPs to traditional law firms generally works on three levels:

·       Backfilling the law firms own teams to support with gaps in resource for longer-term team absences or for spikes in workflow;

·       Provision of secondees to their clients in order to honour panel requirements in a more cost-effective way or as a way of added value/customer service; and

·       Working with the firm’s alumni to offer a flexible resourcing career option for former team members and an accessible pool of pre-vetted and known talent for the law firm.

Traditional law firms tend to have more similar structures than in-house teams; the implementation of flexible legal resourcing can still vary. Here are a few examples of how it works for law firms with different requirements.

Example 1: Magic Circle law firm, implemented own flexible resourcing programme. Branded service managed by bespoke internal team.

Example 2: Leading global law firm with a multibillion-dollar revenue instructed Law Company to provide flexible legal resourcing programme presenting as a joint solution to clients demonstrating range of services and transparency.

Example 3: New entrant regional law firm, working with Law Company to provide flexible work force as part of overall strategy of main law firm and to provide wider range of services to end clients by providing legal operations and project managers alongside generalist in-house and specialist private practice lawyers in curated teams.

Managed Services

The trend toward outsourcing complete tranches of end-to-end legal work has been growing. In the flex legal resourcing sector, the latest iteration of this solution is for entire legal teams or departments to be taken over by the service provider and managed to achieve cost reductions.  Some recent examples include:

ElevateNext and Univar

ElevateNext, using data analytics and consulting from Elevate Services Inc. (its partner), assessed the performance of outside counsel, their efficiency, and adherence to sound budgeting and decision-making processes. They identified ways to streamline efforts, lower costs, and improve outcomes. ElevateNext now handles legal matters directly for Univar, acts as coordinating counsel for certain matters that remained with other law firms, and serves as “chief of staff” to the law department.

DXC Technology and United Lex

In December 2017, DXC Technology, a technology conglomerate of Computer Sciences Corp. (CSC) and Hewlett Packard Enterprise’s Services business (HPES), engaged United Lex to restructure its in-house department and manage its team and services.

Thames Water and Eversheds Sutherland

Thames Water has worked with BCLP since 2010 as the main provider of legal services and transferred this to Eversheds Sutherland as a complete managed service of its legal team in April 2018. Eversheds’ supports on operational activity under its managed legal services agreement and the existing legal team from BCLP transferred across to their team.

Unbundling Legal Services and Working Together

Whilst in-house legal teams have the ability to unbundle services, traditional law firms are well placed to unbundle the entire legal services delivery supply chain. Innovative law firms are doing just this, and some of the most progressive have fully engaged with ALSPs to partner with them on this unbundling. 

A large part of the unbundling ensures that projects are led by the most cost-effective provider, which ensures it is the right person or tool for the job, creates efficiencies, and drives down spend. Some in-house legal teams have requested their panel firms partner with ALSPs to manage their secondments and further resourcing requests. ALSPs can provide a white labeled service for this, so that in-house legal teams have one point of contact and also the contracting entity has the ability to manage quality control. 

The unpacking allows for a total mix of legal process outsourcing of low-cost repetitive work, automation, flex legal resources, and traditional lawyers working with in-house teams to create a seamless blend and providing the most efficient and effective advice.

The Future

The business of providing legal services to industry has evolved significantly from where it was, even at the start of this decade. Where will we be in another ten years? With the changes that have taken place within the profession and in particular the focus on the “business of law,” we are lining up for greater value for our end customers as costs are more transparent and better managed, and legal services are approached increasingly like a business rather than a legal practice.

The pace of change is only going to increase. Looking at the wider economy, 43 of the companies in the Fortune top 100 globally were new entrants since 2008, and some of those included established names like Apple, who rose from a position of #33 in 2008 to #11 in 2018 – a phenomenal rate of change. 

The legal industry, whilst notably slower to evolve, is having to keep up. Even its slow pace will ensure more radical changes appear. The need to evolve will be highlighted by the potential for disruption, as has been seen in other industries such as hotels (Airbnb), taxis (Uber), and food service (Deliveroo). Law companies are being seen as disruptors in the legal industry as they aggregate the disaggregation that has occurred over the last decade. Expect the continuation of outside investments and law companies going public to further accelerate the pace of change.

 Mark Ross Principal, Deloitte - Legal Business Services and formerly headed Integreon’s Contracts, Compliance and Commercial (CCC) business unit, with accountability for the P&L, solution development, and delivery across the U.S., U.K., India, South Africa, and the Philippines. 

    Mark is a recognized thought leader in the Legal Process Outsourcing (LPO) field. He is a former partner at the first U.K. law firm to offshore legal work, and is the only person to have been invited to address the ABA, the Law Societies of England & Wales and South Africa, The Solicitors Regulation Authority, and the International Bar Association on the topic of LPO.

    Mark pioneered the development of the collaborative law firm and LPO delivery model for end-to-end contract management and led the integration of artificial intelligence into Integreon’s contract review services. He also developed the first State Bar minimum continuing legal education (MCLE) and continuing professional development (CPD) accredited courses on the ethical implications of outsourcing legal work.

    He has been interviewed by numerous publications, including The New York Times, Wall Street Journal, and Time magazine, and has also been invited to speak as a leading authority on LPO by organizations that include: Financial Times, U.C. Berkeley School of Law, Northwestern University School of Law, Stanford Center for the Legal Profession, and the International Legal Ethics conference.

    Mark is on the editorial board of Outsource Magazine, and is on the Advisory Boards of Suffolk Law School’s Institute on Law Practice Technology and Innovation, and Northwestern University Law School’s Center for Practice Engagement and Innovation.

    In September 2016 Mark was inducted as a Fellow of the College of Law Practice Management.

Vince Neicho, formerly a U.K. legal industry veteran, is an expert legal solutions consultant with a focus on law firms and corporate legal departments engaging in e-disclosure, e-discovery, and document review. Neicho leverages his expertise in the litigation support field to help Integreon clients design and plan highly efficient processes, establish flexible and scalable resourcing models, and utilise the latest innovative technologies, including predictive coding and other types of artificial intelligence systems.

   Neicho was previously Litigation Support Senior Manager at Allen & Overy, a global Magic Circle firm, where he introduced the concept of outsourced document review. At A&O he amassed years of experience working with the firm's extensive corporate and financial institution clientele on hundreds of matters, designing and managing a wide variety of litigation support solutions and technologies.

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 Even before the onset of the global financial crisis in 2008, in-house legal departments and their outside counsel were under considerable pressure to do more with less. The Great Recession exacerbated this pressure and led to a surge in the exploration of innovative legal services delivery models. Two key questions came to the fore for the in-house legal department: 1) Can we reduce or eliminate the need to undertake certain legal services? 2) For the services we must consume, how can we do so as cost-effectively as possible?

Stemming from these questions, a new legal ecosystem emerged in which, alongside in-house resources and outside counsel, legal process outsourcing (LPO) began to play a crucial role in the efficient delivery of legal services. Initially, the LPO industry’s raison d’être was the labor arbitrage benefits available from outsourcing certain routine legal tasks to lower-cost locations such as India, South Africa, and the Philippines. The class of providers augmenting the work of in-house departments and outside counsel has since matured and grown significantly — to the point that the “LPO” terminology is not inclusive enough to capture them. Today, a robust group of companies more accurately described as alternative legal services providers (ALSPs) are handling sophisticated work at a level we could not have anticipated even a few years ago.

Much of that transformation is because of ALSPs increasingly leveraging technology, particularly artificial intelligence (AI). This article will discuss the impact of ALSPs (and the AI that some of them employ) on the legal landscape. It will then address the journey law firms have navigated in their use of ALSPs to date and what to expect in the future.  

Artificial Intelligence: Does It Play Well With Others in the Legal Industry?

To appreciate how rapidly the ground has shifted in the legal industry, consider the question we raised in the first edition of this text just three years ago. We noted then, as we did above, that LPOs (what we might now think of as first-generation ALSPs) were powered by human labor; they leveraged the low cost of labor in remote locations to drive down the cost of document review. It seems a quaint concern now, but it is understandable that many wondered at the time whether the introduction of technology into the field of legal services would threaten the existence of LPOs. In a passage that has stood up well, we addressed the concern as follows:  

While some might argue that technological advances represent a competitive challenge to LPO, nothing could be further from the truth. It is technology that led to the advent of LPO, enabling offshore locations to interact with clients thousands of miles away, and it is the LPO industry that has since continued embracing and incorporating technology into virtually every element of its legal services delivery offerings, including assisting and advising corporations and law firms on the selection and implementation of enabling technologies. It is the LPO industry that now pushes the envelope to redefine the art of possibility in the legal field, providing expert consultants who can weave together advanced technologies as an integral thread in overall legal process transformation.

In retrospect, we were correct to note that technology made LPOs — or first-generation ALSPs — possible in the first place, and even more correct to emphasize that future ALSPs would “continue embracing and incorporating technology” into legal services. This has proved emphatically true. The leading ALSPs of today are almost exclusively thought of as companies pioneering the utilization of enabling technologies, and correctly so.

In fact, the question being asked now is almost a complete reversal from the one we discussed in the first edition. It is not whether technology will kill ALSPs, but whether ALSPs powered by technology — specifically, artificial intelligence — will kill law firms. Again, our answer is no.

It is indisputable, of course, that technology-assisted document review, legal research, deal rooms, e-billing software, data analytics, knowledge management, and document assembly have eliminated the need for firms to devote man hours to certain tasks. It’s also true that the application of artificial intelligence is only making the tools of automation more powerful. But the ways in which ALSPs are applying technology to various areas of legal practice are illuminating, revealing that technology tools remain complements to human legal practice, not a replacement for it.

Litigation

The days are gone in which huge teams of attorneys reviewed hundreds of thousands — or millions — of unfiltered documents. And it is no longer relatively inexpensive, remote labor that performs the task of document review. The leading ALSPs have long been proselytizers of technology-assisted review (TAR) and have been constantly developing, testing, and refining their workflows to deliver smarter and less costly review processes. ALSPs deploy these technologies in a variety of ways, from supporting a quality control process to leveraging artificial intelligence to perform predictive coding.

Likewise, many ALSPs have created platforms to apply natural language processing, machine learning, and artificial intelligence to the task of legal research. Entrants such as Casetext and Ravel Law offer AI-backed research capabilities and other features. Ravel Law’s Judge Analytics, to cite one example, allows litigants to view a judge’s entire history of decisions in different types of cases. Meanwhile, Allegory, a recent Integreon acquisition, uses what it calls “augmented intelligence” to automate litigation management. Allegory makes it much easier for trial lawyers to access relevant information and makes formerly cumbersome litigation tasks like creating evidence binders a painless process.

Contract Management and Review

In corporate departments, AI has led to impressive developments in the areas of due diligence, contract extraction, and contract data analytics. As with litigation, ALSPs have been at the forefront of these developments. Often triggered by the implementation of a CLM platform, an acquisition, or an audit, corporations can be faced with the need to locate, review, and extract information from thousands of contracts. ALSPs offer technological tools available that can support such an engagement. Integreon, for example, uses Kira’s machine-learning-based technology to assist clients with contract extraction, due diligence, contract analysis, and lease abstraction.

Automated metadata extraction, categorization, and related technologies greatly reduce the cost of a contract-by-contract review performed by lawyers. Even when performing those tasks, however, ALSPs frequently support their technological tools with a review by legally trained personnel; it is this combination of human- and technology-driven analysis that provides the most effective end-to-end solution.

Legal Spend Analytics

Legal spend analytics is another area in which technology is being used to achieve more cost-effective legal services. By analyzing data from legal invoices, corporate legal departments can benchmark historical charges from outside counsel and vendors for a variety of legal services. ALSPs in this area use technology to produce reports that not only track outside counsel spending (broken down by firm, practice areas, timekeeper), but also include savings opportunities, progress against budgets, and other key metrics.

Knowledge is power, and these technology-driven legal-spend analytics tools allow corporate legal departments to revisit their entire relationship with outside counsel — from how they select firms, to how they manage them, to when they cut ties with them — from the position of power. The end game is one in which resource allocation is optimized, using the right legal professionals and technology for the jobs to which they are best suited

The Impact of AI

The takeaway from the above should not be that ALSPs, and the artificial intelligence they sometimes employ, is encroaching meaningfully on the territory of law firms. Instead, in each area, the theme is the same: While technology solutions are automating certain tasks and offering lawyers new insights, the human element remains as important as ever in delivering legal services. AI tools still require that lawyers perform a quality-control check, as they routinely do for contract- and document-review solutions. Lawyers are also needed to provide the input that trains the AI tools to become more powerful.

Most importantly, even with the introduction of artificial intelligence in the legal industry, the heart of a lawyer’s work — legal reasoning, crafting strategy, negotiating with counter-parties, arguing in court, and more — remains largely untouched by technology. Indeed, technology-driven ALSPs are not replacing law firms, but rather: 1) reducing the cost of certain services and 2) allowing them to make more informed strategic decisions. In this sense, ALSPs have advanced beyond LPOs, which were initially aimed exclusively at the first goal. But in another sense, the introduction of AI is similar to the arrival of LPOs: It is a disruption to which some law firms will react better than others. The history of law firms’ reaction to ALSPs, which follows, shows us as much.

Redefining the Law Firm Delivery Model: a Journey of ALSP Acceptance

In order to survive in today’s economy and to thrive in the future, many law firms are actively rethinking their business models. This rethink frequently includes an embrace of ALSPs and a reexamination of the traditional pyramid structure as the usual modus operandi for legal services delivery.

Although some believe ALSPs will increasingly contract directly with corporate clients, it is important to consider that they do not practice law and therefore cannot replace law firms entirely. A more natural fit for ALSPs is to supplant the base of the law firm pyramid. This is not to suggest the only benefit of ALSPs is labor arbitrage. As discussed above, we have ample proof this it is not. What ALSPs are doing is leading the way in incorporation of technology into legal services delivery.

Kicking and Screaming

In or around 2006, it was not law firms but corporate legal departments that were the first proponents of ALSPs. Back in these early days, a cocktail of incredulity with a dash of disdain was the tipple of choice for many a law firm partner when confronted with the ALSP elevator pitch. Big Law executives would protest that ALSPs were win-win-lose: win for the firm’s clients, win for the ALSP, and yet lose for the law firm.

This viewpoint presupposes the adequacy of two hypotheses that simply do not hold water any longer: the zero-sum game (the more the client loses, the more the law firm wins) and that every penny of revenue generated by an ALSP is a penny of revenue lost by the law firm.

In any event, these first couple of years can be characterized, perhaps somewhat harshly, as the phase where law firms were dragged “kicking and screaming” into the arms of ALSPs.

On a case-by-case basis, in-house counsel started to advise their outside counsel that in order to retain their business, the firms must begin to use ALSPs. In fairness to BigLaw, this phase has largely passed and did so fairly quickly. Whether the Great Recession forced them to adapt quickly or merely coincided with a change in attitude is a debate for another day.

Checking the Box

Law firms have many constituencies, but their clients always come first. Large firm clients are, by and large, cost-sensitive in-house counsel. Firms can gain both a perception and actual advantage with clients by making clear they understand and are responding to the cost pressures facing their clients.

In-house counsel muscle-flexing manifested itself not only in ad hoc requests that their outside counsel use an ALSP, but also in the increasing prevalence of requests for proposals (RFPs) asking outside counsel whether they had relationships in place with ALSPs.

Law firms responded in turn by undertaking selection processes of their own to choose one or more preferred ALSPs. The end result was that when asked the question in an RFP, law firms could respond in the affirmative. This is the “checking the box” phase. Many of the firms during this phase were simply looking to place a check in the box, and once a master services agreement was put in place between the firm and the ALSP, it was considered a job well done with no further action required. Many firms today are struggling with how to navigate the transition from the “checking the box” phase into the phase that follows: “strategic collaboration.”

Strategic Collaboration

In 2011, our employer Integreon commissioned research tracking the adoption of ALSPs among law firms and in-house counsel. While a minority of firms seemed to worry that using an ALSP might send clients the wrong signal, the results of the research showed such fear to be unfounded. A significant majority, about 75 percent, of both in-house and law firm lawyers believed using an ALSP did not “diminish the brand.” Rather, those that embraced ALSPs were perceived as cognizant of the cost, efficiency, and quality demands of their clients, and consequently appeared to gain a competitive advantage. Today, a significant number of innovative law firms now publicly acknowledge their relationships with ALSPs. These firms are at various stages of the journey that can be termed as “strategic collaboration.”

The end of this journey, one that arguably no firm has yet reached, is when ALSP solutions are so closely integrated into the firm’s overall value proposition that they are simply viewed as part of a suite of solutions that the firm provides to its clients across all of its practice groups. This requires firms to embrace ALSPs at a strategic level, welcoming them into the firm, lifting open the hood, and working with the provider, as Professor Richard Susskind would say, to “decompose” legal functions, map out “as is” workflows, and then reengineer the processes to incorporate ALSP best practices, lower-cost labor, and technology.

The theory behind strategic collaboration is not rocket science. The premise is that the whole is greater than the sum of the parts. Contrary to early concerns that ALSPs would compete directly with law firms, it has become abundantly clear to those firms embracing strategic collaboration that the most effective legal services delivery model is a symbiotic one in which law firms and ALSPs help each other thrive.

ALSPs do not practice law and so are not true alternatives to law firms. Neither ALSPs nor law firms can individually deliver the holistic, end-to-end services corporate clients are now demanding. While one could argue that law firms with captive ALSP units can do so, the fact is that running a captive center, especially offshore, requires a scale that only the largest law firms possess. Even with respect to those few firms, ALSPs offer several other advantages over a captive. These include better capacity utilization by aggregating demand across many clients; conversion of fixed to variable costs; ongoing investments in technology and continuous improvement; and, of course, business continuity assurance with multiple delivery locations.

A common misconception held by proponents of captives is that working with a third-party ALSP means loss of control. This is not the case. Control is more about governance than ownership. For example, some captives are out of control because they have not been properly set up with service level agreements (SLAs). Conversely, a proper SLA and governance structure can give the law firm more control over a third-party ALSP than they might typically have over their own staff.

Law firms that strategically collaborate with ALSPs, meanwhile, can expand their offerings and deliver a complete, end-to-end approach, efficiently providing the appropriate level of legal services required for each type of work product.

Bifurcated Ownership

Unrelenting cost pressure, deregulation, disaggregation, globalization, and technological advances were the genesis of the ALSP sector. Today, the challenge and the opportunity are for ALSPs and law firm clients to develop new service delivery models that will drive even greater innovation. One can either shape the change or be shaped by it. It is incumbent upon all the key constituent stakeholders in the legal services industry to find better ways of working together.

In coming years, there is no doubt we will see even closer collaboration between law firms and ALSPs, with the lines of ownership of the legal services delivery model becoming increasingly blurred as these stakeholders invest in and enter into joint ventures with one another. This can be called the “bifurcated ownership” phase.

How long will it be before an ALSP acquires a major law firm in the U.K. now that external investment in law firms is permitted via the Legal Services Act? Hardly a week goes by without the rumor mill spinning a story about this law firm or that law firm seeking to monetize either their captive ALSP operation or their high-volume practice group. For many of the reasons cited above, it is likely that the majority of those law firms with captive ALSPs today will look to divest these operations in the coming years. Global ALSPs are the most logical acquirers of these entities.

As time progresses, there is a growing optimism about and enthusiasm for reshaping the way legal services are delivered. The new bifurcated model is inevitable. The end result of the journey to this final fourth phase is a seamlessly integrated delivery model, with clients of all kinds benefiting from better, faster, more readily accessible, and cheaper legal services.

What’s Next?

We remain more bullish than ever about the prospects for ALSPs. The industry has matured and transformed over the last 10 years, but that journey, that evolution, has in reality still only just begun.

Out of all of the different stakeholders providing legal services within the new legal ecosystem, it is the ALSPs that have the deepest experience deconstructing and reengineering legal processes using Lean and Six Sigma techniques, applying best practices and flexible resources, and optimizing the mix and utilization of technology, including AI. It is the ALSPs that have the demonstrated expertise to analyze which aspects of the work done by lawyers, paralegals, and support staff can be complemented through automation or the application of AI. As the rollercoaster of legal services innovation and technological advances continues to pick up pace, not only will ALSPs be
along for the ride, but they’ll also have front row seats.

Tony Williams is a principal at Jomati Consultants LLP, a U.K.-based international management consulting firm for law firms, lawyers and in-house counsel that specializes in strategic expansions, reorganizations, and client strategies. Before founding Jomati Consultants, Tony was worldwide managing partner of Andersen Legal and head of its U.K. practice, where he developed the firm’s international strategy. Prior to joining Andersen Legal, Tony was managing partner of the world’s largest law firm, Clifford Chance. He was with Clifford Chance for almost 20 years and prior to his managing partner role he was a corporate partner in London, Hong Kong and the managing partner of the firm’s Moscow office. For his role in the orderly and controlled dissolution of Garretts following the Enron crisis, he was named “Partner of the Year” by The Lawyer Magazine in 2002. Tony is also a founding member of Halsbury’s Law Exchange, an independent and politically neutral legal think tank that contributes to the development of law and the legal sector.