Investing in Legal Department Innovation: The Case for Engaging an ALSP

There has been a rising trend of the use of alternative legal service providers (ALSPs) in the legal industry, as legal departments are now utilizing these third parties to handle routine tasks. ALSPs collaborate well with legal departments as well as law firms due to their expertise in assisting with recurring tasks, handling mass customized work and providing technology enabled services. Utilizing a traditional law firm or in-house personnel for this type of work may not translate to optimized value as it would result in higher costs and often a lawyer is not necessarily needed for the high-volume, low risk task. The ALSP market segment  is growing between 12 and 15 percent per year as more and more companies and law firms are investing in ALSPs. When making that investment decision, what factors should be considered?

There are macro-considerations that should be made in the decision of engaging an ALSP.  Some aspects buyers should factor in include how work is allocated, what work they want to keep internal, what work they believe should be delegated to law firms, and what work could be assigned to an ALSP. Another major element involves the culture of the business, factoring in client involvement in the ALSP relationship, and balancing switching costs versus the benefit of the organization. Organizations must self-analyze ALSP readiness, including these macro-issues, before hiring an ALSP to outsource work.

The following use cases to keep in mind when deciding to make the investment include:

1.      ALSP-appropriate work.  Ideally, ALSPs should be tasked with recurring, high volume, low risk/low value “every day” work.  As part of the self-evaluation process, it is important to confirm that a sufficient quantum of this type of work exists to justify an investment.

2.      ALSP as the “fixed” part of a strict budget. One of the biggest frustrations with buying legal services is dealing with cost unpredictability which wreaks havoc on a budget.  ALSPs tend to be budget friendly insofar as they offer predictable pricing structures instead of hourly rate fee structures. Indeed, ALSPs specialize in aligning the scope of work with a client’s budgets, which helps legal departments.

3.      ALSPs for strategic work to stay inhouse and legal departments to work closer with clients. Because ALSPs handle low complexity, high-volume work, legal departments and law firms are able to provide their best service to clients on complex matter without carrying the weight of other low value tasks. ALSPs allow the right people to do the right work without wasting time or resources. This improves morale and professional gratification.

4.      Everyday work that may not require the premium costs of a law firm. ALSPs specialize in aiding with document review, contract management, contract lawyers and staffing, IP management and litigation support.  While important, this type of work simply does not justify premium rates... Some ALSPs even have developed specialties in different legal services to provide even better quality of service on “every day” work than other potential service providers. 

The overarching argument for turning work over to ALSPs revolves not just around the lower cost advantage, but also around the soft benefits.