Page 171 - 2019 - Leaders in Legal Business (n)
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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.
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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.
156
