The rise of Alternative Legal Service Providers

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Technology has enhanced how humans communicate, and the internet in particular is creating new forms of competition for traditional law firms and lawyers. In recent years, the advent of alternative legal service providers (ALSPs) has created an entirely new level of competition for law firms that traditionally practice in particular geographic areas and for particular types of clients.
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Whether it is a personal injury law firm, one that specializes in contractual negotiations, immigration, and virtually any other area of practice, ALSPs are having a significant impact on legal practices across the nation.

The Thompson Reuters Legal Executive Institute, Georgetown Law School Center for the Study of Legal Profession and the Said Business School at Oxford University recently partnered on a qualitative and quantitative study to better understand the impact of ALSPs, in order to help law firms better navigate the legal market’s new landscape. 

The Study Shows ALSPs Provide:

  • Access to specialized services at lower rates than law firms.
  • Opportunities for law firms to reduce costs.
  • Repeatable large-scale processes that efficiently handle large data sets.

While ALSPs initially attracted clients primarily looking for low-cost legal services, they now attract corporate clients and others, who are looking for a particular area of legal expertise. The study indicates more than half of all law firms that use ALSPs do so to utilize a particular area of legal expertise offered. Cost savings is not a factor in such decisions, but rather expansion of local legal services.

Defining the ALSP Competition

The Thompson Reuters study shows ALSPs are a combination of legal and non-legal entities that provide basic legal services across a broad region. In many cases, they either partner with law firms to supplement their legal services, or they enable potential clients to represent themselves in a legal matter.

Some of the more common areas of legal practice offered by ALSPs include independent LPOs, e-Discovery services and document reviews. They often cater to corporate clients and their respective law firms and legal departments, to provide essential legal documentation services. Those account for about £6 billion in annual revenues.

Many ALSPs also provide accounting and audit services, which is a £900 million-a-year industry. Such firms provide accounting and audit services, and generally handle high-volume clients with large data sets to be analyzed. ALSPs also provide about £900 million-a-year industry in contract lawyers and staffing services.

Changing Competitive Landscape

Law firms across the nation face direct competition from ALSPs, which generally have much lower operating costs than traditional law firms. Instead of employing highly educated and licensed attorneys, they often provide basic and generalized legal services via paralegals and specially trained personnel. That gives them a large advantage in labour costs.

Many ALSPs also have prominent online profiles and reach a wide audience. Examples include Legal Zoom, Nolo and Rocket Lawyer, which offer packaged legal services at low prices and that are convenient for clients. They enjoy much lower operating costs than law firms that operate out of brick and mortar establishments; they never close; and they have a wide marketing reach via Google and other search engines.

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