Alternative Legal Service Providers are Changing the Legal Market
By: Kirby Nguyen
Technological advances and changes in state laws have opened the legal market to alternative legal service providers (ALSPs). By integrating automation and technology, ALSPs and software developers are giving traditional law practice a run for their money.
The ALSP market has grown from $8.4 billion in 2015 to approximately $10.7 billion in 2017, according to the Thomson Reuters Legal Executive Institute’s ALSP Report for 2019. ALSPs are utilizing new technology to handle tasks traditionally done by law firms, including providing litigation and investigation support, legal research, document review, eDiscovery, and regulatory risk and compliance.
Self-litigants and individual customers have been harnessing the aid of online legal technology to create an array of legal documents. LegalZoom, Nolo, and Rocket Lawyer are helping customers create wills, copyright registrations, and trademark applications.
California courts have determined that practicing law includes performing services in litigation, providing legal advice and counsel, and preparing legal instruments and contracts that secure legal rights, even if matters do not have anything to do with lawsuits.
Narrower definitions of law practice have allowed business entrepreneurs to enter online dispute resolution (ODR). ODR operates in the realm of potential litigation, sometimes touching the blurry line of legal issues that might involve attorneys.
Most would not think of eBay as a legal service provider, “but they sort of built their whole ODR system to meet the same need to keep them out of the courts,” said Colin Rule, Vice President of Online Dispute Resolution for Tyler Technologies.
ODR systems created by e-commerce sites like eBay efficiently manage high volume transactions and e-commerce cases. They also help consumers resolve cases in the comfort of their own home with one click of a “redress” button.
“[It’s] kind of weakening the legal monopoly and allowing other players to come in and provide services … I think technology is opening the door to that as well,” said Rule.
ALSPs see technology as the key to increasing value to clients. Thomson Reuters Legal Executive Institute’s ALSP 2019 report found that “about one-quarter of the 35 ALSPs interviewed … say they are currently using AI in their offerings. [A third is] actively evaluating AI’s potential use for their purposes.”
The Big Four accounting firms, Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers are among the largest and fastest growing ALSPs competing directly with large law firms. Often, they provide regulatory risk and compliance services, according to the Reuters 2019 report.
In the same report, 20% of large law firms reported they have competed against one of the Big Four in the past year, and 21% of mid-size law firms shared that they lost business to one of the Big Four. Each of the Big Four accounting firms have AI initiatives and some have invested heavily into innovation labs, embracing automation and augmentation.
Meanwhile, legal research companies, like Ross Intelligence, Judicata, and Casetext are using AI to analyze briefs and identify missing cases or stronger arguments.
Some large law firms are responding to legal market changes through research into innovation. Bryan Cave Leighton Paisner (BCLP) started off with small innovation groups.
“A lot of what we were doing in client technologies was using some of the cutting-edge platforms that were available broadly in the market … automation tools and client collaboration portals,” said Christian Zust, Regional Innovation Solutions Director at BCLP.
He also leads the development of technology-augmented solutions that help deliver improved, cost-effective services to clients. According to Zust, BCLP “[has] a pretty significant proprietary development team.”
BCLP has restructured its firm to center around innovation. This past June it announced the release of BCLP Cubed, a legal service that integrates complex legal advice with high-volume legal services and legal operations.
Kristi Smith works alongside Zust as Senior Manager of Expert Systems and U.S. Automation at BCLP. She improves the efficiency and effectiveness of legal services delivered for BCLP’s lawyers and clients through automation, intelligent workflows and collaboration portals.
Some challenges are constant regardless of tech-integration or type of business model. Smith said, “It’s dependent on what the clients’ needs are. Innovation [is really] more of stitching things together to provide an end-to-end solution, a one-stop-shop for our clients.”
Not every player is competing against ALSPs or leveraging them in the same way as firms. Code 42 is a small- to mid-sized software company whose in-house counsel created a contracts management and workflow process.
“We’re kind of at a stage where we have a lot of technology on the radar but we’re not quite at the size yet, nor [have we] seen the volume of work where it makes sense for us to actually invest in the technology,” said Paul Shoning, Assistant General Counsel at Code 42.
“Half of what I do is not actually legal advice but understanding process and operations and helping people think through what they want to achieve and … the different ways that they can achieve that,” said Shoning.
Business and corporate clients are also demanding that junior associates be more versed in legal technology.
“The traditional model of hiring entry level associates, training them and making money off the process of training has been receiving a lot of pushback from corporate clients,” said William Henderson. “Step number one is don’t pay for overpriced junior talent. The entry level salary of a graduate in lead firms is $190,000. That’s too high of a wage to train people.”
Due to cost pressures, “clients and firms have looked for ways to avoid the least attractive part of the cost structure, which are entry level associates,” said Henderson.
Henderson teaches a class about law firms as business organizations at Indiana University Maurer School of Law. “The migration toward legal work being [done by ALSPs] is corporate oriented and business oriented,” said Henderson.
Henderson is a self-proclaimed legal rebel, taking on legal academia in the hopes of closing the gap between traditional education and industry demands.
“Specialization is a huge portion of where the legal industry was for most of the twentieth century,” said Henderson. “Now we’re entering this period where allied disciplines need to be added into the mix, so general lawyers, specialized lawyers [and] now allied professionals combined with lawyers is the area that we are entering now.”
(Editor's Note: This article was originally published in the October 2019 [Volume 50, Issue 1] version of The Advocate.)