Paralegals Benefit From the Rise of Alternative Legal Service Provider (ALSP) Companies

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Like any other, the legal industry is open to competition on the basis of price. Still, certain common beliefs and standard practices have delayed innovation in the field of law and made the ship a little slower to turn. For example, the notion still exists that the size of the law firm is somehow proportionate to the expertise of its lawyers, and the industry still clings to the long-held practice of hourly billing.

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But a combination of technology, specialization, and client pushback is forcing the industry to adopt more efficient practices, from value-based billing to virtual law firms.

In no other aspect of the legal profession is this more apparent than in the fact that Alternative Legal Service Providers (ALSPs) are playing a bigger role in providing legal services. Businesses are now more often turning to these innovative companies for many routine legal services, and law firms are even outsourcing certain jobs to ALSPs that would be too expensive and time-consuming to do in-house. This new trend offers a lot of promise for paralegals who may be looking to own and run their own independent businesses.

ALSPs are niche companies that specialize in providing such high-demand legal services as:

  • Document review
  • Contract management
  • Litigation support
  • Discovery and electronic discovery
  • Contract lawyers and staffing
  • Investigation support and legal research
  • IP management

ALSP businesses take on and improve any systematic element of any legal process that can be broken down and performed more efficiently. For example, some firms are emerging now that specialize in analyzing financial transactions as a component of corporate merger due diligence operations. Since the ALSP market is a relatively new development, new service categories are emerging all the time.

Innovative Approaches to Common Legal Services

The thing that makes an ALSP alternative is that it is not, and does not pretend to be, a law firm. Instead, it is a legal services business that can provide one or more services that law firms would traditionally offer, but often at a lower cost or with other advantages, including increased expertise, flexibility, and speed).

Because they do not have to fit into the structure and hierarchy of a typical law firm environment, ALSPs may be free to alter their business practices to increase efficiency using technology or other innovative practices. In fact, it’s really this outside-the-box approach to common tasks and the willingness to adapt to such practices as off-shore outsourcing, web-based services, and IT automation that has characterized alternative legal service providers.

Traditionally, clients have looked to firms to provide a full range of legal services because the appreciate having a single point of contact for all legal business and because they simply haven’t identified alternative specialty providers or segmented their legal needs in order to farm out certain services to lower-cost service providers.

But high legal fees have put pressure on clients to pay more attention to their outsourcing practices, and this has opened an avenue for ALSPs to make inroads.

Both Corporations and Law Firms are Turning to ALSPs

Originally, ALSPs were seen as an appropriate outsourcing choice simply because they offered an affordable option for businesses and law firms looking to get certain tasks completed that don’t need to be billed out to an attorney.

Increasingly, however, they are being seen as a source of specialized expertise that goes beyond what could even be expected from the average law firm, simply due to the volume of work they do performing a very specialized service. An ALSP specializing in e-discovery, for example, may simply have much more refined processes, tools, and methods for unearthing electronic evidence from terabytes worth of legal documents.

While this expertise can make the discovery process much faster (and less costly), it also can unearth relevant evidence that an in-house team, with less experience, might very well have missed.

Traditional law firms are coming around to the advantages of ALSPs for these very reasons. Once having seen them as competition, law firms now understand that subcontracting services to an ALSP can allow them to focus more on their own core competencies and save money while offering better service to their own clients.

According to a 2017 study conducted by the Georgetown Law School’s Center for the Study of the Legal Profession, more than half of all law firms surveyed reported using an ALSP for at least some aspect of legal operations.

Corporations have been more focused on cost reduction as a motive for outsourcing services to ALSPs. Maintaining in-house legal teams to manage corporate contracts or to take care of intellectual property rights management may be cost effective for the music and TV industries, which have deep catalogs of property to keep track of and lots of money to spend. But other businesses that find themselves needing to manage their own intellectual property don’t often don’t need, or can’t always afford the same kind of internal resources.

This has been particularly true as technology has an increasingly dominant role in business, and as the business environment becomes ever more litigious. Companies often find themselves with relatively minor dealings in IP rights or contract issues that nonetheless can produce major headaches if not managed properly. Hiring a traditional law firm to address these concerns if both expensive and overkill; ALSPs fit the niche those companies need perfectly.

The Benefits and Disadvantages of Working for an ALSP

Because an ALSP is not a law firm and does not necessarily engage in the practice of law, it does not necessarily have to be staffed by lawyers. Paralegals with the right type of legal expertise and a head for business have been behind some of the earliest ALSP companies to come online, and the ones that would go on to become the most successful.

Although this offers a kind of freedom and opportunity that a paralegal working in a traditional corporation or law firm could never hope for, it comes with all the risk and uncertainty that self-employment always brings. A paralegal starting and managing an ALSP has to perform not only paralegal services, but also has to be able to take on general business tasks like marketing, billing, customer service, and sales. It’s not a role that everyone is meant to fill.

And for paralegals who might consider working at an ALSP as an employee, the potential disadvantages are no surprise: the possibility of lower pay, less prestige, and more repetitive work than they might find at a more traditional firm.

Work is slowly gravitating to ALSPs, though. According to the Journal of the American Bar Association, employment at traditional law firms peaked in 2004 and declined moderately into 2011.

At the same time, employment at alternative legal providers doubled between 1998 and 2010.

ALSPs are just one possible solution for addressing current demands in the legal industry, and they may not last forever. Most markets go through periods of divestment and concentration of service businesses, and there are already signs that legal process outsourcing is being sucked back into large law firms and major consulting and business services firms like PWC and Deloitte. In many cases, large firms have simply used the model ALSPs have established by setting up internal departments that mimic ALSPs.

But paralegal-run ALSP start-ups with the right expertise and company leadership that knows the local market for services can still maneuver quickly and innovate rapidly, so you can be sure the ALSP model is not going to disappear anytime soon. ALSPs are likely to continue to expand and improve the market for legal services in the United States for some time to come.