How the legal business went digital

Dan Fox, co-founder and CEO at Johnson Hana explains why alternative legal solutions have expanded so rapidly in recent years.

For the legal profession, the sudden shift to 100pc digital in 2020 caused quite an upheaval. Far more than that witnessed in other professional services sectors.

In 2017, Deloitte estimated that adoption of cloud computing – a critical enabler of remote collaboration –  among law firms was only around two-thirds that of all professional companies.

“Firms that may be reluctant to hire are seeking solutions that allow them to remain adaptable yet resilient”

Law firms that hadn’t already upgraded by early 2020 have had to up their game quickly, at a minimum shifting to online correspondence and e-signature software to keep contracts moving.

The rise of the ALSP

The shift to digital has also led to broader changes in the landscape of the legal profession, namely, the embrace of alternative legal service providers (ALSPs.)

According to a study carried out by Thomson Reuters Institute, the Center on Ethics and the Legal Profession at Georgetown Law, and the Saïd Business School at the University of Oxford, published in early 2021, the market for ALSPs has grown to nearly $14bn.

The study found that 79pc of law firms and 71pc of corporations now use ALSPs as a means of controlling costs, increasing efficiency, and leveraging cutting-edge technology.

Independent ALSPs account for around 85pc of the market globally, and are growing at a rate of 15pc year-on-year. While some firms have set up ALSPs as captive subsidiaries to service their own clients, many more simply engage a third-party ALSP.

This underscores the evolution of the ALSP model, and how it is no longer considered a threat to traditional legal providers, but instead very much complimentary to them.

How law firms and corporates collaborate with ALSPs

Law firms can use ALSP services for routine work in areas such as due diligence, discovery, commercial contracts, or legal research. They can pass on the cost benefits to their clients while they focus resources on higher-revenue work.

Corporate legal teams under pressure to reduce costs of external law firms can also take advantage of ALSPs to help manage budgets and outputs.

The role of technology in the rise of ALSPs can’t be overstated. Technology-enabled services allow ALSPs to provide higher value and take on different and more complex tasks. ALSPs also help bear the burden of technology selection and deployment while still allowing legal departments to receive the benefits of its use.

Incorporating new and emerging technology into service offerings is high on the agenda of ALSPs. ALSPs see technology as a catalyst for migrating up the value chain in legal services – allowing them to more fully integrate their work into the wider processes of in-house legal departments in corporate and law firms.

ALSPs in a post-pandemic World

For ALSPs, the pandemic has simply magnified and accelerated many of the changes that they have been leading in the legal sector.

For instance, the rise of ALSPs over recent years has come about as a result of the need for solutions to legal problems with more flexible and open structures consisting of not only human resources – lawyers – but also technology and other “non-legal” professionals such as project managers.

This trend for more flexibility in working arrangements was already well underway, with the rise of on-demand services and the gig economy. The pandemic has extended this desire for flexibility to the broader workforce, meaning that for many people, more working from home or on a project basis will be part of the “new normal.”

A low-risk, high-value opportunity

Similarly, the increasing pandemic-led demand for flexibility accounts for continuing upward trajectory for ALSPs.

Firms that may be reluctant to hire are seeking solutions that allow them to remain adaptable yet resilient. Furthermore, members of the legal profession want alternatives to the nine-to-five (or nine-to-nine!) that afford them the opportunity to have a more flexible work-life balance.

Brexit is also placing significant pressure on the legal profession in Ireland, the UK, and EU countries as lawyers and firms attempt to grapple with the changes and what they mean on a practical level.

It’s a specific scenario, but one that highlights the need for the profession to demonstrate that it can be nimble and flexible enough to respond to seismic regulatory changes.

It’s also worth noting that in May 2020, the Chambers & Partners legal directory, an indisputable reference in the “definition” and “measurement” of the legal market, has decided to evolve its classification of providers of outsourced legal processes, and created a dedicated ALSP ranking.

No Longer the alternative, but increasingly the default

The ALSP market has matured rapidly and is increasingly being seen as an integral component of the corporate legal apparatus.

So, perhaps it’s now time that we stop referring to new ways of providing legal services, flexible fee arrangements, and ALSPs as “alternative.” Now, they are simply another part of the “new normal.”

As the scope and remit of legal departments continue to expand, they are constantly being challenged to do more with less. COVID-19 has been a major catalyst for change, and the value proposition of ALSPs is becoming increasingly salient, in this new operating environment.

From left Paul Ryan, CFO, Dan Fox, Founder & CEO and Alex Fox, Chief Commercial Officer, Johnson Hana. Image: Chris Bellew / Fennell Photography

 

Dan Fox, a qualified barrister, set up Johnson Hana after recognising the division between complex, partner-led legal advice, and volume-heavy, process-driven legal work. Johnson Hana is now Ireland’s leading alternative legal solutions provider (ALSP) offering Legal Process Outsourcing and On Demand Lawyers to large corporate and public sector clients.