6 reasons why

The rise of the Alternative Legal Service Provider

You don’t become innovative by thinking from a traditional mindset. And you don’t transform an industry by just adding technology. No, innovation and change comes from a clean sheet of paper and a disruptive mindset. This is why the future looks bright for Alternative Legal Services Providers, a legal services model that has grown big in the US and UK and is now gaining ground in the Netherlands and other European countries.

New business models come from those whose ambitions reach beyond defending the status quo. And this is why we believe that legal innovation will continue to be driven by those who launched it, namely the companies without vested interests and historical baggage: the Alternative legal Service Providers (ALSPs). Here are 6 reasons why.

1. ALSPs have a unique business model that is fundamentally different to that of law and accountancy firms  
When Legadex opened for business in 2008 as the first ALSP in the Netherlands, we set out to combine people, processes and technology to transform the legal world. With the emerging legal tech and the impact of the then financial crisis, we saw an opportunity for corporate legal departments to drive down the cost of volume legal work while at the same time improving the quality of the output. Our first focus was on staffing and we introduced the concept of the paralegal (previously unknown in the Netherlands) and defined him or her as a specialist in administrative legal processes, legal process management and legal tech solutions. We also partnered with the leading legal tech providers. And we defined a business model built on high-volume efficiency and lower rates than traditional law and accountancy firms could ever countenance. And this continues to be true. Law firms continue to position themselves as supply driven full-service operations even as their clients are becoming more and more demand driven. Likewise the accountancy firms. Yes, some are moving into legal and licencing legal tech, but they remain attached to big numbers and big clients. They don’t represent fundamental change.

2. Legal advisory work is only 20% of the market – and ALSPs are much better at doing the other 80%
The big law and accountancy firms naturally gravitate towards advisory work. It’s their raison d’etre. But that is only about 20% of the legal market. This leaves 80% of the market for the ALSPs, which is more than enough to prosper. And we are prospering. Over the last 10, 15 years, ALSPs like Legadex have proved that we offer something new. Our continuing growth and simple fact of still being around demonstrate this. Just as importantly, we have shown  our clients that it is possible to differentiate between volume work and advisory work, and that volume work can be done faster, more flexibly, at higher quality and lower cost when you leave it to legal data specialists instead of the traditional law and accountancy firms.

3. ALSPs enable corporate legal departments to focus on adding more value
ALSPs meet a well-defined and growing need for flexible legal solutions. We enable our corporate legal clients to align services to tasks. It started with high volume processes initially, but now, and increasingly, we cover niche needs as well. Our solutions can be integrated into a client’s existing in-house structure. Or corporate legal departments can decide to outsource their routine and/ or volume tasks to an ALSP, which can do this work in a more efficient and tech-enabled manner. Both options reduce costs. Just as importantly, both models can be used to free in-house legal talent, allowing them to focus on challenging and complex legal issues, and to provide more proactive support to the business.

4. ALSPs were born out of technology – you can’t just add it on
Back in the dot-com boom of the early 2000s, Jack Welch, then CEO of GE, ordered each of his businesses to go through an exercise he called “Destroy Your Business.com”. The idea was to ask themselves how emerging dot-com competitors could put them out of business. If the legal and accountancy professions are serious about adopting the ALSP model, they need to do something similar because ALSPs, like fintecs, are among the most tech-driven companies on the planet. Technology, data, processes, standardisation, systems, workflows, templates, AI – these are all integral to our business model and way of working. We’re not experimenting with legal tech or adding legal tech – we are legal tech. This puts ALSPs in a unique intermediary position. Tech companies see us as the best partners for innovation and a gateway to the market. We also provide valuable insight into what legal tech works, what doesn’t and why, and we translate client questions into opportunities for legal tech. A perfect circle.

5. We’re moving up the value chain
ALSPs already deliver countless volume and niche services – which provides the perfect platform for taking on more kinds of legal work and processes. With a strong foundation in data, workflow and legal tech, ALSPs can start to move up the value chain. At Legadex, we already support litigation, for example, and M&A. And now we are moving into managed services, something we think will be the next big wave in legal. We see opportunities in legal entity management, contract review, risk and KYC compliance and contract lifecycle management. Managed services won’t fully replace in-house processing, but they will take a large part of that market, because the advantages for clients (efficiency, experience, focus) and employees (variety of work, opportunities to develop your career) are too big to ignore. And as we gain further experience, so more opportunities will open up. Contracting, for example, is seen as complex. But break contracting into process steps and you see that a lot of standard agreements are just that: standard, routine; copy, paste and change the names. And when that’s the case, it becomes simple to make a workflow that limits the involvement of lawyers to specific requests and unusual requirements.

6. Law firms and accountants will learn to love ALSPs
Looking ahead 10 years, we believe that, unable to compete on cost and efficiency terms, and unwilling to destroy their own businesses to adopt a technology driven model, legal and accountancy firms will have come to view ALSPs not as rivals but as value-adding partners to their profession. Just as we do now for corporate legal departments, ALSPs will take over legal and accountancy’s routine work, enabling them, too, to focus on legal advisory services to their corporate clients. Everyone wins.