To coincide with Exigent’s 16th birthday, Nicola Stott reflects on the rapid rise and evolution of ALSPs and the Legal Process Outsourcing (LPO) industry
Playing a role in changing a centuries-old industry is a big responsibility, but Alternative Legal Service Providers are not toddlers in the playground anymore. We’ve gone through our discovery years, learnt to walk and then run. We’re ready and eager to make the industry even better. We’re young enough to have the energy and imagination to do it, and the experience and confidence built in the last 16 years to make it come true.
It seems like yesterday that David Holme and I began the journey of Exigent, but it was 2003 and the term ‘Alternative Legal Service Providers’ didn’t exist (I don’t think). How far this sector has come: the industry has evolved so much in the last 16 years and it does feel like we’re finally moving past that teenage angst to shape more confidently our identity and embrace adulthood. It’s an evolution in both quantity and quality.
Thomson Reuters reports that in the US half of large law firms are now using ALSPs for legal research, compared to just 21% two years ago. But it’s corporate legal departments that are pushing the envelope: they now have the most diverse use of ALSPs across multiple categories ever, and projections show that in five years 52% of US corporations will be using ALSPs across their top five use cases.
A New Identity
Like a teenager who’s been trying out different hairstyles or music genres to help define which group he belongs to in high school, ALSPs have also been experimenting with what it means to do things differently from the old generation. The diversity of approaches is refreshing and shows just how much passion and drive there is in the industry. Is it too naughty to suggest that most law firms still behave a bit like uncompromising parents who want their children (corporates) to be ‘good’ and continue with tradition?
The latest report by Thomson Reuters shows just how much momentum there is and, interestingly, it proposes a taxonomy of ASLPs that attempts to categorise the myriad of payers out there, but somehow fails: for example, Exigent doesn’t fit in any particular category, but many.
Taxonomy of ALSPs
- The Big Four refers to the largest accounting and audit firms which derive a large amount of revenue from legal services.
- Captive LPOs are law firms’ wholly-owned captive legal services units, often located in lower-cost regions.
- Independent LPOs perform legal work on behalf of corporate legal departments and law firms, often via matter- or project-based engagements.
- Managed services providers contract for all or part of the function of an in-house legal team, typically for ongoing work.
- Contract and staffing services provide lawyers on a temporary basis to companies and law firms, ranging from entry-level document review to highly skilled specialists.
Aside from the Big Four and Captive LPOs, the other categories are much more blurred and providers like Exigent cross several of them, showing just how vibrant the industry is. It’s also great that we’ve (almost) moved on from the LPO term: it doesn’t do justice to the level of ingenuity, creativity and value creation that non-law firm providers bring to the table.
Long gone are the days of wage arbitrage only or delivery centres executing low-value work from overseas. Or rather – the smart providers have moved on, some still linger there. But with consolidation, Private Equity money coming in and acquisitions right, left and centre, the landscape is changing fast towards value through technology and data, rather than the old adage of ‘more with less.’
Like teenagers rebelling against the status quo, ALSPs have found innumerable ways to break with tradition and create truly innovative ways of delivering not just legal services, but meaningful commercial value. Contract management is an area where we’ve seen this happen the most: starting from a need to bring order to legal documents, some visionary corporates, like Hub International, have had faith in ALSPs proposing a completely different way of thinking about their contract portfolio. Contracts like assets, not liabilities. Analysing statistical trends and bringing financial outcomes into the equation, it’s possible to change the conversation dramatically and Hub managed to reduce property costs by 10% (they have 450 offices worldwide). It’s not just contract management that has provided ALSPs with opportunities to come up with creative solutions to old problems:
- Take M&A due diligence and turn it into a source of data for long-term strategic decisions (Telstra is the living proof that it works).
- Partner with technology providers to review 14TBs of data in just 6 weeks.
- Develop AI-powered services that are sure to disrupt the industry.
We won’t stop. We have the energy and the means, so we’ll continue to grow confidently into the next phase. And we’ll take legal departments with us in our transition towards maturity: legal as part of the bigger picture and as a revenue generator, with its metrics aligning to the business strategy. Anglo American, for example, improved their contract turnaround times seven-fold, meaning the business can now do business faster.
The new identity of alternative legal service providers is built solidly around technology (technically, ALSPs are gen Z – digital natives –so it makes sense that technology is so central to the way they are changing the industry), but most importantly on a multidisciplinary approach. Today, we talk to the legal department but swiftly take the conversation to other areas of the business. Increasingly, we talk directly to the C-suite.
What’s certain is that we have graduated from a ‘cheaper’ option to business partners. More and more we are at the centre of the corporate conversation about value through data.
Alternative Legal Service Providers are Here to Stay
Having gone through the growing pains of finding our true self, making mistakes and polishing our offering by trial and error, we’ve shown stamina. Numbers from across the industry testify that: ALSPs are going strong.
At Exigent alone, we’ve grown to have 500 staff in six countries, four continents and five time zones. From a start-up that helped law firms with document specialists in South Africa, to a global organization that offers legal, tech and consulting services to corporates around the world. Last year our revenues grew by over 20%. Not bad for a teenager who just turned 16, eh?
We’ve shown entrepreneurial spirit, energy, and imagination, but it also took visionary partners to really turn the page. In the early years of LPOs, it was hard to move the conversation away from tick-box exercises and cost. A bit like a baby, LPOs understood they had to learn to walk before they started running. Until the moment finally came to sprint forward: the 2008 crisis changed the game. And with it changed the power dynamic within legal: law firms weren’t in a position to bully corporates anymore. GCs took control and started demanding more efficient ways of getting legal work done.
As David Holme says, there will be consolidation. That’s a natural selection process that is inevitable with so much growth and economic turmoil. Coming into ‘adulthood’, ALSPs will occupy a slightly different place in the corporate landscape and, most interestingly, the smart ones will blur the lines of disciplines and departments to become more like the Big Four.
Exactly what the future holds for the industry is unknown, but one thing is certain: ALSPs are shaping the future of legal, not just in designing and implementing better processes, but in training the next generation of lawyers with a multidisciplinary approach. The Citi Report also mentions it: the industry is looking more and more to hire lawyers that have a diverse skill set.
It’s not law schools, nor city firms who are providing the training needed for this shift; it’s the alternative legal service providers. At Exigent, we are committed to investing in our legal talent to arm them with the skills and tools they need to be successful lawyers of the future.
With ‘anything is a possible’ as a mantra, Exigent’s Global Managing Director, co-founded a global organization that quickly grew from one to over 15 service lines. Nicola’s determination and energy are infectious, making clients excited about the possibilities of change and leaving them empowered to take the first step.