UK corporates are turning to alternative legal services providers for core law firm Services as 40 percent say they use alternatives to access specialised legal services, suggests research by Thomson Reuters.

Moving up the chain

The report is entitled “Alternative Legal Service Providers 2019: Fast Growth, Expanding Use and Increasing Opportunity.” The ALSP market accounted for an estimated $10.7bn of revenues in 2017, up from $8.4bn in 2016, according to the report and is principally made up of legal start-ups, specialist outsourcers and other large accountancy or consulting firms. Thomson Reuters explains that corporates often utilise ALSPs for short-term staffing assistance by licensed lawyers for the delivery of a project. In addition to the 40 percent of corporates already using ALSPs to access specialised legal services, an additional 11 percent plan to do so within the next year. Legal research is now the second most common type of work given by corporates to ALSPs – 30 percent of corporates surveyed said they gave legal research work to ALSPs, followed by regulatory risk and compliance services (23 percent), and document review and coding services (22 percent). Jim Leason, vice president at Thomson Reuters, says: "Alternative legal service providers are moving up the legal value chain and have become a key tool for both corporates and large law firms in the UK.”

Captive models

The research also highlighted a trend towards the creation of “captive” ALSPs by large law firms, which are wholly-owned subsidiaries of law firms often based in lower cost regions. The use of captives allows law firms to access the benefits of outsourcing core legal functions whilst keeping profits within the same group. The research reveals that 49 percent of large UK law firms currently outsource electronic discovery services, 42 percent outsource legal research tasks and 40 percent outsource document review and coding services to ALSPs. Also, 26 percent of mid-tier firms now outsource electronic discovery services and legal research. Mr Leason explained, “Rapid growth of specialist providers means it was inevitable that law firms would look to develop their own captive models. These mean law firms retain the primacy of their client relationships and do not have any third parties in the mix.” The report can be downloaded here.