The Point

Too often, in-house law departments and law firms use licensed lawyers (Category #1 below) to perform routine, recurring tasks that an alternative legal services provider (ALSP) or law company (Category #2 below) could do more cheaply, faster, and with higher accuracy.

CFOs and others in the C-suite should take a hard look at using ALSPs and law companies for routine, recurring legal tasks. Because in-house law departments and law firms, for the most part, are not doing so.

 This Matters to Your Business

From an operational standpoint, corporate legal services fall into two categories:

Category #1 — Legal tasks for which only a licensed attorney is qualified.

Category #2 — Routine, recurring legal tasks that can made more efficient using software, data analysis, business process expertise and / or labor that costs less than a licensed lawyer charges (all under the guidance of one or more licensed lawyers / Category #1).

Alternative legal services providers (“ALSPs”), or “law companies”, do Category #2 work — at great savings and higher speed, and often more accurately, than traditional law firm or in-house counsel using licensed attorneys and paralegals. Except for Elevate Services as recently authorized by the Arizona Supreme Court (described here), ALSPs and law companies are prohibited from offering Category #1 services (those of a licensed attorney) in the United States.

…

Liam Brown, as quoted in an earlier post, offers the best description I’ve heard of the work ALSPs and law companies do (Category #2), as distinguished from what only licensed lawyers are permitted to do (Category #1):

“Imagine a chess board of 64 squares … Customers would ask us [as an ALSP or law company] to perform work [that] required the capabilities that we had on 63 of those squares. It could have been our software … our data scientists, … our business consultants, … our understanding of their business … our process expertise.”

In Mr. Brown’s description, the 64th square — distinct from the 63 that an ALSP or law company is capable of doing — is comprised of work that only licensed lawyers are capable of doing (Category #1).

…

Law firms are, for the most part, reluctant to cooperate with the use of ALSPs or law companies to do routine, recurring Category #2 legal work. They prefer to have their own junior, trainee associate lawyers do this work — and to bill hundreds per hour for their junior, trainee services.

In-house counsel departments have been similarly reluctant to adopt ALSP or law company services.

Indeed, ALSPs’ and law companies’ percentage of total legal spending is in the low to mid single digits (reported at a mere 3 percent of total legal spending for 2020 here).

Because …

From the standpoint of the cost, speed, and quality of Legal’s operations, CFOs and others in the C-suite should demand careful consideration of ALSPs and law companies for routine, recurring Legal work.

As a useful description of ALSPs / law companies for the business executive, the following June 2022 article by Yvonne Nath, recently retired from the legal services consultancy Law Vision, offers the best summary I’ve seen:

“Your Most Common Questions about ALSPs“.

CFOs and the rest of the C-suite need to press their corporate law functions to tap the cost efficiencies, speed, and accuracy offered by ALSPs and law companies for routine, recurring legal tasks. In-house law departments and law firms, for the most part, are not doing so.