In the modern legal profession, there is no longer a straight line on corporate matters that runs from the legal department to outside counsel to law firm vendors. The reality is, for any work on a given matter, there are a number of options available to corporate and law firm counsel—including alternative legal service providers (ALSPs).

You’ve seen them around—they’re the companies that offer a range of legal-oriented services, such as   document review, e-discovery, contract management, and regulatory and compliance litigation support, but aren’t law firms themselves. These providers also often offer services in a way that differs from the traditional law firm delivery model, utilizing technology and new ways of working like contract lawyers, process mapping or web-based technology.

What remains, though, are two simple questions: Are law firms and corporate legal departments actually utilizing ALSPs? And when they are, what matters when using one? To find out, Thomson Reuters partnered with Georgetown University Law Center’s Center for the Study of the Legal Profession and the University of Oxford Saïd Business School to produce “Alternative Legal Service Providers: Understanding the Growth and Benefits of These New Legal Providers,” a comprehensive look at the current ALSP market from the perspective of their corporate and law firm partners.

Representatives from Reuters, Georgetown and Oxford presented the study’s findings at Legaltech New York, and also sat down with Legaltech News before the event to discuss the study’s key takeaways. And ultimately, the study’s authors found three key takeaways that portend an interesting—and lucrative—future of the ALSP field.

The Rise of Expertise

For years, the reasoning behind going to an alternative service provider was simple: cost. And indeed, according to the survey, that seems to be the case when it comes to tasks such as document review. For instance, 85 percent of law firms who use ALSPs said they do so in document review for cost savings; 52 percent said they use them to meet peak document review demand without increasing headcount.

Outside of document review though, and particularly in corporate legal departments, the need for expertise is increasingly turning people towards ALSPs. About two-thirds of law firms using litigation and investigation support services ALSPs, for instance, said they did so for access to specialized expertise not available in-house; only one-third using litigation and investigation support services ALSPs cited cost savings as a driver. The difference was also stark for nonlegal, factual resource ALSPs (63 and 38 percent, respectively).

On the corporate side, meanwhile, access to specialized expertise not available in-house was the No. 1 reason for the four most-used types of ALSP services beyond e-discovery and document review—regulatory risk and compliance services, specialized legal services, intellectual property management, and legal research services. For regulatory risk and compliance services, the difference between expertise and cost as a primary driver was particularly pronounced, at 77 percent for expertise versus 27 percent for cost savings.

“Having matured in their offerings a little bit, these alternative legal service providers are differentiating based on expertise,” Eric Laughlin, managing director of legal managed services for Thomson Reuters, told LTN. “And that makes corporations more and more comfortable to reach out to them and use them.”

A Still Growing Industry

But of course, those figures only measured those organizations currently using ALSPs. In the overall marketplace, their use has grown—particularly in e-discovery and document review—but there are many areas where law firms and corporate legal departments have not yet embraced ALSPs. Overall, 51 percent of law firms and 60 percent of corporate legal departments use at least one ALSP.

Although litigation and investigation support ALSPs are the third most-used category of ALSPs for law firms (behind e-discovery and document review), for instance, the survey found that they are used by just 28 percent of firms. Twenty-six percent of firms use ALSPs for nonlegal factual research, meanwhile, and 24 percent use them for specialized legal services.

When breaking down the ALSP services used by corporations, there seems to be even more reluctance to adopt. Regulatory risk and compliance services are the categories that see the most use proportionally, but even those ALSPs see adoption at only 29 percent. The only other category above 20 percent adoption in corporate legal departments is specialized legal services (21 percent).

Notably, this is the first year for the survey, so there is no way yet to see how these figures have changed over time. When taken in conjunction with the overall percentage of law firms and corporate legal departments embracing ALSPs , though, Laughlin expects growth across the board.

“The data says that law firms are recognizing ALSPs for more expertise, so there’s a respect there for what ALSPs are doing. And then their experience in the market is that clients are pushing them more to disaggregate. They’re being asked to look at more models by their clients,” he explained.

The numbers bear this out. Among litigation and investigation support ALSPs, for instance, although only 28 percent of law firms use them now, another 15 percent said they would be likely to use them in the next year. Among regulatory risk and compliance services for corporations, meanwhile, the number jumps 13 percent when looking at potential adopters within the next year.

Still, there are some key areas that law firms and corporations would like cleared up before adopting ALSPs. Fifty-nine percent of law firms that do not use ALSPs cited data security as the main reason, and 54 percent cited quality of service. Among corporations, meanwhile quality of service and the ALSP not actually reducing costs tied as the top inhibitor, at 43 percent.

Technology as the Driver

Overall, the survey was conducted through 200 individual surveys, as well as 37 interviews with counsel and technology decision-makers. And within those interviews, Laughlin said an interesting trend emerged behind ALSP adoption: an increasing expectation from clients that ALSPs will bring technology to bear.

“The legal ecosystem has a bit of a mixed track record when it comes to technology adoption, but clients are now looking to ALSPs with high expectations for them adopting technology,” Laughlin explained.

Beyond just process improvement and cost savings, he said that those interviewed identified a number of different technologies that clients hoped ALSPs would use, including artificial intelligence, contract management, process mapping and workflow technology. In many cases, he said, these are technologies that are still in the nascent stages in firms and legal departments themselves.

“I think it shows that while legal departments and law firms either haven’t been able to adopt yet because of budget, or perhaps because of the scale, they have high expectations that ALSPs will use technology to their advantage,” he said.

To the survey’s authors, this again ties back to expertise as a primary driver for ALSP adoption, albeit a different type of expertise from being subject matter-driven. Laughlin added, “ALSPs by definition came from a place of cost savings originally, and now are migrating to be more expertise-based, but because ALSPs have that underlying DNA around process they’re able to utilize technology in that process.”

And now, the survey’s authors explain, as data continues to grow exponentially and technology is developed to keep pace, this pattern will likely continue going into the future.

“It used to be that the narrative was, the ALSP ecosystem is changing, and there are a lot of low-cost providers that are changing the way things are getting done. And to some extent, I think that was true,” Laughlin said. “But the narrative has now evolved, so that both law firms and corporations are now … [using] the latest and greatest technology, so it won’t just be cost savings or expertise, but it will be all of those backed up by technology.”