Cutting BigLaw Down to Size: New Alternatives for Legal Services Procurement (Part 2)

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While it has been said that the wheels of justice turn slowly but grind exceedingly fine, that process may now be accelerating in the procurement of legal services. In Part 1 of this series, we discussed how monolithic, traditional BigLaw firms are being challenged by disruptive economic forces, the ascendance of legal procurement in enterprises and, last but not least, the growth in a broad range of alternative legal services providers.

According to a recent ALM Intelligence survey, 66% of law firm leaders said they were “somewhat to very concerned” about alternative legal services providers and accounting firms encroaching on their business. Indeed, BigLaw firms are waking up and pinching themselves, but the nightmare is continuing.

However, on the flip-side, as we noted in Part 1, BigLaw’s nightmare is also a shared opportunity for legal services procurement and for emerging alternative legal services providers. According to some industry observers, we are witnessing an ongoing paradigm shift from BigLaw to what is being dubbed NewLaw. In Part 2 of this series, we provide an introduction to the increasingly important, complex and rapidly evolving NewLaw landscape of non-traditional/alternative legal services providers (ALSPs). Later, in Part 3 of the series, we’ll look at some of the implications for increasingly influential legal services procurement professionals facing this changing environment.

From BigLaw to NewLaw and ALSPs

The term NewLaw was reportedly coined in 2013 by legal industry strategy and M&A consultant Eric Chin, when he and his team began analyzing  what was then already called “alternative legal service providers” (now abbreviated ALSPs) that were emerging at the periphery of the legal industry. In 2014, legal market analyst and consultant Jordan Furlong defined NewLaw as “any model, process or tool that represents a significantly different approach to the creation or provision of legal services than what the legal profession traditionally has employed.” While NewLaw is a broad paradigm encompassing innovative and often technology-enabled business and operating models (even as adaptations/extensions at BigLaw firms), ALSPs may be the most important manifestation from a legal services procurement perspective.

At this stage of the game ALSPs come in many forms. Thomson Reuters’ recent study “Alternative Legal Service Providers: Understanding the Growth and Benefits of These New Legal Providers” breaks ALSPs down into these categories:

From a procurement perspective, we would probably take issue with some of these categories. For example, the lumping together of independent LPOs, e-discovery and document review service providers and the isolation of captive LPOs seems unhelpful. Captive LPOs represent less than 2% of estimated total ALSP revenues, while independent LPOs, e-discovery and document review service providers as an aggregate category makes up almost 75% (and in all likelihood Independent LPOs account for a large majority of those revenues). Moreover, the remaining types of ALSPs in this category are numerous, diverse and growing (e-discovery and document review service providers are not the only ones).

One other type of alternative for procuring legal services--not mentioned above-- is what we might call an online marketplace or network of vetted legal firms. Globality, for example, provides legal services buyers with network of highly vetted, sometimes specialized small to mid-sized firms operating across the globe in many different legal jurisdictions. Online marketplaces of this sort bring into play a whole different set of buying options.

Indeed, the evolution from BigLaw to NewLaw means a proliferation of many entirely new legal services providers that generally incorporate new technologies into their operating and business models. At the same time, traditional heavyweights — such as some BigLaw firms, information services providers like Thomson Reuters and now Big Four accounting and audit firms — form a big part of the overall picture.

The Big Four and the NewLaw

While representing just over 10% of estimated total ALSP revenues at this time, accounting and audit firms’ presence as suppliers of legal services is increasing and expanding across categories. According to ALM Intelligence, 70% of all law firms surveyed said they considered accounting and audit firms a major threat to their firm’s market share.

While legal advisory services have long been embedded in the Big Four’s tax and audit services, new categories and geographic markets are now being pursued separately and strategically. For example, over the past year or so PwC has built up and added new management to what it now calls its NewLaw practice. The NewLaw practice has been described as an MLS (Managed Legal Services) offering that “covers a broad range of services, including: giving advice on in-house legal function efficiency; contract digitization and the integration of better processes; and the use of legal tech in large contract review projects, which includes using AI applications.”

Earlier this year, PwC acquired a Washington DC-based law firm as a first step in its NewLaw practice US market entry. More recently, the company crossed over into the ALSP category of contract lawyers and staffing services with its flexible legal resources offering — something that now puts PwC NewLaw in competition with legal temp ALSPs like Axiom and Lawyers on Demand (LOD), not just with BigLaw firms. Different providers playing across different categories in the emerging ALSP world seems to be a fact of life. Axiom also plays in the managed legal services space, and Thomson Reuters plays in both managed legal services and several other ALSP categories.

Where to From Here?

We are passing to a new era of how and where to source and procure enterprises legal services. Gone are the days when a corporate general counsel and a full-service BigLaw firm remain married for a long period of time. BigLaw is giving way to NewLaw and a broad range of alternative legal services providers that can be selected and configured — even over time, reconfigured — to meet the specific needs of a particular enterprise. At a time when legal services procurement is coming into its own, it is facing a radically modern and complex supply landscape, which promises exciting opportunities to devise new strategic sourcing and buying approaches to deliver significant value to an organization. In Part 3 of this series, we will look into what that might entail.

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