09 October 2020

Top US firms creating ALSP clones to recapture lost revenue, study finds

Baretz+Brunelle report shows 35% of Am Law 100 firms have set up in-house ALSP units

More than a third of Am Law 100 firms have set up their own in-house alternative legal service provider (ALSP) units as they seek to win back revenue that has shifted to other suppliers, according to a study by advisory firm Baretz+Brunelle.

The study found that 35 Am Law 100 firms had created their own captive ALSP-type units to compete against the tech-focused firms that have been promising clients more cost-efficient services. The creation of these captive ALSPs could radically change the traditional business model for law firms in the coming years, Baretz+Brunelle said.

Brad Blickstein, partner and co-head of Baretz+Brunelle’s NewLaw practice group, said: “You would expect law firms to be shouting from the rooftops about the new capabilities they are developing, but the market doesn’t know much about them. This frustrates their clients, too.”

He added: “Law firms got into this game late, but they have plenty of reason to be optimistic about their future in this line of business. As incumbents, they have advantages over ALSPs that they can and should be exploiting.”

The study found that 91% of those firms that had set up captive ALSPs offer e-discovery services, with a majority also providing additional services. Around a third of those offered only e-discovery. 

The study also looked at firms in the Global 100 that aren’t members of the Am Law 100 and found a further 13% of international firms had also created captive ALSP units. The study showed that international firms’ captive ALSPs tended to provide more sophisticated services than their US-based counterparts, such as contract review, IP-related services and M&A due diligence.

While the majority of firms (86%) in the Am Law 100 had made some effort to brand their captive ALSPs, only 9% of those ALSPs were set up as separate standalone businesses.

Blickstein’s fellow co-head Beatrice Seravello said: “Change is hard for any organisation, especially a tradition-bound law firm with many centres of power. The fact that so many have taken on the challenge of building a captive ALSP shows how urgent the business need is.”

In June, Eversheds Sutherland launched its new law arm Konexo in the US having set it up in the UK in 2019 while in March UK magic circle firm Linklaters launched a 400-strong legal operations function grouping together its new law services under one umbrella. 

And in February, top 50 UK firm Kennedys unveiled Kennedys IQ as a separate technology driven company.

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