Sourcing external legal advice no longer necessarily means instructing a traditional law firm. Now, internal teams can turn to a range of new, flexible from well-established brands like Axiom and Lawyers on Demand (LoD), to law firm-tied flexible resource providers such as Peerpoint and Adaptive.
The advantages to utilising flexible legal resourcing are clear. It allows businesses to access specialist legal expertise when it’s needed, keeping down headcount without incurring the high costs of external counsel.
But this flexibility often comes at a premium. Many organisations are paying an unnecessarily high price for flexible resourcing when they could be accessing the same resources at a significantly reduced price point.
How do alternative legal service providers work?
According to a global EY study, 33% of businesses are already outsourcing a wide range of legal function processes, such as legal entity management and compliance, while 41% would consider doing so in future.
It is therefore unsurprising that so-called alternative legal service providers (ALSPs) have become increasingly popular with in-house teams in recent years. Indeed, more than one-third of corporations in the UK are now turning to ALSPs for legal tasks, with the market growing by almost 13% a year.
ALSPs ostensibly deliver one or more services offered by traditional law firms, but at what should be a lower cost. Many claim to offer further advantages, too, including:
- Faster speed;
- Greater flexibility;
- Increased specialist expertise.
While they are, in effect, in competition with traditional law firms, many ALSPs are owned by those very same firms. Aren’t those law firms simply cannibalising their own revenue?
In reality, the service that these alternative providers offer – delivering short-term legal support for specific projects or time periods – is actually more akin to that of a legal recruitment agency. ALSPs source experienced lawyers on a contract basis, then second those lawyers to in-house teams for a fee.
What does this mean (and what are the alternatives)?
Many in-house teams find that the cost of sourcing external legal consultants via an ALSP can be deceptively expensive. Indeed, it is often significantly higher than recruiting them via a traditional legal recruitment agency. We have seen examples of paralegals working through ALSPs who have been charged out with a 100% markup on their salary. In contrast, the average legal recruiter would charge 20%. Over the course of a six to 12-month project, this disparity really stacks up.
This increased cost may not be an issue for some in-house teams. The support of an ALSP backed by an international law firm may be an attractive prospect. It may even be unavoidable, with some procurement processes lumping all “recruitment firms” into the HR budget, but ALSPs into “legal” (or to another relevant budget).
The result is that ALSPs can often charge much higher rates for the same product. This is particularly significant given that most contract lawyers on the books of the alternative providers are also on the books of recruitment consultancies, so it is normally possible to sign up the same consultant at a significantly discounted rate.
In other words: the best, most cost-effective way to access flexible legal resourcing is still through a specialist recruiter.
Montresor Legal’s Interim & Consulting business supports clients across Private Practice, Financial Services and Commerce & Industry. Contact us to discuss your flexible resourcing needs.