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Born as Legal Process Outsourcing, "LPOs" initially focused on wage arbitrage and they took on basic, repeatable processes that comprise large-scale legal services such as document review and standard contracting vehicles like NDAs. Ultimately, LPOs introduced the concept of process discipline to legal work. Then, steadily moving up the value chain, taking on higher-order legal work, LPOs became embedded in the legal services delivery model of both corporates and law firms. Today, they have matured into what are now called Alternative Legal Service Providers ("ALSPs") that are indispensable partners in tackling large-scale, complex legal operations challenges.

These firms have proven their bona fides in the deployment of leading-edge technologies, implementation of efficient and effective processes, and expert management of risk and compliance. No longer just a cost savings strategy, ALSPs, in addition to lowering costs and improving processes, are helping corporates and law firms:

• reduce risk,
• improve legal operations,
• impact business performance, and
• drive new value through deft use of data analytics and business intelligence.

From the Transactional to the Programmatic

Leading ALSPs are true learning organizations. Armed with data, operational insights, and decades of experience, some are already in the process of delivering next generation legal services: A programmatic delivery model that goes beyond transaction-based support to tightly integrate the legal department, outside counsel, and ALSP. The programmatic approach incorporates:

• policy and procedure,
• technology testing and selection,
• operational execution, and
• continuous improvement schema.

Operating programmatically is the logical—and necessary—next step to continue gains in cost reduction, risk mitigation, and legal and business value.

Currently, the focus is on work disaggregation. Or, a "re-sourcing," where law firms and in-house counsel will "decompose (or unbundle) legal projects into discrete tasks and processes, each of which will be handled by specialized service providers who are organized to perform that work with maximum efficiency." (Richard Susskind, Tomorrow's Lawyers.)

This is an interim step.

Just as the cost benefits of wage arbitrage and process improvements are exhausted, so too will the cost benefits of "re-sourcing." Forward-looking corporates and law firms recognize the diminishing returns of these approaches and understand the need for a well-designed framework to drive continued value. The programmatic approach provides that framework.

Current Approaches

The current work distribution landscape remains diverse and includes:

1. Project-based outsourcing. A traditional vendor relationship that is by definition transactional. There is little broader context concerning the goals of the legal department or business. Any value-add is largely confined to the individual matter.
2. ASLPs operating on a "lift and shift" model. Bringing traditional Business Process Outsourcing to legal services, this model is becoming prevalent in Contract Lifecycle Management. While effective in reducing cost, it divorces the in-house legal experts from the operational activities that codify their expertise.
3. Law firms who have established their own ALSP-like operations. These ALSP-like operations introduce a form of wage arbitrage much like the earliest LPOs. As noted by Jonathan Brayne, head of Allen & Overy's legal tech space in The Future of the In-House Legal Function: The challenge is "how you form your kind of routine, business-as-usual work without having to absorb huge amounts of time of high-quality expensive lawyers." This is a challenge for law firms too. Their ALSP-captures are premised on distributing tasks to lower cost resources/jurisdictions to manage cost. In effect, wage arbitrage.
4. Corporates keeping it in-house. Corporates have outsourced, re-insourced, and outsourced again almost cyclically. Disappointed with the results of outsourcing, they re-insource to find the infrastructure and human resource burden too much for the budget-constrained legal department.

Current re-insourcing initiatives are supported by two key developments: the advent of legal operations departments that embrace process discipline, technology and data-driven analysis; and the increased use of ALSPs.

The common denominator among existing models is the division between internal and external resources resulting in:

• Lack of integration among Legal Department, Law Firm and ALSP, isolating business goals, legal expertise, and supporting infrastructure from each other.
• Limited knowledge-sharing across matters, and key players impeding the learning necessary for continuous improvement.
• The forestalling of operating more strategically.

The programmatic approach posited here solves for these challenges.

Programmatic Approach

The programmatic approach begins with all parties coming together to design the policies and procedures within which all resources will operate. But this is not a set it and forget it event. "For the Deutsche Bank Legal eDiscovery Team" as detailed in their 2019 ACC Value Champion award, "this meant creating an eDiscovery Center of Excellence that would enforce tight process controls and standardization while leveraging innovation and integration of new technologies."

The results of bringing parties together in this way are significant. The ACC notes that In less than two years the cost of managed review declined by nearly half. This is in addition to savings already achieved through the already existing "lift and shift" model.

The benefits go beyond cost reduction and also improve risk management. "With this approach, we could look at eDiscovery programmatically … to ensure we were handling cases globally in a consistent manner" says Kelli Stenstrom, Deutsche Bank Global Head of Legal E-discovery.

In another example, Ocwen Financial, Hunton Andrews, Orrick Herrington, and ALSP QuisLex devised a large-scale, AI-enabled due diligence program to manage the transfer of $110 billion in mortgage servicing rights. This required review of 15,000 agreements and associated documents, as well as analysis of 300 data points involving 2,000+ mortgage servicing deals.

"Altogether, almost 200 professionals worked concurrently across four organizations. Leaders held brainstorming sessions; complex decision-making protocols were disseminated through daily communications." (ACC)

Using traditional approaches these results would not be possible. Operating programmatically softened the boundaries between corporate, law firm, and ALSP. It enabled a rethinking of existing due diligence models that led to vastly improved outcomes.

"This is a complex industry, and this experience has added meaningfully to what I can offer to clients moving forward," says Orrick partner Martin Howard.

In other words, everybody wins.

 

Adam Beschloss has more than 20 years' experience in transformational technology and process-driven services in the legal industry. He has held leadership positions at a Big 4, a renowned global technology company, and a leading Alternative Legal Service Providers. Adam earned his B.A. at Columbia University. He can be reached at [email protected].