EMERGING MARKET SPOTLIGHTS: An Introduction to Spain
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The scope of this essay is to define what an ALSP is, the different type of ALSP that exist, to provide an updated view on how ALSPs are related to the legal sector, specially focusing on their relationship with law firms and corporate legal departments; and finally to explain how ALSPs combine and exploit technology, knowledge and project management methodology to drive a consistent value proposition to the markets where they operate, as a trusted ally for their clients.
The term Alternative Legal Services Providers (ALSP) in Spain has emerged relatively recently but is being well received thanks to the value that these types of providers are able to transfer to the different legal actors in the market, which has become more demanding of flexibility and transparency due to cultural and economic globalization.
Alternative Legal Providers share a common objective, which is optimizing costs and results for their clients, given their excellent implementation of legal software and technology into the area of expertise of the services they provide, allowing legal departments and law firms to be released from the recurrent and high volume work in order to be focused on value-added tasks.
ALSPs are normally categorised into 5 large groups, which are described below.
1. Auditing firms, commonly known as the Big Four, which include the large accounting and auditing firms that derive revenues from their legal services business units.
2. Legal Process Outsourcers (LPOs), captive or dependent on law firms, which are entities or legal services business units wholly owned by the law firm.
3. Independent Legal Process Outsourcers (LPOs), which perform legal work requested by in-house legal departments and law firms.
4. Managed Services Providers, through which law firms and in-house legal departments contract out all the functions and tasks that an in-house legal team typically performs on a day-to-day basis.
5. Staffing Solution Providers, which both law firms and in-house legal departments use to source qualified staff for a given project.
Whatever the type of ALSP, all of them have something in common: they can offer different legal players in the market agile solutions to a wide variety of specific problems and challenges that they are not ready (or don’t know how) to face in-house. Moreover, while the COVID-19 pandemic pressured the legal industry worldwide, agile organizations that embraced new ways of working during the crisis have emerged stronger, with a promising horizon of opportunities. This becomes clear in the report Wolters Kluwer Future Ready Lawyer Survey: Moving Beyond the Pandemic. Its findings show clearly that the transformation dynamic in the legal profession has been accelerated by the pandemic. Overwhelmingly, trends and priorities already in place gained new ground. Among the key findings and overall trends of this research, we can highlight the following:
• Overall, 36% or fewer lawyers say their organization is very prepared to keep pace with the most significant trends they believe will have an impact over the next three years.
• The two top trends cited by legal professionals as having the biggest impact on their organizations over the next three years are the increasing importance of legal technology (77%); and coping with increased volume and complexity of information (77%). Yet, only 33% say their organization is very prepared to address the first factor, and only 32% to address the second.
• The growth of Alternative Legal Service Providers (ALSPs) was the trend that saw the biggest gain over 2020, up six points to 74% in 2021. Coping with increased volume and complexity of information was next highest, with a five-point gain to 77%.
In summary, there is still a large volume of players representing the legal sector that do not feel yet prepared to face the market forecasts. These forecasts point the need to adopt legal technologies, and to cope with an increasing volume of information and data. These assumptions have opened a window of opportunity for alternative legal service providers, who can respond with agility and efficiency to the common needs of a majority of market players.
Within the Spanish market, ALSPs are gaining strength. Proof thereof is that we find different ALSPs in Spain belonging to the aforementioned categories.
We find ALSP divisions within the Big Four, as well as the increasing creation of captive ALSPs from law firms; independent firms providing staffing legal services; independent firms of managed services as well as independent LPO firms that provide services to both law firms and corporate legal departments.
This is the case of AFIENS LEGAL, which, since it was founded in 2012, combines a high technical legal level with the innovation and technological developments necessary to provide efficient solutions in outsourcing legal processes. Companies in this model are responsible for providing standardized legal services, helping law firms and corporate legal departments to improve their processes and manage their legal projects, by incorporating the best technological tools that allow active collaboration between all parties involved in a project, document and knowledge management as well as standardization and automation of documents and workflows.
What Spanish law firms are looking for is an effective and efficient solution, which is why some firms, mainly the larger ones in Spain, contact ALSPs so that they can serve as a complement to ensure that the final deliverable to their client is of the highest quality.
Ally of Law Firms
We see that active collaboration between law firms and ALSPs is a trend that continues to grow in Spain, mainly because law firms are more confident in outsourcing legal matters not within their own specialization. Considering that customers are increasingly reluctant to pay the same prices for services that are not considered to have the same value of specialization, outsourcing certain tasks and services with an ALSP provides confidence to all project stakeholders, while achieving a considerable reduction in execution times.
Within this growing trend of active cooperation between different service providers, the client figure is always at the heart of the collaboration. This focus is what leads to firms such as AFIENS intervening in high-level operations led by the large national and international law firms, who rely on ALSPs in one of the links of the production chain of the service, supervised by that law firm. Thus, for example, for M&A operations within the Spanish market, AFIENS provides SPVs to the law firm's clients, adapting them to the needs of the client based on law firm requests, as well as the provision of all those legal and paralegal matters necessary to achieve the aim of the investment project. In this context, AFIENS provides related services, such as company secretariat, AML and GDPR services to the law firm's clients who request that more routine work is not economically valued as a grey hair service.
Ally for Corporate Legal Departments
As stated in the aforementioned report, corporate legal departments are also demanding and pursuing improvements in efficiency and productivity of their teams.
The current legal trend demonstrates that companies increasingly continue using ALSPs to get access to expertise they lack, as well as to use their existing resources more effectively and strategically.
Relying on a confident ally allows legal departments to free from legal routine tasks which burden their teams due to work peaks, thus preventing collapse in corporate legal departments while retaining control of their affairs when facing with one-off projects, and therefore, being able to focus on more strategic or value-added work, consequently satisfying maximum projects demand without having to permanently increase their workforce.
The key point of these type of services is the technology applied to the provision of these type of services. The legal departments continue to have control of all their issues, but work with flexible outsourcing teams to cover routine work and unanticipated peaks.
In the case of ALSPs such as AFIENS, they are able to use their technology and the methodologies of Legal Design and LPM to provide to their clients efficient solutions based on their specific needs. They design, jointly with the client, the best solution after analysing their needs to standardize their internal processes and subsequently automate processes and legal documents with their automation software solution. The COVID pandemic has encouraged legal departments to seriously consider engaging ALSPs that are more experienced in improving legal processes using the appropriate technology due to the nature of their business model.
In this case, AFIENS has been an ally for those legal departments that needed to speed up the signing of legal documents, being drafted within a sole technological platform in which any stakeholder could intervene during a project, making remote work the best approach to the needs of the situation. The COVID pandemic has accelerated the process of introducing Legaltech solutions to legal departments and rethinking the way things were being done. This is especially true in Spain due to the fact that the disruptive model of ALSPs has been implemented in Spain in a soft line until 2020, when the use of these technologies became a necessity.
Technology and LPM, key parts of an ALSP
If something differentiates ALSPs from traditional law firms, it is not the service itself but rather the way ALSPs provide them to the market. The sector has over time become increasingly modernized, understanding the fact that technology is our great ally in simplifying processes and improving yields and costs. And ALSPs have played a leading role in that way, as most of them were born with a clear focus on technology and implementation of process management methodology.
In recent years there has been an explosion of projects that, by linking technologies with different areas or production processes in the legal sector, have led to a paradigm shift in the way many traditional law firms think; and they have also gradually seen how these changes (that were taking place in our immediate environment) brought multiple organisational and, above all, economic advantages.
Technology is one of the main pillars of ALSPs' business models, driving innovation and performance up the value chain of legal services. The ability to use technology to ensure performance became more important as the pandemic sent professionals out of the office and into their homes where they interacted remotely with clients, colleagues and even the courts. The crisis made clear that technology solutions are essential to business resilience and client service. Research also confirms that professionals see digital transformation and technology as a key driver of improved performance, efficiency and productivity ahead and that increased use of and investment in technology solutions will continue.
Although the influence of LawTech in the sector is evident (and we can easily find a wide variety of technological solutions, applications and providers in the market) it is critical to be aware which provide real solutions to specific problems in specific areas of improvement. It is important to distinguish between those which apply to business management, from those that apply to process improvement. There is also a clear difference between the role that different stakeholders can play around technology, and processes. Some uses may be only internal to a firm, others may involve external agents, who can be clients, providers, or the Administration. As may be the case, ERP or CRM software can be an example of business management technological solutions; but document automation software, collaborative work platforms, knowledge management tools, digital identity or e-signature solutions are some good examples of technology applicable to legal processes and services provided by ALSPs focused on providing LPO and paralegal flexible staffing services, like Afiens.
There are many uses for technology in the legal sector, too. But identifying and implementing the most appropriate ones depends on taking advantage of real opportunities into existing areas of improvement in each business model. Specially, needs for improvement which can, in the end, provide a firm with a competitive advantage and turn into an improvement of the firm's value proposition.
As with technology, ALSPs rely on the Legal Project Management methodology to create their business models. Current market demands are seeing the LPM methodology increasingly implemented in the sector, providing a clear roadmap with defined processes that help improve the efficiency and performance of the legal teams involved. The improvement of processes is one of the most important aspect of legal practice. The legal profession is rethinking itself and is becoming aware of the need to change business models, the ways of interacting with clients and other stakeholders, as well as the use of information and technological tools in settings marked by the massive exploitation of data.
By combining technology, project management and talent, ALSPs seek the standardization of their processes, being more agile and transparent in client affairs.
We can conclude that Spain is a market with both challenges and opportunities, after analysing the needs and wants of the different players in the legal sector. Flexibility and transparency towards project management and technology are the most expected values for ALSPs' clients, while expertise and mastery of routine legal tasks and flexible resource allocation are the fundamentally differential aspects of service delivery.
One more year in Spain, there are more and more companies and law firms that are becoming aware of the desirability of making business with ALSPs. The ALSP sector keeps growing at double digit rates and has a very promising growth potential. That is why Spain is becoming an emergent market for ALSPs, which are here to stay in the legal sector.