By Tobias Heining, Sebastian Hartmann, and Marcus M. Schmitt.
It's already been more than a decade now since the so-called "Alternative Legal Service Providers" (ALSPs*) have entered the already stiff competition in the legal market to get a piece of the B2B budgetary cake – a market that is supposed to reach a volume of almost $ 850bn in 2023. ALSPs entered this lucrative market by targeting legal departments, law firms, or even both as their primary clients. The landscape of ALSPs has been growing from every angle and corner of the market. In contrast to most traditional law firms, they use business models such as managed legal services, legal resourcing, legal tech solutions, etc. – and they do so at scale (or claim it).
However, it is now early 2021, and the revolutionary dreams of so many hopeful new entrants have been cut down to a more or less sobering market reality: No runaway victories but rather concentrated or sometimes even moderate accomplishments – with market shares won over in tough and grueling skirmish fights.
Nonetheless, the ones that earned these tight victories and found a way to tackle the prevailing dominance of a very conservative and change-averse profession have shown that things can be done differently and that even the hardest nut can be cracked with the right solution. These obstinate pioneers who spearheaded their way into the legal market, toughened up by the positional competition, are now being joined by an ever-growing number of converted clients, believers, and supporters.
Still, some ALSPs might wonder why a market so much in need of change is not welcoming their offerings with open arms. When we, the authors of this article, got together after the last in-person ELTA conference in Madrid in late 2019, we began to discuss our observations, analyses, and experiences of this situation. By combining our various perspectives, we quickly realized that we could agree on specific observations and attempted explanations. Together we might help answer that question about the change in the market – and, more importantly, suggest some conclusions on what it takes to finally succeed as a non-traditional player in the legal services market:
Information Gap Whenever participating in any of the multiple legal tech and legal innovation events, observers could get the impression that the market and its players are fully committed to change and that things are really moving forward now. Often, this turned out to be a too optimistic impression. In reality, those with specialist knowledge and market insight take their information booth as a given. They expect everybody else to be at the same level. However, for most potential buyers of alternative legal services, this is not the case. There is still a vast amount of people in the legal market caught in a state of mind somewhere between innocence, paralysis, and ignorance. And as the real market potential for ALSPs is with the vast majority of “uninformed" buyers rather than with the few "enlightened"ones, this information gap already creates difficulties in communications and selling. Hence, ALSPs should dedicate significant effort to reaching out to the relatively uninformed potential clients and try to close this information gap. Promotion needs to be replaced with education. This might go as far as regularly informing the various roles involved in B2B purchase decisions about market developments and the alternative options and new solutions available – in their own language and unique perspectives.
Pressure to Act Closely linked to the above is the finding that decision-makers in legal departments and law firms usually do not fancy trying something new but rather prefer using “well-trodden" paths and proven solutions. They often only start acting once they feel they are losing ground against the market, their peers, or their competitors. This means that ALSPs, in their desire to convince potential clients, have to create a certain sense of urgency with their target group. Business acumen and a complete understanding of their buyers' specific situations, industries, and companies are critical to identify both urgent and important issues, which can drive demand and the willingness to buy. Positive word-of-mouth is also a strong force multiplier in this effort, which can often be harvested by establishing some award or at least regular celebrations of successes other clients have achieved with the ALSP's solutions.
Transparency Many introductory presentations or sales pitches by ALSPs tend to spread somewhat overdrawn – or at least deliberately vague – promises about their services and solutions' capabilities and performance, often leaving potential clients with a lack of understanding and transparency. Still too often presentations are held in a technical support format, rather than a war or success-story appearance. ALSPs need to clarify what specific business problems or challenges they address with their services and solutions and, of course, what differentiates them from their competitors. Also, they need to make sure not to overpromise. A “can-do" mentality is great for a service provider, but only if they are very clear under which circumstances they can deliver what they promise, e.g., by clearly outlining associated costs and time to adjust the services or solutions to specific client needs. The response to the traditional opaqueness of legal services must be sought in transparency and crystal-clear value propositions.
Seamlessness Many providers face practical roadblocks when trying to implement their services and solutions with their clients because they are not fully aware of the particularities of legal market requirements or even the challenges of partnership structures in law firms and the position of in-house legal departments in group structures. Therefore, ALSPs have to have sustainable and proven answers to questions on data protection, compliance, (local) legal services regulations, compatibility with existing technical systems, as well as non-technical processes and structures and – last but not least – usability, adoption, and user experience to keep the hurdles to implementation and change management as low as possible. Partnerships with complementary service providers (e.g., management consultants or technology service providers) can help to add the necessary capabilities for seamless solutions and successful implementation work.
Value (for Money) Providers often are confronted with the challenge that most potential clients are either lacking larger budgets for ALSPs or are generally hesitating to spend larger amounts of money at all. And in this environment, "larger amounts" could already mean a low six-digit sum. When selling B2B software solutions, ALSPs might experience that lawyers usually do not have any idea about the cost associated with implementing (and operating) software. Again, ALSPs will often need to lower the adoption hurdles and facilitate investment decisions by offering cloud-enabled and easy to access SaaS (Software-as-a-Service) models, attractive alternative pricing, gain-sharing, or reliable cost-saving examples. It may help to complete the picture by joining forces with other professional services firms, business consultants, or complementary ALSPs for more holistic offerings – and thus better value for money and ease of implementation.
Alternative Sales Channels The latter opens the door to using a broader range of sales channels other than your own, which might be a fruitful approach, as the market for ALPS is fragmented and potential buyers are hard and costly to target – still mostly achieved through one-on-one presentations with uncertain results. For ALSPs, alternative external sales channels might facilitate broader access to their services and solutions. They can establish co-operations with one or more of the existing legal market platforms and associations and even with non-competitive providers for combined offers or special offers to platform and association members. Even clients may open multiplier effects in their networks of customers and suppliers. Finally, larger technology companies can also make for feasible partners through their app stores and marketplaces.
Tangible Experience Due to professional deformation and operational blindness, most potential clients lack imagination of how collaborating with ALSPs or implementing their solutions would work and how it would improve their lives, daily work, and business outcomes. Therefore, providers need to be well aware of their clients' reality and speak to their challenges. This is best achieved by making services and solutions very tangible to potential clients and giving them a positive impression of how it would feel practically working with them and using them every day – thus creating a sense of “desire" to at least give it a try in a particular project or test case. One approach to this could be setting up a lab for dry runs and inviting potential clients for a test run or extensive demo.
Strategy and Future Readiness Also, professional deformation and operational blindness result in many potential clients lacking vision on where they want to go or what they want to achieve and – last but not least – how they could get there. To avoid lengthy discussions on purely operational details, on potential problems with low probability or unrealistic goals, ALSPs need to take this challenge on and help potential clients work on their strategy, goals, and KPIs. It is the translation of one-off examples and anecdotal evidence into a journey of improvement and business success. Breaking the future down into short-, mid-, and long-term roadmaps is a good starting point – and an opportunity to demonstrate that investing in the ALSP's solution is a safe bet and even opens up other potential use cases and tangible opportunities in the future.
Processes and Implementation As the emerging next generation of legal services and solutions is still relatively novel and has often ‘not crossed the chasm’ into the mainstream, the future readiness of many established ways of working, processes, and organizational structure is questionable. So, many law firms and legal departments struggle to analyze and re-design existing structures and processes to make ALSPs' services and solutions unleash their full potential. This is also where the ‘human factor’ frequently plays a significant role – resistance to change and even fear of being replaced by services or technology need to be considered. Furthermore, motivation of trying any new solution might be constrained by bad experience with implementations in the past. Again, ALSPs need to help them achieve this by offering relevant expertise, approaches, and support – easily added through partners, like business and technology consultants.
Client Success Management Finally, providers win if they put their clients' success first. If they can make their clients look good and achieve their goals and drive the relevant KPIs, they will happily be assigned again. This is almost always associated with the roles and personal agendas of the respective decision-makers. ALSPs should therefore emphasize helping the ones who take the budgetary decisions with the internal promotion and implementation of their services and solutions, e.g. by offering state-of-the-art client support (technically and personally), information and communication material and services, as well as facilitating high-level buy-in and change management support. Finally, the increasing role of technology and cloud-based solutions make systematic client success management the cornerstone of successful SaaS models.
These ten points are just a starting point for further discussions. Each of the above findings and suggestions requires closer scrutiny and illumination. The list is probably never final either, given the evolving market of professional services. Nonetheless, we hope to have amplified a few of the essential stepping stones, which might accelerate positive change in the world of law, legal services, and solutions.
Over the coming months, we will elaborate on these various topics in follow-up articles and look forward to complementary contributions and dialogues with other experts, professionals, and observers.
About the Authors
Tobias Heining (L) is Director Business, Clients & Strategy at Osborne Clarke in Germany. He also is founding member, former President, and current board member of the European Legal Tech Association (ELTA). Prior to joining Osborne Clarke, Tobias was Director Business Development & Communications at CMS in Germany, where he also established a unit responsible for developing technology-based legal advisory products. Tobias started his professional career as Consultant at a PR agency advising law firms, worked as Marketing Manager at a US law firm, joined CMS as BD Manager and headed their Business Development team for a couple of years. In these various functions, he has been dealing with product development in law firms and its effects on the legal market as well as business models of the future and the development of digitization strategies for law firms. Tobias studied History, Politics and Communications, as well as Business Economics later on.
Sebastian Hartmann (M) is leading both the global technology strategy and the innovation portfolio and investment steering team for KPMG International. Prior to his current international roles, he established a strategic portfolio management function across all of KPMG’s services (audit, tax, advisory) and a sales intelligence team for KPMG Germany. Next to his leadership roles, Sebastian is also advising other services firms (e.g., technology and business services, as well as legal, consulting and other professional services) on strategic management, innovation and operational development challenges. He is a frequent speaker and panelists at international conferences, events and universities – and collaborates with many thought leaders around the globe on topics such as the future of knowledge work, service design and professional services management. Sebastian holds a master’s degree in Services Management, System Information Science and International Management from the Catholic
University of Eichstaett-Ingolstadt.
Marcus M. Schmitt (R) has been General Manager at the European Company Lawyers Association (ECLA) based in Brussels since 2017 and represents the professional interests of more than 68,000 corporate lawyers from 22 member states at European level. In addition to legal issues concerning the professional status of in-house counsel, he actively supports European legal departments in the digital transformation and the further development of the professional profile of in-house counsel. He appears throughout Europe as a speaker and panelist on selected topics related to Corporate Legal Departments. Prior to his work in Brussels, he supported the Federal Association of Corporate Lawyers in Germany as Director in the association’s office. Since 2012, he has also been advising large and medium-sized legal departments throughout Germany in the context of efficiency improvement and optimization projects. Schmitt studied law at the Free University and Humboldt University in Berlin and completed his legal clerkship in Berlin and Chicago, IL. #TobiasHeining #SebastianHartmann #MarcusSchmitt #ALSP