Recently, Rhys Dipshan published a good piece on law.com entitled The E-Discovery Identity Crisis.
It examines the marketplace dynamics between law firms, ALSPs, and corporate clients and whether the “juice is worth the squeeze” for law firms to set up captive ALSPs.
At a high level, each type of organization has different strengths:
Law Firm/Captive ALSPs
Quick thoughts on each of the Captive ALSP value props:
- Being a single point of a contact for a matter provides more control over the client experience and flow of communication, but it also means service offerings are restricted to the skill set and experience of their W2 employees unless they subcontract the work. Subcontracting is not a dirty word, but it lessons the control the captive ALSP purports to offer because there is another link in the accountability and communication chains.
- Because there are conflicting opinions from the Courts on whether eDiscovery is the practice of law or legal-adjacent, applying legal risk management and representation where ALSPs cannot is unquestionably a strength of captive ALSPs. This is where “picking your battles” becomes important from a business development perspective. It’s a big market, and there’s enough work for everyone.
- The prestigious logo factor is proof that most people, no matter how sophisticated, educated, or data-driven, often operate from the gut and a paradigm of loss-aversion. It’s just a reality. Because litigation inherently deals with uncertainty, clients want to rely upon “the best” – even when that’s more of a qualitative than a quantitative decision. This is a topic for another day.
Finally, a captive ALSP provides or protects the revenue stream resulting from eDiscovery, though not without the substantial costs of personnel and IT infrastructure. Plain old discovery may have been a rite-of-passage for associates performing tedious document review in a very hot (or very cold) warehouse. But eDiscovery is complex, technical, sophisticated, and an increasing part of case law and sanctions; it’s also projected to be a $15 billion market by 2025, and naturally law firms want a piece of that pie.
A few things are generally true about independent ALSPs, but none of them strike at the heart of the matter:
- They tend to be more amenable to varying revenue models (per hour, per doc, per gig; even Discovery As A Service is starting to get some publicity)
- There is a financial advantage for individual ALSPs that aren’t competing for capital with other practice groups or departments
- They are typically far better at marketing than most captive ALSPs
- There is typically more technical know-how for the increasing complexity of data preservation, collection, and processing
All of these truths have very tangible impacts on funding the organization and service delivery.
But the most compelling passage from the article may be this: “’Law departments are part of corporations, and they are expected to act in a certain way with KPIs, metrics and productivity analysis, and law departments increasingly like to work with organizations that think the same way,’ says Brad Blickstein, a partner in Baretz+Brunelle’s New Law practice group.”
Ultimately, where an ALSP obtains it’s funding is a piece of trivia for clients.
Their pricing is compelling, but so are the often decades-long relationships with law firms.
The primary challenge, as with all things, remains human behavior.
Returning to Brad Blickstein’s quote: candidly, focusing on KPIs and metrics is not a mindset or a skillset many law firms hire for or cultivate. The root of the advantage for many independent ALSPs is that they operate with a business mindset and “speak the same language” as the people ultimately paying for the services, and that implicitly builds trust. I’m not advocating that it’s good or right, but even for sophisticated, educated executives, law firms are intimidating but business vendors are more easily understood.
Best of Both?
One type of arrangement that has generated substantial positive and negative press recently has been law firms and ALSPs formalizing partnerships.
The law firm obtains the advantages of the independent ALSP with SLAs and economic benefits. The ALSP enjoys reputational gains and an increased workload.
On the other hand, the law firm still doesn’t receive the lions’ share of the revenue (or profit), and the ALSP is often kept at arms’ length from the client, which can lead to its own difficulties.
Ultimately, the eDiscovery delivery model is an amoral decision – there is no right or wrong economic or ethical choice. Different cases benefit from different arrangements. But transparency and accountability are paramount.
Ryan Short is the Vice President of Marketing for DiscoveryMaster. You can reach him at email@example.com