Alternative Business Structures To Transform Legal Process Outsourcing Landscape

July 4, 2011

Mark Ross writes in, that the formal Alternative Business Structures (ABSs) are fully functional, when the Legal Services  Act (LSA) comes into full swing in about five months.

A little background: U.K. law firms proceeded to obtain licensing as Legal Disciplinary Practices (LDPs) since March, 2009. Although the LDP is limited to engagement in legal services, it can still have a quarter of its managers from a non-law background. When the ABSs come into effect, the ownership of an ABS may be partially or wholly by  non-lawyers. Hence, investors who have a 10% stake in ABS are required to pass a ‘fit own ‘ test.

Analysts say that this will bring about major changes in the legal services market. However, there has not been a lot of discussion on the ABSs, LPO providers and law firms in a legal scenario that is changing quickly. Questions abound regarding the LSA’s potential to transform the LPO market. Law firms will be looking into their own operating models as LPO service providers grow and ABSs establish themselves as a part of the legal outsourcing landscape. Another fundamental question that is raised is “who competes with whom and for what?”Are traditional law firms likely to think of these changes are a threat or a challenge?

With law firms transforming into ABSs and forming relationships with LPOs, they will  be operating with a broad spectrum of models, including build-operate-transfer, captives, dedicated delivery centers, joint ventures and traditionally third party joint ventures.  This might even lead to more ‘hands-on’ control from the side of law firms. Another option would be for law firms to rediscover an independent delivery model in order to compete in a commoditized marketplace.

Experts in the LPO industry agree that the LPO mantra of taking apart legal services will become the ‘modus operandi’ rather than something that is an exception. This translates to law firms opting for a captive or third party vendors. When this happens a large volume of work will be done by attorneys positioned in offshore and onshore cost delivery centers.


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