Cultural change is needed for in-house legal teams to fully benefit from the wider liberalisation in the market since the Legal Services Act reforms took hold, a new report has argued.
Obelisk Support said the introduction of alternative business structures (ABSs) – the first was licensed just over 11 years ago – inspired new ways of working and delivering legal services, even though some did not need to be ABSs to innovate in this way.
This has led to the growth of alternative legal services providers (ALSPs) and Obelisk said that, together with the “sluggish response” of City law firms, they have given general counsel “much-needed choice and diversity in their suppliers”.
But the report, Liberalisation: Reflections on the future of legal service delivery, said cultural change was needed if in-house teams were to see the full benefits of liberalisation.
It quoted Jenifer Swallow, a former GC and ex-head of LawtechUK, as saying how it was too easy for general counsel and senior executives to take comfort from instructing a well-known law firm, “even though that may be unnecessary, way overpriced and not structured in a way that aligns everyone’s interests”.
Karl Chapman, the founder of Riverview Law (now part of EY), argued that GCs have always had the opportunity to drive change but not always taken it.
“They hold the purse strings, but they choose to spend their money in traditional ways. They’ve been tremendously resistant to looking at alternatives.
“This is changing because the pressure is increasingly being put on the corporate legal function, plus there are maturing alternative delivery models, high-quality suppliers and proven technology solutions.”
Chris Fowler, former general counsel of BT’s technology division, said ALSPs have helped him do his job: “The real big thing for me was that it just created a whole market in the UK of different sets of providers, all offering different things at different levels within one ecosystem.”
This pointed to another effect of liberalisation, the report argues – “the start of a paradigm-shifting journey in which legal departments actively embrace and advocate for more client-centric and purpose-driven legal service provision.”
Chris Grant, head of legal market engagement at HSBC, highlighted how, once they secured work, ALSPs started looking at how they could do it more effectively and more efficiently, a focus not shared by traditional practices.
For Helen Lamprell, general counsel of AVEVA, it helped in-house teams that ALSPs created “a bit more tension in the system for the big law firms, meaning they have to stay on their toes and not get complacent”.
GCs were also urged to think creatively about how they could use ABSs. Crispin Passmore, a consultant who used to be head of policy at the Solicitors Regulation Authority, said: “The GC of a big company could float off their legal services in partnership with an alternative provider as a joint venture not only to meet their own needs but to compete for work elsewhere.”
The report identified four areas for in-house teams to focus on: a change of mindset, creating true partnerships, embracing collaboration, and data-sharing and standardisation.
Dana Denis-Smith, who founded Obelisk Support in 2010, near the start of the Legal Services Act revolution, said: “The new breed of legal business builds services that are genuinely client-centric. And it makes choice real.
“ALSPs are an increasingly prominent feature of this landscape, enabling supply chain diversity to drive up quality and customer service while making costs more predictable and manageable. They are also helping to force a much-needed change in mindset, alongside advances in the use of technology and data.
“Evolution of the market is only going to accelerate from here as a value-based approach to legal services takes a firm hold.”