The days of relying solely on law firm expertise to navigate corporate clients' challenges may be numbered. Fueled by a demand to provide cost efficiencies and data-driven solutions, law firms are collaborating with alternative legal service providers (ALSPs) to deliver more legal services.

"Clients want new ways to perform work, and they are looking for ways to do it faster and making best use of human capital," said executive director of Advanced Delivery & Solutions at Allen & Overy Cathleen Butt, who previously served as deputy general counsel at CSC for 14 years.

But corporate clients aren't the only entities suggesting collaboration. Notably, the Big Four's growing presence in legal services is pushing some law firms to seek collaborations with or create alternative legal services subsidiaries.

"The main difference we see is law firms are more often creating these alliances themselves and proactively offering their services with a captive ALSP to the clients as a way to proactively provide a better and complete business model," said Association of Corporate Counsel associate vice president of legal management services Catherine Moynihan.

She cited Dentons' Nextlaw Labs, Allen & Overy's Fuse and other law firm tech subsidiaries as examples of "captive ALSPs." Law firms creating subsidiaries and fostering collaborations highlights a proactive effort to reduce overall costs, become data driven, leverage technology and improve processes and other factors, she said.

Still, while some law firms say they have no intention in becoming a tech company, they understand they must leverage outside technology and resources to better provide legal services.

"We are able to partner with some of those [legal tech] companies to get reduced rates," said Clark Hill advanced services director John O'Connor. "We are able to handle the production internally by utilizing outside technology."

The firm can then become more cost-effective for clients and provide a "holistic solution without having to go out to five different vendors," he added.

To be sure, over the last 10 years law firms and outside vendors have been paired together to work on a client's project, usually for e-discovery and document review tasks.  

"Traditionally it's been the high-volume type of work that has traditionally been seen as the type of work that is repetitive but not necessarily on the higher end of the value spectrum, that was the sweet spot of [an] ALSP," said Inventus CEO Paul Mankoo.

But as ALSPs expand their capabilities beyond technology, the line between a law firm and law company's expertise is starting to fade.

"Over the last three years I think we've seen an improving sophistication from very commoditized work to slightly more sophisticated," said Elevate chairman and CEO Liam Brown. "The reason I talk about law companies, the people that are actually at law companies have the same sophistication, they come from law firms and law departments."

Still, a shift toward a collaborative approach with these increasingly sophisticated ALSPs and vendors means that law firms must also pivot away from the billable hour, observers said.

"Certainly we aren't always using billable hours," Allen & Overy's Butt said. "We do look at creative models to make sure there's good value." While the billable hour isn't completely dead in these transactions, flat fees or pricing per unit models are leveraged by law firms when they collaborate with an ALSP.

Still, Brown argued the drop in billable hours shouldn't impact a law firm's profits because the technology utilized should streamline processes. 

"As law firms' metrics move beyond only billable hour and revenue and there is more understanding and awareness of the profit drivers of a law firm, we find law firms are increasingly interested in collaborations where it's a win-win. The cost to the law department goes down, but the profitability of the law firm remains the same and in some cases increases through its collaboration with a law company," he said.