Last week, U.K. law firm Optima Legal and its subsidiary Cost Advocates were granted an Alternative Business Structure (‘ABS’) license by the Solicitors Regulatory Authority (‘SRA’), marking the entrance of BPO services provider Capita into the legal market.

The acquisition of Optima by Capita is imminent. It will bring in new capabilities in reserved activities (property services, recoveries related litigation, legal costs control and management) which Capita will be able to complement with its legal process outsourcing services portfolio - mainly consisting of document review, soon to be followed by larger scale corporate legal support - currently delivered from its 550 seats delivery center in Krakow, Poland.

Capita announced its intention to acquire Optima in September 2013, less than one year after its first steps within the LPO space. From the beginning, Capita’s ambition was made clear: to become a top law firm, rather than an LPO provider. According to James Cowan, director of Capita Legal Services, this will allow Capita to build upon the synergies between Optima’s range of offerings and client targets and Capita’s “expanding debt recovery businesses and presence in property consultancy and financial services”.

On the other side of the spectrum, some law firms, such as LegalBase, have made the strategic decision to shift to the “commoditized” market, that of LPO. And understandably so: who could blame them for wanting a piece of the cake that is growing faster than all other BPO areas?   

So, what does this tell us about LPOs, law firms and the legal services market in general? Where is it heading? Who will enter the game and who will be left out?

As a new entrant in the legal space, Capita’s acquisition confirms that, as explained in NelsonHall’s recently published market assessment “Targeting Legal Process Outsourcing”, law firms will be increasingly implicated in providing legal process outsourcing services, directly or indirectly.

ABSs change the rules, legally crossing the border between legal process outsourcing providers – who emerged as an answer to law firms’ general lack of human, process and technology capabilities and expensive fees – and law firms, who are losing their share in legal work that does not solely rely on legal expertise. They come as a reminder that “in unity there is strength”: as LPOs gain in popularity and acceptance, the more complex work they are trusted with; as the need for handling complex work grows, building relationships with law firms appears like the next logical step. In parallel, law firms increasingly need to add new capabilities and lower their costs to respond to a market now accustomed to outsourcing, offshoring and the savings that come with it.

Some organizations, especially LPO specialists, are conscious of this – Integreon has partnered with AmLaw 100 Seyfarth Shaw to deliver contract management services as part of their “collaborative legal services delivery model”; others remain exclusively focused on what they do best: process, technology and delivery capability.

In the meantime, BPO providers are joining (ike Capita) or strengthening (WNS is going from conveyancing and claims management specialism to the traditional LPO portfolio) their position in the game. Expect to see a jump in the number of law firms’ acquisitions by BPO giants in the U.K., while most flexible organizations in the U.S., South Africa and Australian LPO market will be prompt to strike partnerships with law firms in support of their legal services delivery.

In the midst of all these changes, other structures have adopted yet another (niche) angle: bringing services, legal or not, to corporate law departments and law firms likewise. Cognia Law is one of these “Second generation LPO” organizations, whose business vision is to “empower” the legal market, rather than taking over part or all of their processes. 

To put it in a nutshell, in the last few years, it was all about how the LPO market was taking shape, now it is about how the whole legal services market is changing shape.