Which firms will win and lose from the rise of ALSPs?
The legal industry is undergoing a significant transformation, driven by the rapid growth of Alternative Legal Service Providers (ALSPs). According to the most recent Alternative Legal Service Providers report from Georgetown Law Center on Ethics and the Legal Profession and the Thomson Reuters Institute, the ALSP market has reached an estimated size of $28.5 billion in 2023, with a compound annual growth rate (CAGR) of 18% from 2021 to 2023. This growth is outpacing that of traditional law firms, with estimated ALSP market size tripling within a decade, and signals a fundamental shift in how legal services are delivered and consumed.
AI news and insights
Industry-leading insights, updates, and all things AI @ Thomson Reuters
Join community ↗Jump to ↓
Market growth: The thriving ALSP industry
Bifurcation in usage: Differences in ALSP adoption
Competitive advantage: Benefits for firms and their clients
Risks for traditionalists: Potential loss of business
Strategic implications: Recommendations for staying competitive
Market growth: The thriving ALSP industry
The ALSP industry is thriving, offering more cost-effective and efficient solutions for a wide range of legal needs. ALSPs offer a broad range of services, including legal managed services, software, and matter-specific legal services.
More than half of corporate clients report using independent or allied ALSPs, with even more unsure if their firms are subcontracting work to ALSPs without informing them. Clients report a willingness to spend more in coming years with ALSPs on services as diverse as legal managed services, process and management tools, and even legal advice. Corporate departments report their major reasons for choosing ALSPs are cost and familiarity with the business, with business-as-usual and corporate/commercial work being the most common types of matters to outsource to an ALSP.
Clients who currently use ALSPs report they are both more likely to use ALSPs for additional types of work and to expand their current ALSP relationships. As the market continues to expand, ALSPs are becoming an indispensable part of the legal ecosystem.
Bifurcation in usage: Differences in ALSP adoption
There is a clear divide in ALSP adoption between forward-thinking and traditional law firms. Forward-thinking firms are actively embracing ALSPs, recognizing the quality and efficiency they provide – many with allied ALSPs that are part of the overall business structure of the firm, and even more that contract with independent ALSPs. These firms are leveraging ALSPs for a variety of services, from eDiscovery and document review to more complex legal managed services.
In contrast, traditional firms are more hesitant to adopt ALSPs, often citing concerns about confidentiality and quality. This bifurcation is creating a significant gap in the market, with forward-thinking firms gaining a competitive advantage.
Competitive advantage: Benefits for firms and their clients
Firms that use ALSPs gain several competitive benefits, both for themselves and for their clients. ALSPs can provide specialized expertise that traditional law firms might not have in-house, allowing firms to better meet client needs without expanding their permanent headcount. This flexibility is particularly valuable in high-volume tasks, where ALSPs can offer cost-effective solutions that maintain high standards of quality. Additionally, the use of ALSPs can help control costs and attract business, as clients increasingly appreciate innovative approaches to legal services.
Risks for traditionalists: Potential loss of business
Traditional firms that resist the adoption of ALSPs risk losing market share and client trust. Corporate law departments that have embraced alternative delivery models have been quite clear that going forward they will tend to spend less with traditional law firms that do not offer these innovations. This shift in client spending can lead to a decline in business for traditional firms, as clients seek more cost-effective and efficient solutions. The resistance to change can also erode client trust, as forward-thinking competitors are better positioned to meet evolving client needs.
Strategic implications: Recommendations for staying competitive
To stay competitive in this evolving market, law firms should:
- Embrace innovation and alternative delivery models: Actively explore and adopt ALSPs to enhance service offerings and meet client needs more effectively. For most firms, this will mean partnering with independent ALSPs, but larger firms may want to investigate creating a “captive” ALSP themselves.
- Develop a deep understanding of clients’ needs and goals: Tailor solutions to meet the specific requirements and goals of clients, ensuring that services are both efficient and high-quality. Remember that clients will not necessarily come to your firm to ask you if you are starting an ALSP; they are likely to just give the work to a competitor.
- Leverage technology, including generative AI: Utilize advanced technologies, such as generative AI, to streamline processes and reduce costs, thereby enhancing the value proposition for clients.
- Build and maintain strong relationships with clients and ALSP partners: Foster strong, long-term relationships with clients and ALSPs to ensure consistent and reliable service delivery.
- Continuously evaluate and adapt to new market trends and client preferences: Stay informed about emerging trends and client preferences and be willing to adapt and innovate to remain competitive.
The ALSP divide is a critical issue for law firms and will only grow more critical as ever more clients become comfortable with using ALSPs for a greater variety of matters. The firms that have already embraced ALSPs and alternative delivery models have gained a competitive advantage, while those that continue to resist change risk falling behind even further. By understanding the benefits and strategic implications of ALSP adoption, leaders in the legal industry can navigate this transformation and thrive in the evolving market.
ALSP 2025
The market for ALSPs is shifting, as some legal departments and law firms get increasingly comfortable with these alternative methods
Read the report ↗
