Robert Ambrogi Blog
The market for alternative legal services providers has grown to an estimated $28.5 billion, achieving an 18% compound annual growth rate from 2021 to 2023, but the industry appears to be reaching a critical juncture, with a bifurcation emerging between forward-looking and traditional law firms in their adoption of alternative delivery models, according to a report released today.
The report, Alternative Legal Services Providers 2025, published by Thomson Reuters in collaboration with the Center on Ethics and the Legal Profession at Georgetown Law and the Saïd Business School at the University of Oxford, suggests that while the ALSP market continues its robust growth, the legal industry is dividing between those embracing alternative delivery models and those adhering to traditional practices.
More than half (57%) of corporate law departments now use ALSPs for services ranging from flexible resourcing to e-discovery and litigation support. However, the report identifies an emerging split in the market between what it characterizes as forward-looking law firms and law departments that are expanding their use of ALSPs and those that remain committed to traditional models.
The report warns of potential consequences for firms that resist innovation, as corporate law departments indicate they anticipate reducing their spend with firms that do not adapt to alternative delivery models.
“The split between these two attitudes suggests an emerging bifurcation in the market, as more forward-looking firms and law departments continue to expand their use of ALSPs while others remain committed to a more traditional way of doing business,” the report says. “There are warning signs for these traditionalist law firms, as forward-looking corporate law departments predict that their spending with these firms will diminish.”
Not surprisingly, the report finds that generative AI appears poised to become a catalyst for further advancement within the ALSP market, though its long-term impact remains uncertain.
Thirty-five percent of law firm respondents and 40% of corporate law department respondents said they view ALSPs that are leading in gen AI as more attractive. However, one-quarter of law firms and one-fifth of corporate law departments expect that their own expertise with gen AI might eventually reduce their need for ALSPs.
“The legal industry is going through significant transformation, driven by the adoption of gen AI technology,” Laura Clayton McDonnell, president, corporates, at Thomson Reuters, said in the report. “As legal departments become more sophisticated in their use of technology, they will increasingly expect their law firms and alternative legal service providers to deliver tech-enabled services that meet their evolving needs, driving a wave of innovation and efficiency across the entire legal industry.”
The Integration of ALSPs
The report reveals complex relationships between traditional law firms and ALSPs. Notably, law firms with their own affiliate ALSPs are more likely to also use independent ALSPs, with 62% of firms with affiliates using independent ALSPs compared to just 23% of firms without such affiliates.
Among corporate law departments that use both panels and ALSPs, 45% include law firm affiliate ALSPs on their panel, and 25% include independent ALSPs. This inclusion on panels represents a significant indicator of ALSPs’ increasing acceptance and adoption by corporate law departments.
Cost remains the primary driver for corporate law departments turning to independent ALSPs, although access to specialized expertise is also important. The report notes that ALSP leaders are well aware of cost frustrations that often characterize relationships between corporate law departments and outside law firms, viewing this as a pain point that ALSPs can help resolve.
Barriers and Challenges
Despite the growth, certain barriers to ALSP adoption persist. Confidentiality concerns have increased, with 44% of corporate law departments expressing concern about confidentiality, up from 26% two years ago. Quality remains a consistent concern, with about half of corporate law departments citing it as a barrier – a number that hasn’t changed significantly over the past six years.
The report identifies generative AI as a potential game-changer for the industry. One in six law firms reported having active plans to offer services powered by gen AI, with this number heavily weighted toward firms that already have affiliate ALSPs. Among firms with affiliates, 40% are planning to develop gen AI-enabled services, compared to just 7% of traditional law firms.
“One-quarter of law firm respondents and one-fifth of corporate legal department respondents said that at some point in the future, they expect to have less need for ALSPs mainly because gen AI will allow them to do work more efficiently themselves,” the report says. “However, very few said they expect this to happen in the near term. In the next three years, many expect their use of ALSPs to increase as gen AI enables ALSPs to expand their service offerings.”
What Is An ALSP?
An interesting section of the report provides a framework for defining the types of companies that fall into the ALSP category. Given the evolution of the market and the fact that some ALSPs have become “decidedly mainstream,” the report suggests a spectrum of providers of legal advice and services, as illustrated below.
“On the far left of the spectrum is legal advice offered by traditional licensed lawyers,” the report explains. “On the far right are software solutions for the legal market. These may be knowledge solutions or process and management tools such as those used in eDiscovery and document automation. In between (in the shaded box) are a range of legal and legal support services that may be offered via a non-traditional delivery model and, in those cases, may be considered alternative legal services.”
Looking Forward
The report suggests that the ALSP market is positioned for continued growth, with new services and innovative delivery models on the horizon. However, it also notes that some traditionalist law firms remain hesitant to adopt these models, potentially risking their competitive position as more tech-savvy organizations deliver superior client experiences.
“For the more innovative part of the market, growth looks to continue,” the report concludes. “Those firms and departments that are well past the early adopter stage have become accustomed to using ALSPs and are willing to bring them into new parts of their business.”
The report’s findings are based on survey responses from 424 law firm respondents and 213 corporate law department respondents, conducted from mid-September to mid-October 2024, as well as in-depth interviews with 15 ALSP leaders and three decision-makers within corporate law departments.
This report is the latest in a series of biennial reports by Thomson Reuters tracking the evolution and growth of the ALSP market.