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ALSP market share hits US$28.5bn
Despite an emerging bifurcation between those that use alternative legal service providers and those that do not, the ALSP market is booming – with the advent of GenAI set to further bolster the offerings of such providers.
Jerome Doraisamy
ALSPs ‘thriving’
According to Thomson Reuters’ newly released Alternative Legal Services Providers 2025 Report, the “ALSP industry is thriving” and “reshaping the legal landscape through both partnership and competition with traditional law firms”.
The report, a biannual collaboration between the Thomson Reuters Institute, the Centre on Ethics and the Legal Profession at Georgetown Law, and the Saïd Business School, University of Oxford, shows that ALSPs had an estimated market size of US$28.5 billion in 2023, marking an “impressive” 18 per cent compound annual growth rate between 2021–23.
More than half (57 per cent) of corporate law departments surveyed said they rely on ALSPs for a range of services, including flexible resourcing, e-discovery, and litigation support.
In addition to this, Thomson Reuters noted in the report’s executive summary, ALSPs have become “integral players” in the work done by law firms, including those with their own affiliate ALSP.
Both firms and law departments, the provider wrote, are “increasingly recognising the value of ALSPs for the specialised expertise, cost-efficiency, and ability to manage high-volume tasks”.
Moreover, in-house teams are poised, the report found, to increase spending on ALSPs, “particularly in areas such as legal managed services and software”, as they become more and more comfortable with alternative delivery models.
“The ALSP market is positioned for continued growth, with new services and innovative delivery models on the horizon,” Thomson Reuters said.
Advent of AI
The advent of generative AI (GenAI), the report continued, is expected to “significantly enhance” ALSP offerings by streamlining processes and reducing costs.
Such advancements in the ALSP market, Thomson Reuters suggested, add an “element of unpredictability in the legal ecosystem but also the potential for further innovation and growth”.
One in three (35 per cent) law firms and two in five (40 per cent) law departments said they view ALSPs that are leading the way on GenAI as being more attractive prospects.
Such emerging technology, the provider wrote, could provide ALSPs with a substantial competitive advantage soon.
Bifurcation
Elsewhere, the report discussed a “division within the market” between those that use ALSPs and those that don’t.
“Those that are using ALSPs are building a deep bank of experience with these providers and – based on their anticipated future spending levels – an elevated comfort level in working with them,” Thomson Reuters said, adding that the other side of the market “has yet to experiment with alternative delivery models, and shows little inclination to do so”.
The split between these two attitudes, the provider deduced, 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”.
There are warning signs for such traditionalist firms, the report warned, “as forward-looking corporate law departments predict that their spending with these firms will diminish”.
Challenges ahead
Further to this bifurcation, there are anticipated hurdles ahead – including from the age of AI.
One in four law firms and one in five law departments said that they expect that their own expertise in GenAI means that their need to use ALSPs will eventually be reduced.
To this end, Thomson Reuters wrote, “the longer-term picture is less clear”.
The number of firms and law departments predicting a potential decrease in the use of ALSPs suggests, the provider mused, a “complex interplay between technology adoption and service outsourcing”.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
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