Growing ALSP Market Becoming Less “Alternative”, says New Report

The market for alternative legal service providers (ALSPs) has become an important and growing part of the legal landscape. ALSPs provide both corporate counsel and law firms clients with specialised expertise and tech-savvy, often at lower costs that allow clients to then focus on higher priority work.

Further, clients are increasing relying on ALSPs for a wider swath of work types, which has enabled in-house departments and law firms alike to work more cost-efficiently and transform the way that the legal industry thinks about the practice of law.

In the third biennial survey of this critical sector, Thomson Reuters — in partnership with The Center on Ethics and the Legal Profession at Georgetown Law and the Saïd Business School at the University of Oxford — has published the Alternative Legal Service Providers 2021: Strong Growth, Mainstream Acceptance & No Longer an “Alternative” report.

The report was compiled using a combination of online desk research and interviews with ALSP leaders. In June and July 2020, Thomson Reuters also surveyed 514 decision-makers at law firms in the U.S., U.K., Canada, and Australia, and in corporate law departments in the U.S., U.K., and Canada. The survey repeats many questions from the previous two reports, published in 2016 and 2018, in order to better benchmark progress of the ALSP market.

Evolution of the ALSP market

The new report reveals a picture of an industry which has reached a point of maturity, showing how ALSPs are moving from a simple cost-saving proposition to a true partner than can be counted on for expertise, tech-enabled solutions, and new ways of doing business, especially during the ongoing pandemic crisis.

The ALSP market has grown during the last six years and now is valued at nearly $14 billion, according to the report, with almost 80% of law firms and more than 70% of corporate law departments surveyed using ALSPs.

The report considers the three distinct types of ALSPs: independent ALSPs, captive ALSPs, and the Big Four legal service providers. This breakdown illustrates some interesting market trends. For example, captive ALSPs — those created internally within law firms — still have the smallest market size, yet are achieving the highest growth rate in percentage terms.

The report also examines what services clients are seeking from ALSPs, with (unsurprisingly) technology being at the core of many of ALSPs’ offerings. However, in a newer development, the report shows that in addition to accessing ALSPs for their technology solutions, law firms and corporate law departments are increasingly turning to these entities to act as consultants on legal technology, validating the sector’s expertise and experience. In fact, an increasing sense of collaboration, rather than competition between law firms and ALSPs, is a strong thread that runs through the current report.

While the surveys revealed that about half of law firms and corporate law departments still harbor some doubts about the quality and security of ALSPs, those negative perceptions are giving way to more widespread acceptance.

Indeed, this could well be the tipping point for the ALSP market, the report suggests, as greater acceptance, more tech-tuned business acumen, and a wider array of service offerings is demonstrably transforming the ALSP market, paving the way for rapidly growth and expanded market share.

Legal Insight has republished the article and report with full permission from the authors and Legal Executive Institute, the Thomson Reuters publication.

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