Alternative legal services providers face diverging market, new Thomson Reuters report shows
The “Alternative Legal Services Providers 2025” report finds that the market for ALSPs is shifting, as some legal departments and law firms get increasingly comfortable with these alternative methods
The market for alternative legal services providers (ALSPs) is continuing to show strong signs of growth, even as it faces emerging bifurcation that could have significant implications for future expansion.
On one side of this split are those law firms and corporate law departments that are successfully using ALSPs for a wide variety of work; and on the other side is a segment of the market that has yet to reach that level of comfort and shows little inclination to do so, with just 5% these firms saying they will use an ALSP in the next year.
To study this divergence more deeply, the Thomson Reuters Institute — in partnership with the Georgetown University Law Center on Ethics and the Legal Profession and The Professional Service Firms Group at Said Business School at the University of Oxford — have produced the latest edition of their biennial Alternative Legal Services Providers report.
As the 2025 report shows, avoiding ALSP use may be a risky strategy for law firms, as corporate law departments anticipate shrinking spending with these more traditional firms. For ALSPs themselves, it suggests that future growth may be more likely to come an expansion of services offered to existing customers, rather than enrollment of new customers.
The new report also identifies a potential wildcard within this market: generative AI (GenAI). In the short term, ALSP leaders said they believe their use of GenAI could make them more attractive partners to both law firms and corporate law departments — and for now, their clients tend to agree. But some law firm leaders, traditionally cautious in their technology investments, said they believe that in the longer term, their own use of GenAI will surpass that of ALSPs.
Key findings in the report
Some of the most important revelations in the report include:
Strong growth — The ALSP market continues to grow quickly. The estimated size of the ALSP market is $28.5 billion as of 2023, with a compound annual growth rate of 18% from 2021 to 2023.
ALSPs prove their value — The business model and expertise of ALSPs is becoming increasingly clear. Law firms that have set up their own ALSPs are more likely — not less likely — to engage independent ALSPs. Among both law firms and corporate law departments, ALSPs get particularly high marks for their specialized expertise, cost-efficiency, and ability to manage high-volume tasks.
Increasing comfort levels — As corporate law departments become more comfortable with alternative delivery models, they expect to increase spending with ALSPs, particularly in areas such as legal managed services and software. And law firms that use ALSPs are also moving to more fully integrate them into their practices. Among corporate law departments that use ALSPs and have panels, 45% include a law firm-affiliated ALSP on their panel, and 25% include an independent ALSP.
A short-term boost from GenAI — Some 35% of law firm respondents and 40% of those from corporate law departments said that ALSPs that are leaders in the use of GenAI are more attractive, as they expect these providers to be able to cut costs and streamline processes. The long-term picture is less clear, as both law firms and corporate law departments expect to ramp up their own use of GenAI.
In addition to ALSP market’s strong and steady growth through 2023, the Alternative Legal Services Providers 2025 report finds that legal services buyers expect to increase their spending with ALSPs. Among law firms, 40% expect to increase their use of independent ALSPs in the next year, while only 1% expect to decrease such use. And 16% of corporate law departments plan to spend more with independent ALSPs, while only 4% say they’ll spend less.
These projections may even underestimate the strength of the market, as ALSPs have historically been successful at introducing new services. Interviews with ALSP leaders indicate that this innovation will continue, potentially spurring more spending on the part of corporate law departments.
