The Alternative Legal Services Provider (ALSP) market is growing at a much faster rate than the traditional law firm segment, reaching $28.5bn in 2023, according to research by Thomson Reuters.

The Alternative Legal Services Providers 2025 report calculates that the ALSP market enjoyed a compound annual growth rate of 18% from 2021 to 2023.

Legal support ($13bn) accounted for the largest slice of the market, followed by consultancy and advisory ($4.8bn), flexible legal professionals ($4.8bn), legal advice ($3bn) and software ($2.9bn).

Both law firms and corporate law departments increasingly recognise the value of ALSPs for their specialised expertise, cost-efficiency and ability to manage high-volume tasks, the report said. 

More than half (57%) of the 213 corporate law departments surveyed used ALSPs, most commonly for matter-specific legal services and for consulting and legal managed services. 

Among law departments that had panels and used ALSPs, 45% included at least one law firm-affiliated ALSP on their panel, and 25% included an independent ALSP.

Traditional law firms were also increasingly integrating ALSPs into their workflows, with some 35% of the 424 law firm respondents saying their firms use independent ALSPs to deliver work to clients, and 40% of those saying they expected to increase that use in the next year.

Those firms with an affiliate ALSP seemed to particularly believe in their value: 62% of these firms also used independent ALSPs, compared to just 23% of firms without such an affiliate.

However, the report found an emerging bifurcation in the market, with law firms and corporate law departments that are using ALSPs for a variety of work on the one side, and those that remain wedded to the traditional model on the other.

Law firms that aren’t using ALSPs cited a preference for keeping work in house while clients not requesting ALSPs believed the quality would not be up to standard, the report said. Only 5% of respondents from these firms said they planned to start using ALSPs in the next year.

This split is significant, as 22% of corporate law departments anticipated reducing their spend with traditional law firms, a proportion that rose to 33% for departments that were current users of ALSPs.

The report noted that the only law department group that expected to spend more with traditional law firms were those not using ALSPs — fewer than half of the corporate respondents surveyed.

Corporate law departments were also poised to spend more on ALSPs, with 15% expecting to increase spend on law firm affiliates and 16% expecting to increase spend on independents, compared to 5% and 4% respectively that expected to decrease spend.

The report also identified a potential wildcard within the market: generative AI (Gen AI). Many law firm and corporate law department respondents expected their use of ALSPs to increase in the next three years as Gen AI enables ALSPs to expand their service offerings. Some 35% of law firms and 40% of law departments also said that ALSPs that were leaders in the use of Gen AI were more attractive, as they expected these providers to be able to cut costs and streamline processes.

However, the long-term picture was less clear, with one-quarter of law firms and one-fifth of law departments saying that at some point in the future, they expected to have less need for ALSPs mainly because their own Gen AI use would allow them to do the work more efficiently themselves.

The report surveyed 424 law firms and 213 corporate legal departments from the US, UK, Europe, Canada and Australia in September and October of 2024.