Key points:
- The alternative legal services provider market reached $28.5 billion in value, with an 18% compound annual growth rate from 2021 to 2023.
- A market divide is emerging between traditional law firms and those embracing ALSPs.
- Confidentiality and quality concerns remain significant barriers to further ALSP adoption.
- Generative AI is set to accelerate ALSP innovation, though its long-term impact remains uncertain.
The market for alternative legal services providers (ALSPs) has grown significantly, reaching $28.5 billion, according to the Alternative Legal Services Providers 2025 report by Thomson Reuters.
- This growth reflects an 18% compound annual increase from 2021 to 2023, underscoring the expanding role of ALSPs in reshaping legal service delivery.
- More than half (57%) of corporate law departments now use ALSPs for services such as e-discovery, litigation support, and flexible resourcing.
However, the report highlights an emerging split in the market: some law firms and corporate law departments are integrating ALSPs into their operations, while others remain tied to traditional methods.
Complex Relationships with Traditional Firms
The report also examines the interplay between ALSPs and traditional law firms. Law firms with their own ALSP affiliates are more likely to use independent ALSPs, with 62% doing so compared to just 23% of firms without affiliates.
For corporate law departments, 45% include law firm affiliate ALSPs in their panels, while 25% include independent ALSPs. Cost and access to specialized expertise are the primary reasons for turning to independent ALSPs, as they often alleviate frustrations with high legal fees from traditional firms.
Generative AI as a Catalyst
Generative AI is poised to drive the next wave of ALSP growth.
Thirty-five percent of law firm respondents and 40% of corporate law department respondents indicated that ALSPs leading in generative AI are more attractive partners. Yet, a notable segment of respondents—25% of law firms and 20% of corporate departments—anticipate that expertise in generative AI could eventually reduce their reliance on ALSPs.
However, most do not expect this shift to materialize in the near term, with many planning to increase their use of ALSPs as these providers expand their AI-enabled services.
Persistent Challenges
Despite their growth, ALSPs face hurdles.
Confidentiality concerns are on the rise, with 44% of corporate law departments citing them as barriers to adoption, up from 26% two years ago. Quality concerns also persist, with nearly half of corporate law departments identifying them as obstacles—a figure that has remained unchanged for six years.
Still, the ALSP market is evolving rapidly. One in six law firms plans to develop generative AI-powered services, with firms that have ALSP affiliates leading the charge. Among these, 40% are actively pursuing AI service development, compared to just 7% of traditional firms.
The Road Ahead
The report underscores a critical juncture for the legal industry. Forward-looking firms and law departments are embracing ALSPs, leveraging their cost-effectiveness and innovative solutions. In contrast, traditionalist firms risk falling behind as clients increasingly demand tech-enabled legal services.
“For the more innovative part of the market, growth looks to continue,” the report concludes, emphasizing the importance of adaptation in an industry undergoing significant transformation.
The findings are based on survey responses from 424 law firm participants, 213 corporate law departments, and interviews with 15 ALSP leaders and three decision-makers within corporate law departments.