Huge growth in alternative legal services provider market


Legal research: US firms use ALSPs more than UK firms

The alternative legal services provider (ALSP) market has expanded rapidly in recent years, with those operated by law firms the smallest but fastest-growing part, a report has found.

The study found that UK firms used ALSPs less than their US counterparts for most tasks, such as legal research and e-disclosure.

Researchers from Thomson Reuters spoke to 586 decision makers last summer at law firms in the US, UK, Canada, and Australia, and at in-house legal departments in every country apart from Australia, and 26 leaders of ALSPs, as part of a biennial study.

They estimated that the total size of the ALSP market hit $13.9bn by the end of 2019, an increase of $3.2bn or about 30% over the previous two years.

ALSPs operated by law firms, or ‘law firm captives’, made up the smallest part of the market, but it grew at the fastest rate, rising in value from an estimated $150m in 2015 to $480m in 2019.

Researchers described this as “a big win for firms that have adopted this strategy, often to the surprise of resistant partners”.

They said independent ALSPs, which accounted for “by far the largest share” of the market, had seen the value of their share rise from $7.35bn in 2015 to $12bn in 2019.

“Technology is at the core of many of the independent ALSPs’ business models. In addition to leveraging their technology solutions, law firms and corporations are increasingly turning to the independents as consultants on legal technology, accessing their expertise and experience.

“In general, this round of research shows an increasing sense of collaboration, rather than competition between law firms and independent ALSPs.

“In prior years, corporations would be the ones mandating the use of an ALSP. Now law firms may be the ones bringing that idea forward.”

The pace of growth was slower in the legal services departments of the Big Four accountants.

From $900m in 2015, the size of this market was estimated at $1.2bn in 2017 and $1.4bn in 2019.

“The Big Four continue to be hampered by regulation in some markets and appear to be shifting their focus to a more ‘client issues-led’ and ‘consulting-based’ approach – two areas the Big Four are highly adept in.

“Their collective growth rate appears to trail the independents and the captives by some margin. However, they remain focused on significant growth and international expansion and, with their unmatchable resources and know-how, are serious competitors.”

The study found big differences in the way US and UK law firms used ALSPs, with much smaller proportions of UK firms using them for most tasks.

A quarter of UK firms used them for legal research and only 27% for e-disclosure services, compared to 51% and 49% in the US.

The proportions of UK firms using ALSPs for litigation support, document review and coding and non-legal research were 23%, 27% and 25%, compared to 43%, 37% and 31% in the US.

However, UK firms were more likely to use ALSPs for intellectual property management and particularly legal drafting – a fifth of UK firms did this compared to 9% of US firms.

The research found that ALSPs were not “immune to the pandemic”, with reduced demand for some, “amplified by law firm and corporate customers hanging on to work” they would previously given to ALSPs.

However, it went on: “As activity resumes at more normal levels, the pandemic has, in many ways, validated the ALSP approach.

“The acceptance of new ways of working, thanks to the shift to remote, technology-enabled, and more flexible working styles, leaves ALSPs perfectly positioned for growth through 2021 and beyond.”




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog


Are inheritance disputes set to become disputes with will-writers?

With one in four people saying they’d contest an inheritance if they didn’t feel it was distributed properly, many solicitors will have dealt with clients who are making a will that will subsequently be challenged.


If resigning is not enough…

Last week, I wrote about the Post Office scandal. I made clear my view that resigning is not enough, but some people have rightly challenged me to say what I feel would be enough.


Loading animation