Global growth: ALSPs’ income up much more than traditional firms’
There has been another big rise in the size of the alternative legal services provider (ALSP) market, up by around 40% in only two years to $28.5bn (£22.9bn) globally, new research has found.
However, lawyers were divided on whether generative artificial intelligence (GenAI) would increase use of ALSPs over the next three years, with 44% of in-house lawyers and 37% of those in law firms believing that it would.
The biennial report on the ALSP market was produced by the Thomson Reuters Institute, the Center on Ethics and the Legal Profession at Georgetown Law in the US, and the Saïd Business School at Oxford University. It was based on responses from 424 law firms and 213 corporate law departments based in North America, the UK, Europe and Australia.
Researchers estimated that the market for ALSPs grew from less than a billion dollars ($0.9bn) as recently as 2015 to $13.9bn by 2019, £20bn in 2021 and $28.5bn in 2023 – the figure in this report.
This was made up of $25.1bn from independent ALSPs, $1.8bn from law firm captives/affiliates, and $1.6bn from the Big Four accountants.
Broken down by services, the report said $13bn was attributable to legal support, $4.8bn to flexible resources (ie, temporary lawyers), $4.8bn in consultancy and advisory services, incuding training, $3bn to legal advice and $2.9bn to software.
Though a smaller percentage increase that in the previous two years, the latest figure “nonetheless shows that the ALSP market is growing much more quickly than the market for traditional legal services”.
On GenAI, just under a fifth of law firms (18%) had ‘active plans’ for new Gen AI-enabled services – a group “heavily weighted toward firms that already have affiliate ALSPs” – with 27% saying they were considering whether to do this.
In-house lawyers were more likely than private practice lawyers to believe that GenAI would increase use of ALSPs over the next three years, but then a quarter of law firm respondents and one-fifth of corporate legal department respondents said that at some point in the future, albeit not in the near term, “they expect to have less need for ALSPs mainly because GenAI will allow them to do work more efficiently themselves”.
When it came to the barriers faced by law firms in using ASLPs, the biggest worry, cited by 42%, was concern about offshore storage of sensitive client information. It was followed by concern about the risk of breaching client confidentiality (41%) and worries about quality (35%).
Some 57% of in-house lawyers used ALSPs, generally for matter-specific legal services – such as compliance and e-disclosure – consulting services, and process and management tools.
The main reasons for using ALSPs were cost, specialist knowledge, efficiency and work capacity issues.
Researchers said there was a division emerging between lawyers who used ALSPs and those who did not.
“Those that are using ALSPs are building a deep bank of experience with these providers and, based on their anticipated future spending levels, an elevated comfort level in working with them.
“The other side of the market has yet to experiment with alternative delivery models and shows little inclination to do so.
“The split between these two attitudes suggests an emerging bifurcation in the market, as more forward-looking firms and law departments continue to expand their use of ALSPs while others remain committed to a more traditional way of doing business.
“There are warning signs for these traditionalist law firms, as forward-looking corporate law departments predict that their spending with these firms will diminish.”
