According to a recent report by Thomson Reuters Institute, alternative legal service providers (ALSPs) are seeing accelerated growth and now makeup $20.6 billion of the legal market. The biennial report found that the growth of ALSPs has increased by 45% since the last report in 2021, with a compound annual growth rate of 20% for fiscal years 2020 and 2021. The report, titled “Alternative Legal Services Providers 2023: Accelerating growth & expanding service categories,” was issued by the Center on Ethics and the Legal Profession at Georgetown University Law Center and the Saïd Business School at the University of Oxford and surveyed 649 respondents (407 law firms and 242 corporations) and included qualitative interviews with ALSP leaders.
Law firms mainly use ALSPs for specialized expertise, but the report found that the lines between ALSPs, firms, corporate departments, and technology and software firms are “rapidly blurring.” According to the report, consulting on technology was one of the fastest-growing use cases for firms, with more than half of large firms and over one-third of midsize and small firms using ALSPs for those services. On the other hand, corporate legal departments use ALSPs for regulatory risk and compliance and legal research, with 50% and 48% of corporations using ALSPs for these purposes, respectively. E-discovery is now the third most common use case for corporations.
Mike Abbott, the head of the Thomson Reuters Institute, believes that the growth of ALSPs is a positive indicator for the legal industry in terms of efficiency, productivity, and delivering better legal work. He believes that if firms and ALSPs collaborate and work together, it would be better for the legal industry. During the COVID-19 pandemic, firms had to deal with a “difficult-to-manage proliferation of legal software solutions,” which has driven work toward ALSPs.
The report also noted that firms have gravitated towards ALSPs due to their specialized expertise, cost-effectiveness, and ability to improve efficiency. They can also help firms and corporations manage their head counts. Additionally, the report adds that the shift toward remote work has benefited ALSPs. Many ALSP leaders reported that clients have become more open to remote staff, partly because so many have now worked remotely.
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The report found that independent ALSPs make up 87% of the market, while “captive” ALSPs, owned by firms, are six times as numerous as they were in 2015. ALSPs from the Big Four accounting firms—Deloitte, Ernst & Young, PricewaterhouseCoopers, and KPMG—represent $1.5 billion of the market. Marcus Belanger, an analyst for the Thomson Reuters Institute, expects the upward trend to continue, saying, “we can already tell that there’s going to be substantial growth.”
In conclusion, the report shows that ALSPs are seeing accelerated growth and now make up a significant portion of the legal market. This growth is due to their specialized expertise, cost-effectiveness, and ability to improve efficiency. The shift towards remote work has also benefited ALSPs, and the upward trend is expected to continue. The report highlights the importance of collaboration between ALSPs and law firms to drive efficiency, productivity, and better legal work in the legal industry.
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Alternative legal services providers hit $20.6B share of legal market, new report says
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