Feb 03, 2025 |

The $28 Billion Rise of Alternative Legal Services Providers and a Looming Bifurcation in the Legal Market

GenAI is poised to enhance ALSP offerings, streamlining processes and reducing costs as law departments plan to increase spending on ALSPs

The legal landscape is changing, and a new report reveals just how significant the shift is becoming. According to the Alternative Legal Services Providers 2025 Report, released by Thomson Reuters, the ALSP market has ballooned to an estimated $28.5 billion, fueled by an 18% compound annual growth rate from 2021 to 2023. This growth signifies a powerful trend: the increasing adoption and reliance on ALSPs by both corporate legal departments and traditional law firms.

One of the most intriguing aspects of this growth is the role of technology, particularly generative AI (GenAI). The report found that a significant percentage of both law firms (35%) and corporate legal departments (40%) find ALSPs leveraging GenAI to be more appealing.

However, the rise of ALSPs and the adoption of AI is also creating a division within the legal market. The report points to a bifurcation emerging between forward-looking legal entities embracing alternative delivery models and those clinging to traditional practices. This divide is especially notable as many corporate legal departments are signaling a decrease in spending with law firms hesitant to adapt to these evolving client expectations.

“The legal industry is going through significant transformation, driven by the adoption of GenAI technology,” stated Laura Clayton McDonnell, president of Corporates at Thomson Reuters. “As legal departments become more sophisticated in their use of technology, they will increasingly expect their law firms and alternative legal service providers to deliver tech-enabled services that meet their evolving needs, driving a wave of innovation and efficiency across the entire legal industry.”

ALSPThis doesn’t mean traditional law firms are or will be obsolete. Many are successfully integrating ALSPs into their workflows, recognizing the value of their specialized expertise and cost-effectiveness. The key takeaway is clear: adaptability is critical. Those who embrace innovation, whether through incorporating ALSPs, leveraging AI, or adopting other technological advancements, are better positioned for success in this evolving landscape.

The legal market is at a crossroads. The future belongs to those who are willing to adapt and evolve, embracing new technologies and service models to deliver greater value and efficiency to their clients. The Alternative Legal Services Providers 2025 Report serves as a roadmap, highlighting the trends shaping the future of the legal profession.

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