Of that total market, law firm captive or affiliate ALSPs 鈥� those owned and operated internally by a law firm 鈥攔epresented just a small portion of the total, $1.8 billion. However, that total itself at the same time represented a major jump from past iterations of our ALSP research. Just two years before, in 2021, the law firm affiliate market was just $1 billion, and two years before that, in 2019, it was just $500 million.

Obviously, it will be a long time before total law firm affiliate revenue matches that of independent ALSPs, but at the same time, the market opportunity for law firm affiliate ALSPs continues to grow exponentially. Particularly for a large law firm sector already deliberating alternative ways of billing, new technologies such as generative AI (GenAI), and an increasingly business-savvy client base, further building out law firm affiliates鈥� capabilities may seem a tantalizing prospect.

So, then the question becomes: What exactly do clients want from an affiliate ALSP? And where do they fit into the modern law firm鈥檚 client service equation? The answer may be simple to conceptualize, but tougher to execute.

Expertise and more

The reasons for using a traditional law firm have been clear for decades, if not centuries. Attorneys hold specialized knowledge about both the law and particular areas of interest, and that interest remains in high demand. One could presume, then, that the reasons for moving away from traditional law firms would be the opposite: lower cost and speedier service above all else.

However, when corporate law department leaders were asked directly why they would want to choose a particular legal services provider, they often tell a different story. When going to an ALSP, clients still want expertise first and foremost. They simply also want the cost savings, speed, and efficiency that comes with an alternative type of provider.

For law firm affiliates, this means that there are multiple levels of success which they need to achieve. Similar to their traditional law firm counterparts, law firm affiliates are expected to deliver expertise and quality, even at a higher rate than independent ALSPs, simply because of their affiliation status. At the same time, however, they are expected to offer lower costs, greater efficiency, and quicker work than traditional law firms.

To be sure, finding this combination is not easy. Yet, for those that achieve success, the results can be greatly beneficial. Indeed, according to corporate respondents to the survey underlying the ALSP 2025 report, 15% said they anticipate increasing their law firm affiliate spend, while only 5% said they anticipate decreasing their law firm affiliate spend. The difference is even greater among corporate clients that already use ALSPs, with 25% noting they plan to spend more with law firm affiliates specifically.

Standing out through value

It鈥檚 because of this opportunity that many law firm leaders are eyeing the potential of law firm affiliates. However, therein lies the rub: The secret is out, and many law firms already have plans in motion to capture this emerging market.

Some law firms are planning on utilizing their affiliate to provide what clients ultimately want 鈥� expert legal advice 鈥� under an alternative structure or through tech-enabled services. However, the survey also found that law firms are also moving into areas that have typically been the purview of independent companies, such as consulting services, legal managed services, and process & management tools.

With so many law firms actively creating multiple touchpoints, the question becomes less of whether clients desire these sorts of services because the data is in 鈥� clients are buying. Already, 33% of corporate clients said they are purchasing directly from law firm affiliate ALSPs. Use of affiliates is not novel and is increasingly a client expectation to provide cost and time savings beyond a baseline level of expertise.

For law firms, therefore, the question becomes more about market differentiation. If a law firm is one of the more than half-dozen with an affiliate that plans to offer managed services, for instance, how will those services differ not only from other law firm affiliates, but from independent ALSPs that would now be considered competitors as well?

The answer comes in the law firm demonstrating the value of its affiliate 鈥� and not only the value of the service itself, but how the firm鈥檚 expertise and the affiliate鈥檚 speed and cost savings complement one another. One interesting finding in the report is that, just as one-third of corporate clients said they are purchasing from law firm affiliates, nearly as many (27%) believe the law firms they鈥檙e working with use affiliate ALSPs 鈥渂ehind the scenes.鈥�

Why would law firms hide that from clients? For many, it鈥檚 simply to avoid cannibalizing potential billable hours or losing them to a lower-cost option. Others may be concerned about clients viewing a law firm affiliate as a less reliable option.

However, clients also said they wanted to decrease their spend with traditional law firms 鈥� 22% said they are decreasing spending with traditional firms, while only 16% are increasing. (For corporate clients using any type of ALSPs, those numbers are even more stark, with 33% of corporate respondents saying they want to decrease their spend, compared to 12% saying they are increasing.) The choice for law firms then may not be between keeping billable hours in the traditional firm compared to within the firm鈥檚 affiliate 鈥� rather, the choice may be whether clients will use the firm at all.

鈥淯se of such affiliated ALSPs can be highlighted to the client as a means of demonstrating the law firm鈥檚 willingness and ability to innovate and seek greater benefit on the client鈥檚 behalf,鈥� the report states. 鈥淐lients clearly appreciate it 鈥� they express a fairly solid desire to increase spending with those law firms they suspect are employing affiliate ALSPs on their behalf. Imagine how much more likely they would be if the benefits they were receiving were made more obvious.鈥�

Clearly, law firm affiliate ALSPs should no longer be hidden away from clients. The affiliate of the future will need to stand on its own merits as a revenue-generating enterprise 鈥� and in doing so, it will need to provide an alternative path to revenue that could suit firms well in an increasingly technology-enabled future.

For more insights into the ALSP 2025 Report, you can listen to

Are independent ALSPs and law firms competitors?

In the legal services universe, law firms have long been the go-to resource for individuals and companies seeking counsel. Their dominant position has allowed them to increase rates faster than other professional services and has resulted in some of the highest profit margins of any major industry. From 2015 to 2023, for example, demand combined with these rapidly increased rates to result in a roughly 6% revenue CAGR for firms in the Am Law 1-200 alone, easily outpacing broader economic growth in the United States.

This elevated top line growth, however, pales in comparison to the approximate 17% annualized revenue growth realized by independent ALSPs over the same period. As a result, and not surprisingly, law firms have lost legal service market share. By some estimates, law firms handled a little more than 90% of outside legal spend in 2015, but now that number is estimated to be closer to 86%. That four-percentage-point drop may not be much on its face; however, the pace of loss is accelerating and much of it is being absorbed by independent ALSPs. Yet despite this development, many law firm leaders said they do not see these providers as a threat to their business model.

Why law firms don鈥檛 see independent ALSPs as a threat

Of those law firm respondents surveyed in the ALSP 2025 report, only 21% said they believe that their traditional business model is being challenged by ALSPs. The other 79% are either unsure or disagree with the idea that ALSPs challenge their model. This perception rests on several key pillars, that include (not in order):

• • • A perception that law firms鈥� value proposition is fundamentally different than that offered by ALSPs
    • A belief that ALSPs are taking work that would have been handled by in-house teams rather than outside counsel
    • An expectation that current legal barriers will remain in place and continue to exclude independents from the work that law firms perform.

While these perceptions each have compelling arguments supporting them, there is a different perspective that exists as well.

Looking at independent ALSPs differently

The first point mentioned above is connected to the fact that law firms currently have a corner on the most valuable area of legal service 鈥� legal advice. Corporate law departments surveyed in the ALSP 2025 Report did not anticipate allocating a significant, or even increasing, amount of their spend on legal advice toward independent ALSPs. This dominant market position on offering legal advice may suggest to law firms that the value they provide is unique. Indeed, in the chart below law firms lead by a substantial margin in the two areas upon which they focus: expertise and the ability to extend a law department鈥檚 capacity.

What this chart does not show is that over the previous editions of the ALSP report survey, we have observed a trend of independent ALSPs steadily encroaching on both of these value propositions. For instance, in the most recent survey we found that independents are rapidly becoming key players in the consulting services arena, which ranks as the third most utilized service after legal advice and support. This service area, far from being routine, demands a high level of expertise, and much of its growth is linked with advancements in technology, including software acquisitions and training. Independent ALSPs expertise is further evidenced by a noticeable decrease in concerns about the quality of services; as of the 2025 report, only 31% of respondents viewed quality as a barrier to using their services, down from 41% in 2021 (these data points also include affiliate ALSPs, however this broader trend of increased quality is applicable to independents specifically as well).

As for the capacity extension argument, the narrative that independent ALSPs are only absorbing work that law firms aren鈥檛 interested in is evolving. The 2025 report highlights a significant shift in purchasing behavior among corporate legal departments; they plan to reduce their reliance on legal managed services from traditional law firms while ramping up their spend on independent ALSPs. This pattern is also evident in matter-specific legal services. Such changes indicate that ALSPs are not merely complementary but are becoming essential partners for capacity expansion and strategic service delivery.

Only 21% of law firm respondents agree that their traditional business model is being challenged by ALSPs.

As for the third point 鈥� yes, laws in countries like the United States currently provide a regulatory moat for law firm鈥檚 top line. But is this moat sustainable, and more importantly, should it be depended upon? We already see examples of jurisdictions like the United Kingdom, Australia, and states such as Utah, Arizona and the District of Columbia that have either eliminated or lessened the restrictions placed on ALSPs towards the practice/business of law. While regulatory momentum has been slow in the US, from KPMG in Arizona, where the Big Four giant plans on starting a legal service business, highlights the potential for independent ALSPs in the legal advice niche and underscores the danger law firms could face if their moat is defined by regulation.

The threat of potentially shifting market landscape is further illustrated in the data below. Corporate clients are anticipating a greater amount of spend going towards independent ALSPs, while they intend to spend less on traditional law firms. Herein lies a critical insight: ALSPs are not just peripheral players but increasingly formidable competitors in the legal services landscape. Failing to recognize and adapt to this reality could result in further market share erosion for traditional law firms.

However, this competitive environment also presents an opportunity. Those law firms that strategically partner with third-party ALSPs or develop their own affiliate ALSPs can leverage these relationships to enhance their service offerings and remain competitive. Law firms must innovate and evolve beyond traditional practices to meet the changing demands of their clients. Embracing these shifts, rather than resisting them, will be essential for long-term success in an increasingly dynamic legal marketplace.

You can find more on how the legal industry is using ALSPs here

On one side of this split are those law firms and corporate law departments that are successfully using ALSPs for a wide variety of work; and on the other side is a segment of the market that has yet to reach that level of comfort and shows little inclination to do so, with just 5% these firms saying they will use an ALSP in the next year.

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Alternative Legal Services Providers 2025 Report

To study this divergence more deeply, the 成人VR视频 Institute 鈥� in partnership with the Georgetown University Law Center on Ethics and the Legal Profession and The Professional Service Firms Group at Said Business School at the University of Oxford 鈥� have produced the latest edition of their biennial Alternative Legal Services Providers report.

As the 2025 report shows, avoiding ALSP use may be a risky strategy for law firms, as corporate law departments anticipate shrinking spending with these more traditional firms. For ALSPs themselves, it suggests that future growth may be more likely to come an expansion of services offered to existing customers, rather than enrollment of new customers.

The new report also identifies a potential wildcard within this market: generative AI (GenAI). In the short term, ALSP leaders said they believe their use of GenAI could make them more attractive partners to both law firms and corporate law departments 鈥� and for now, their clients tend to agree. But some law firm leaders, traditionally cautious in their technology investments, said they believe that in the longer term, their own use of GenAI will surpass that of ALSPs.

Key findings in the report

Some of the most important revelations in the report include:

Strong growth 鈥� The ALSP market continues to grow quickly. The estimated size of the ALSP market is $28.5 billion as of 2023, with a compound annual growth rate of 18% from 2021 to 2023.

ALSPs prove their value 鈥� The business model and expertise of ALSPs is becoming increasingly clear. Law firms that have set up their own ALSPs are more likely 鈥� not less likely 鈥� to engage independent ALSPs. Among both law firms and corporate law departments, ALSPs get particularly high marks for their specialized expertise, cost-efficiency, and ability to manage high-volume tasks.

Increasing comfort levels 鈥� As corporate law departments become more comfortable with alternative delivery models, they expect to increase spending with ALSPs, particularly in areas such as legal managed services and software. And law firms that use ALSPs are also moving to more fully integrate them into their practices. Among corporate law departments that use ALSPs and have panels, 45% include a law firm-affiliated ALSP on their panel, and 25% include an independent ALSP.

A short-term boost from GenAI 鈥� Some 35% of law firm respondents and 40% of those from corporate law departments said that ALSPs that are leaders in the use of GenAI are more attractive, as they expect these providers to be able to cut costs and streamline processes. The long-term picture is less clear, as both law firms and corporate law departments expect to ramp up their own use of GenAI.

In addition to ALSP market鈥檚 strong and steady growth through 2023, the Alternative Legal Services Providers 2025 report finds that legal services buyers expect to increase their spending with ALSPs. Among law firms, 40% expect to increase their use of independent ALSPs in the next year, while only 1% expect to decrease such use. And 16% of corporate law departments plan to spend more with independent ALSPs, while only 4% say they鈥檒l spend less.

These projections may even underestimate the strength of the market, as ALSPs have historically been successful at introducing new services. Interviews with ALSP leaders indicate that this innovation will continue, potentially spurring more spending on the part of corporate law departments.

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