Alternative legal service provider market hits ‘point of maturity’ as 80% of law firms say they use them
The alternative legal service provider (ALSP) market has ‘reached a point of maturity’, with US law firms and corporate legal departments using them for a wider remit of work, according to a Thomson Reuters survey.
The Alternative Legal Service Providers 2021 Survey – produced in partnership with Georgetown Law and Saïd Business School – found that 79% of law firms and 71% of in-house teams now engage ALSPs for legal work compared to 51% and 61% respectively in 2016.
The ALSP market was valued at almost $14bn at the end of 2019, an increase of about $3.2bn over the previous two years. Law firms and in-house teams have both increased the amount of services they buy from ALSPs, with law firms using on average 3.7 service lines today compared to 2.4 in 2016 and corporate legal departments using 2.7 service lines on average compared to 1.8 in 2016.
The report stated: “In general, this round of research shows an increasing sense of collaboration, rather than competition between law firms and independent ALSPs.”
The survey highlighted the top three areas where law firms use ALSPs is for electronic discovery services (45%), legal research services (44%) and litigation and investigation support (39%). By contrast, the top three areas where in-house teams engage ALSPs is for regulatory risk and compliance services (35%), legal research services (29%) and specialised legal services provided by licensed lawyers (26%).
Attitudes towards ALSPs remain mixed however. More than half of law firm respondents (56%) said their concern about quality affects their willingness to use ALSPs, while almost half (49%) said their concern about the risk of breaching client confidentiality deterred them from using ALSPs, although that is fewer than were concerned last time around. Some 41% of law firms also said their business models were being challenged by ALSPs.
Meantime, half of corporate legal department respondents said they prefer their law firms to manage ALSPs themselves to ensure quality, while 41% said they are concerned about quality in using ALSPs.
The report states: “Scepticism over standards remains but many see opportunities by working with ALSPs. There are some shifts in agreement levels, with less negative perceptions of ALSPs in general.”
ALSPs also increasingly take umbrage with being referred to as alternative providers, with many independent firms preferring to call themselves law companies. One ALSP leader said: “There really is nothing alternative about ALSPs anymore – even the name is stale.”