Alternative legal services market reaches $28.5 bln, report says

By Sara Merken

Jan 28 (Reuters) - The market for legal services that are not performed by traditional law firms has hit a record $28.5 billion, according to a new report, with a small but growing share belonging to law firm subsidiaries or affiliates.

Independent companies providing legal services accounted for the bulk of the market, generating an estimated $25.1 billion in revenues in 2023, according to the biennial report by the Thomson Reuters Institute, the Center of Ethics and the Legal Profession at Georgetown Law and the Saïd Business School of the University of Oxford.

Law firm businesses known as "captive" providers or affiliates generated $1.8 billion, up from $1 billion in 2021, while the Big Four accounting firms' share reached $1.6 billion, up from $1.5 billion, the report said. The overall market stood at $20.6 billion in 2021.

The report is based on survey responses from 424 law firms in the United States, United Kingdom, Europe, Canada and Australia and 213 corporate legal departments between September and October 2024, and interviews with alternative legal services providers (ALSPs) and legal department leaders.

The Thomson Reuters Institute and Reuters share the same parent company.

Corporate legal departments and law firms turn to the alternative providers for lower cost, high-volume work and specialized expertise in areas such as technology and project management, the report said. ALSPs also offer legal managed services, access to temporary lawyers and paralegals, and other consulting and software services.

Law firms are often customers for ALSPs, but for years they have also been building their own ventures to compete in the growing marketplace. About one-third of the law firms surveyed said they had such an affiliate, the report said, and corporate legal departments have used them for tasks such as electronic discovery and compliance.

Generative artificial intelligence is also expected to give alternative providers an edge in the short term, the report said, though some law firm and corporate respondents said their own internal progress using AI may reduce their reliance on alternative providers in the future.