ALSP opportunities can increase efficiency and save costs

ALSPs are now mainstream, no longer “alternative”, with flexible lawyer and managed legal services markets booming. The growth of generative artificial intelligence (AI), among other technological advancements, is aiding industry growth, with corporates becoming more aware of the advantages that managed legal services can offer.

Highlighted by Thomson Reuters Institute’s Alternative Legal Services Providers 2025 report (31-page / 1MB PDF), the use of ALSPs can allow businesses to focus on their core business activities while ALSPs help to ensure any additional legal needs are met. The 2025 ALSP report reveals a legal services market undergoing rapid transformation, with ALSPs growing into a $28.5 billion industry, representing an 18% compound annual growth rate between 2021 and 2023. 

Market bifurcation and its strategic implications

At the heart of the Thomson Reuters report analysis is the concept of bifurcation – a clear split between law firms that are integrating ALSPs into their operations and those that are not.

Forward-thinking firms are leveraging ALSPs to enhance efficiency, reduce costs, and expand service offerings. Many have even established allied ALSPs within their own structures – often referred to as ‘captive’ or ‘affiliate’ ALSPs – creating hybrid models that blend traditional legal expertise with alternative delivery mechanisms. In contrast, there are some traditional firms that remain hesitant. Concerns about confidentiality, quality control and cultural fit continue to hinder adoption. However, these concerns are increasingly being outweighed by market realities. Clients are demanding more for less, and ALSPs are delivering.

Deploying ALSPs and their capabilities allows law firms to embrace innovation, gaining a competitive edge. A collaborative approach offers clients a broader range of services, faster turnaround time and more predicable pricing. Conversely, those law firms who do not adapt may risk losing business to more agile competitors. In some instances, clients are no longer loyal to legacy models but instead loyal to value – and value, increasingly, is being delivered through ALSPs.

‘Flex’ market

The divide between law firms and corporate law departments actively using ALSPs to enhance their service offerings, while others remain committed to the traditional model, is particularly evident in the flex lawyer market. The market includes flexible resourcing for qualified lawyers, paralegals, and other professionals.

The Covid-19 pandemic has fundamentally changed the world of work. Remote and flexible working have become the norm, and this has opened up new opportunities for flex lawyers. At Pinsent Masons Vario, the ALSP captive of the multi-national professional services firm Pinsent Masons, we are seeing a significant increase in both the availability of candidates and the demand from corporates for flexible legal services.

As the flex lawyer market is becoming an integral part of the legal services ecosystem, the market is becoming more stable and predictable, meaning that organisations can scale their legal resources up or down based on demand, providing a more efficient and cost-effective solution.

Other ALSP trends

A key trend is the growing reliance on managed legal services for high volume, repetitive tasks that do not require the specialised expertise of a traditional law firm. This shift is driven by the need for cost efficiency and the ability to manage large volumes of work without permanently increasing headcount. Managed legal service providers are particularly valued for their ability to offer scalable solutions that can be tailored to the specific needs of their clients. This applies to a wide range of activities, including data privacy, property asset management, compliance and regulatory support, as well as the ongoing core business need for commercial contracting.

Additionally, the emergence of AI is expected to significantly enhance the capabilities of managed legal service providers by streamlining processes and reducing costs. This technology is anticipated to provide a substantial competitive advantage for managed legal service providers in the near future.

However, the integration of generative AI also raises strategic questions, for instance whether law firms develop their own AI capabilities or continue to rely on ALSPs. The answer may lie in hybrid models that combine in-house innovation with external expertise.

Pinsent Masons is a great example, having long been recognised as pioneers in the way that we have been using AI for legal work, starting way back in 2011. The firm is building the best of generative AI into our ways of working, with clear benefits for clients visible in terms of speed, efficiency and a data-driven approach to delivering legal services.