According to the “ALSP 2025” report, the law firm affiliate market continues to grow rapidly; and as more entrants emerge, the question turns from whether clients will buy to how these affiliates can offer firms differentiation from competitors
In 2023, the total market for alternative legal services providers (ALSPs) was between $28 and $29 billion, according to the recently released Alternative Legal Services Providers 2025 report from the Thomson Reuters Institute, 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.
Of that total market, law firm captive or affiliate ALSPs — those owned and operated internally by a law firm —represented 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’ 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’s 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’s 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 — expert legal advice — 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 — 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 — and not only the value of the service itself, but how the firm’s expertise and the affiliate’s 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’re working with use affiliate ALSPs “behind the scenes.”
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Why would law firms hide that from clients? For many, it’s 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 — 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’s affiliate — rather, the choice may be whether clients will use the firm at all.
“Use of such affiliated ALSPs can be highlighted to the client as a means of demonstrating the law firm’s willingness and ability to innovate and seek greater benefit on the client’s behalf,” the report states. “Clients clearly appreciate it — 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.”
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 — 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 our recent Clarity podcast on Spotify
