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Legal Talent
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State of the Market: ALSPs in 2021 and Beyond

  • February
  • 25
  • 2021
  • David Galbenski, EVP of Strategic Initiatives

As an alternative legal services provider (ALSP) insider, it’s always interesting to review outsider perspectives and predictions about where the ALSP market is headed. One of the most credible and interesting industry surveys was recently released—the third biennial edition of “Alternative Legal Service Providers 2021” (the “Report”).

The Report, produced by Thomson Reuters in partnership with The Center on Ethics and the Legal Profession at Georgetown Law and the Saïd Business School at the University of Oxford, is a fascinating analysis of the past, present, and future of the ALSP market.

Is the ALSP Market Mature?

One claim that immediately jumps out is the Report’s assertion that its data “reveals a picture of an industry which has reached a point of maturity.” Some of the facts underlying this assertion include:

  • The ALSP market has grown during the last six years and is valued at nearly $14 billion

  • Market penetration is high. Some 79% of law firms surveyed are using ALSPs, along with 71% of corporate law departments

  • The range of services being offered and used by both law firms and corporations have grown in volume and value, although e-discovery remains dominant

From our perspective, if the ALSP market is mature, it’s at the very beginning phase of reaching maturity. According to Investopedia, “A mature industry is an industry that has passed both the emerging and growth phases of industry growth.” While there is no doubt that our industry has experienced significant growth over the past decade, there is certainly a significant amount more to come.

Consider, for example, that according to Statista, the global legal services market is expected to reach $767 billion in 2021. Compare that to the $14 billion market value that the Report assigns to the ALSP market, and you can see that there is still plenty of room for growth. While ALSPs have quickly moved from upstart to mainstream acceptance and adoption, full maturity is still off in the distance. More innovation, M&A activity, the emergence of new business models, and growth are surely in store.

Increasing Collaboration vs. Competition

One of the key findings of the Report is that law firms and ALSPs are increasingly pursuing collaboration as opposed to competition. According to the Report:

“This round of research shows an increasing sense of collaboration, rather than competition between law firms and independent ALSPs. In prior years, corporations would be the ones mandating the use of an ALSP. Now law firms may be the ones bringing that idea forward. Comfort is growing in the use of ALSPs, directly or indirectly, for all parties.”

This is an issue we addressed, and a prediction we made, in an article for The American Lawyer in August of 2019. In “The Future for ALSPs and Law Firms is Collaborative not Competitive,” we asserted that a collaborative model between ALSPs and law firms would prevail, with ALSPs enhancing—not hindering—the ability of law firms to do what they do best, which is solving difficult legal problems for clients.

As the Report states, while utilization of ALSPs by law firms typically came as a result of a mandate by corporate clients in the past, law firms are now more often independently engaging their services.

One of the signs of increasing collaboration is the greater breadth of ALSP services being utilized by law firms. According to the Report, “The average law firm is now using an ALSP for 3.7 different service lines.”

The benefits to law firms are straightforward. By leveraging the processes, systems, and technological capabilities of ALSPs, law firms can provide more effective legal services for clients and continue to grow. ALSPs can help reduce costs, provide specialized expertise and allow attorneys to work on higher-value matters.

Bottom-line: ASLPs and law firms are not competing in a zero-sum game. They’re collaborating in order to grow the pie together.

People, Processes, then Technology

One of the overarching themes of the Report is that technology is a growth driver and key differentiator for ALSPs. That’s true but doesn’t tell the whole story. Technology is an important feature of the service delivery model of many ALSPs (including Lumen Legal), but it’s often heralded as the primary one. But it’s still people and processes that are key to ALSPs’ ability to deliver successful outcomes.

Businesses across almost every sector are trying to position themselves as technology-forward. That positioning helps in marketing and with market valuations. And it’s true that most ALSPs are extremely tech-savvy. By no means, however, is technology the answer to every problem. It’s more of an accelerator of results set in motion by putting the right people and processes in place.

Now, and at least into the foreseeable future, people, processes and technology will be necessary to ensure the problems ALSPs are called upon to solve are effectively addressed.

Looking Forward

While we tend to think the ALSP market is still in a growth phase, as opposed to having reached maturity, there’s no doubt this industry has come a long way in the last 20 years.

We may even be dropping the ALSP acronym soon, as the Report notes that market participants are increasingly being referred to as part of “new law.” And “new” is an encouraging development in a legal services industry often marked by stasis. From the Report’s conclusion section, “ALSPs have spurred on the industry as a whole to modernize and this can only be a good thing for customers.”

About the Author

David Galbenski is the EVP of Strategic Initiatives at Lumen Legal (now Lexitas). Dave founded Lumen Legal 27 years ago. He enjoys providing his thoughtful, creative, and innovative counsel to law firms and corporate law departments looking to solve problems and reduce costs. David also enjoys staying abreast of all developments in the legal industry and has contributed to the dialogue with two books: Legal Visionaries and Unbound: How Entrepreneurship is Dramatically Transforming Legal Services Today. He is a frequent speaker at conferences.