(Reuters) – As the market for alternative legal services continues to grow, providers owned by traditional law firms remain the fastest-growing segment, according to a new report released Tuesday.
The total market reached $20.6 billion by the end of the 2021 fiscal year, up 45% from two years prior, 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.
The report on alternative legal services providers (ALSPs) includes independent companies, the Big Four professional services firms and ventures created within law firms — so-called “captive” providers.
Law firm captives make up the smallest part of the ALSP market with about $1 billion in revenues, compared to independent providers which generate about $18 billion and the Big Four which have reached $1.5 billion, the report said.
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But as the fastest-growing segment, the captives, which include firm business units, technology incubators and firm-owned independent providers, have grown 117% since 2019 and 589% since 2015.
Large law firms including Cleary Gottlieb Steen & Hamilton and Norton Rose Fulbright have recently created new alternative legal ventures.
The report said the ALSP market has hit new heights as law firms and corporate legal departments continue to expand their use.
“ALSPs are expanding the services they offer to law firms and legal departments by providing specialized services, improving cost efficiency, and delivering greater flexibility in headcount,” James Jones, a senior fellow at the Center on Ethics and the Legal Profession at Georgetown Law, said in a statement.
The report is based on a survey of about 650 respondents from law firms and corporate legal departments based in the US, UK, Canada, EU and Australia. The Thomson Reuters Institute is part of the same parent company as Reuters.
Most US law firms surveyed said they plan to increase or maintain spending on alternative providers. Among large law firms, 26% expect to increase spending, while about 15% plan to decrease spending or don’t know.
Meanwhile, 21% of US corporate legal departments surveyed plans to increase spending, with 8% expecting to decrease and 14% reporting they are lacking.
The report said the lines between ALSPs, law firms, corporate legal departments, and tech and software firms are “rapidly blurring” as providers seek to best assist clients.
The report sees a ‘tipping point’ as the market for law firm alternatives hits $14 billion
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