The legal services market is no longer a monolith. It has bifurcated into two fundamentally different categories of work: “Bet the Company” and “Run the Company.”
“Bet the Company” work includes high-stakes litigation, complex M&A, and novel regulatory matters. This work remains the stronghold of the Am Law 200, where judgment, trust, and reputation are the primary value drivers.
“Run the Company” work consists of the high-volume, business-as-usual workflows that keep an enterprise functioning: contract lifecycle management (CLM), entity maintenance, regulatory compliance, discovery, and operational legal support. In the age of AI, this work is being decoupled from the traditional billable hour and reorganized around Alternative Legal Service Providers (ALSPs).
At Razorhorse, over the last six months, we have spoken directly with more than 100 founders and operators across the global ALSP ecosystem. Across enterprise providers, niche specialists, and tech-enabled service platforms, the message has been remarkably consistent. Legal services are being broken into component workflows that can be measured, automated, and priced for outcomes, while judgment-heavy “exceptions” are being repriced for value rather than replaced.
The data supports what operators are seeing on the ground. According to the Thomson Reuters 2025 ALSP Report, 57% of corporate law departments now rely on ALSPs, and 35% of law firms use independent ALSPs to help deliver client work.
The Workflow Shift: From Legal Matters to Auditable Systems
The most important change underway is conceptual. Buyers are no longer engaging providers for monolithic “legal matters.” They are engaging them for workflows.
Corporate legal departments need to implement CLM, manage expanding compliance obligations, and support faster commercial cycles, all without adding headcount. Law firms need variable capacity to handle fluctuating demand, discovery surges, and specialized processing. Even firms with captive ALSPs increasingly rely on independent providers for overflow and niche expertise.
These workflows share three defining characteristics: they are repeatable, they generate data, and they can be optimized.
ALSPs compete on throughput, accuracy, and visibility. They turn historically opaque legal activity into auditable systems with measurable cycle times, staffing mixes, and error rates. This transparency fundamentally changes the economics of legal delivery. In a traditional hourly model, efficiency destroys revenue. In a workflow-based ALSP model, efficiency becomes the margin engine.
This shift also explains why ALSP buying decisions are no longer driven solely by General Counsels. Legal operations leaders, compliance teams, and finance stakeholders increasingly own these relationships because their priorities are predictability, risk control, and cost certainty, not bespoke legal craftsmanship.
From Hours to Outcomes: Why Pricing Has to Change
Once legal work becomes a measurable workflow, pricing inevitably follows.
When CFOs and procurement leaders can see unit-level performance data, it becomes difficult to justify pricing based purely on time spent. Fixed-fee, per-unit, and managed services pricing models are no longer experimental. They are becoming the default for standardized legal work.
One ALSP CEO we spoke with described their platform as a “perfect data gatherer,” enabling them to commit to fixed-fee pricing that would have been untenable a decade ago. AI and automation reduce delivery variance, allowing providers to lock in outcomes while retaining the efficiency gains as margin.
Traditional law firms face a structural constraint here, not a tactical one. What is playing out in the legal market is a textbook example of the Innovator’s Dilemma. If AI reduces a ten-hour drafting or review task to ten minutes, a firm billing hourly loses 98% of the revenue on that task. An ALSP charging a fixed fee keeps the gain. The incentives are fundamentally misaligned.
Two Growth Stories, Moving in Opposite Directions
Financial data makes this divergence explicit.
In 2024, Am Law 200 revenue was just under $190 billion growing 13% year-over-year, one of the strongest performances in recent history. But nearly all of that growth was driven by billing rate increases approaching 10%, not by structural efficiency or new delivery models.
By contrast, the global ALSP market generated approximately $28.5 billion in revenue in 2023 and is growing at an 18% compound annual rate, according to Thomson Reuters and industry analyses.
This distinction matters. Big Law is growing by raising prices. ALSPs are growing by delivering demonstrable value. Rate-driven growth is inherently fragile in a world where legal work is becoming measurable, benchmarked, and increasingly unbundled.
Beyond Labor Arbitrage: The Modern ALSP Stack
The ALSP market has matured far beyond its origins in low-cost outsourcing. Today’s ecosystem is best understood as a set of tech-enabled legal infrastructure layers, increasingly converging around hybrid service-and-platform models.
- Enterprise Managed Services: Large ALSPs function as the operational backbone for high-volume legal work, combining managed talent with proprietary or deeply integrated technology. This segment is consolidating as providers move up the value chain into legal operations and transformation.
- Contract Lifecycle Management (CLM): CLM platforms have become critical systems of record. Generative AI is enhancing these tools through automated extraction, drafting, and risk analysis, increasing stickiness rather than threatening displacement.
- Law Firm Operations & Litigation Support: Niche providers are leveraging AI to dramatically reduce cost of goods sold in discovery, case management, and litigation workflows.
- Specialized Compliance & Governance: Immigration, entity management, and regulatory services benefit from rising global complexity. These are “must-have” services with defensible pricing and deep domain moats.
- Flexible Legal Talent Platforms: Leading ALSPs deploy flexible talent through proprietary systems, giving GCs cost flexibility while maintaining quality and governance.
Across all segments, AI is reorganizing value drivers.
The Real Moat: Operating Systems, Not Tools
One insight consistently emerged from our conversations with ALSP operators: technology alone is not the moat.
The most defensible providers own the operating system, the combination of workflow design, governance, adoption, security, and change management that makes legal work predictable at scale. AI enhances this system, but it does not replace the need for accountability, escalation paths, and human ownership when things go wrong.
This is why ALSPs increasingly resemble infrastructure providers rather than alternative vendors. They absorb operational complexity so that enterprises and law firms can focus scarce human judgment where it actually matters.
The Razorhorse Take
AI is not just a tool. It is a dividing line. The winners in this space use AI to concentrate human expertise where it matters most while automating the rest. Document review and routine drafting are being fully automated, while complex advisory remains human-led.
The ALSP market remains fragmented, creating a consolidation opportunity for acquirers looking to build comprehensive platforms.
In the next three to five years, the “Middle Office” of law will be fully industrialized. Traditional law firms will continue to see revenue growth in “Bet the Company” matters through a combination of rate increases and outcomes based pricing, but they will lose the volume work that previously subsidized their associate pyramids.
Future winners will own the legal workflows and embed technology so deeply that they become the essential infrastructure of the modern enterprise. They will not replace lawyers, but they will fundamentally change how legal systems function.