As ALSP Market Matures, Mergers Seem Likely

Updated: May 24

By Andrew Kemp








Since arriving in Asia a little more than 10 years ago, alternative legal service providers (ALSPs) have exploded across the region. New offices continue to spring up as clients seek out the most cost-effective legal options.



The ALSP market, commonly referred to as NewLaw, has been a disruptive force in a space not known for embracing change. ALSPs have successfully carved out a share of the legal market by offering innovative and flexible legal solutions that address large volumes of work while also offering clients greater control over their costs.


ALSPs have focused on capturing work that is often time-bound and high-volume in nature, while traditional law firms continue to leverage infrastructure and expertise to win more strategic work.


The time of ALSPs being considered a disruptive force in the market is drawing to a close, however.


Not only have corporations and traditional law firms embraced ALSPs in pursuit of greater efficiencies, but a growing number of traditional law firms have moved to launch their alternative legal service divisions. The ALSP market is beginning to mature as the larger legal firms weigh in, which could leave independent ALSPs struggling to compete in the long run.


First steps


The managing director of flexible legal service Vario’s Asia division, Kirsty Dougan, pioneered the concept of NewLaw in Asia.


Dougan, who launched Asia Counsel in 2009 before selling it to Axiom six months later, described those early days as being about proof of concept: demonstrating to a conservative market that resourcing as a paid service was not only viable but also desirable.


She said: “Prior to NewLaw, secondment was provided by traditional law firms as a favour to their clients and it was typically provided free of charge. This created a culture of reciprocity, where law firms provided bodies to help their clients churn through a workflow spike in exchange for the promise of future work.”


The 2008 global financial crisis (GFC) created an opening for legal professionals looking to shake up the sector. Corporate and banking clients were increasingly cost conscious and legal expense was scrutinised.

“Prior to NewLaw, secondment was provided by traditional law firms as a favour to their clients and it was typically provided free of charge. This created a culture of reciprocity, where law firms provided bodies to help their clients churn through a workflow spike in exchange for the promise of future work.”

Kirsty Dougan, Managing Director, Vario, Asia


Dougan said: “We were chasing the banks in the wake of the GFC, offering our lawyers with no risk. The banks could take on staff ad hoc and still be able to trim down as and when they needed to. NewLaw was an opportunity to disrupt the usual way of doing business. By charging for resourcing it became a transparent cost that clients could factor in. It gave them a greater choice in allocating their budgets and workflows.”


While educating the market about the advantages that alternative providers offered took about five years, once the message landed clients quickly understood the opportunity that ALSPs represented.


Bedding in


A Thompson Reuters-led study of the ALSP market, which was published in 2019, discovered that not only had the sector grown rapidly but also that its growth outlook was robust.

The market was worth an estimated US$10.7bn in 2017 revenue, according to the Alternative Legal Service Providers 2019 report, up from an estimated US$8.4bn in 2015. Corporations and law firms of all sizes had increasingly turned to ALSPs for litigation and investigation support, legal research, document review, eDiscovery and regulatory risk and compliance, the study noted.


More than simply seeing ALSP as tool however, traditional law firms have gained a greater insight into their clients’ needs as well as the wider legal market. The Thompson Reuters survey discovered that while bigger law firms had embraced partnerships with existing ALSPs, one-third of respondents intended to establish their own alternative offering within the next five years.


Vario, itself backed by international law firm Pinsent Masons, has already opened offices in Hong Kong and Singapore. Herbert Smith Freehills, meanwhile, has brought its alternative legal services business to Hong Kong. They have joined the Eversheds Sutherland-backed Eversheds Agile, which opened a branch in Hong Kong in 2015.


Deeper integration between ALSPs and the bigger law firms was something of an inevitability, really. With clients wanting greater transparency around bulk contract work as well as the high-level legal opinion that traditional firms offer, a one stop-shop adds value for all involved.


Dougan noted that while ALSPs could grow their particular offerings, they simply could not compete for strategic work, lacking the necessary scale or expertise. She said: “Traditional law firms specialise in dealing with their client’s more high-profile cases, which carry with them reputational risks or deal with complex regulatory or financial details.”


In this sense, ALSP divisions can appear more attractive to larger clients than independent operators. Beyond this advantage, however, independent Asian ALSPs face several fundamental challenges to scaling up in at a regional level.


Next wave

The region’s multiple languages, cultures and legal systems makes regional expansion a slow affair and also prevents ALSPs from employing technology at a high level to streamline workflow.


Dougan said this constraint meant that general counsels from multi-national companies (MNCs) often could not hand out all of their high-volume workloads – such as the review of hundreds of non-disclosure agreements (NDAs) – to a single provider.


She noted the traditional route of building or buying technology to enable a greater uptake of work, something traditional law firms tended to be slower in embracing, could only take a smaller company so far in Asia. Instead, independent ALSP operators are likely to be geographically constrained and must compete against divisions of bigger law firms that have deeper pockets.


Dougan said: “More consolidation seems likely in the market. As BigLaw expands its presence, offering a full suite of services, the ALSP sector will have to scale up and quickly to meet the challenge. The natural route is through M&A. This will be good news for clients as it will see competition and availability of services expand rapidly.”


This article was written by Andrew Kemp for Conventus Law in association with Vario


For further information on Alternative Legal Service Providers in Asia, please contact:


Kirsty Dougan, Managing Director, Vario

kirsty.dougan@pinsentmasons.com