Law Firms NAICS 541110

Jul 31, 2025 - Alternative Legal Services a Growing Industry Niche

• The alternative legal services (ALS) market, which provides clients with services not performed by a traditional law firm, has grown to a $28 billion business according to a report issued jointly by the Thomson Law Institute, Georgetown Law School, and the University of Oxford. Corporations and law firms are increasingly using ALS providers as a way to reduce in-house legal costs and or take advantage of specialized industry-specific services such as technology or project management. Other ALS services include access to temp lawyers and paralegals, software services, research and consulting. Most of the growing market (almost 90%) is made up of independent companies. The rest comes from “captive” law firm subsidiaries and affiliates, as well as accounting companies. Roughly one-third of law firms report having some sort of ALS unit.
• In trying to strike a balance in partner compensation transparency, some law firms are finding a ‘middle-ground’ approach is the best fit, according to Law.com. In completely transparent models, firms report the compensation of all partners, which can often lead to distractions and friction as partners scrutinize various metrics to compare themselves with peers. To avoid the possible pitfalls of full transparency, some firms take the opposite approach, sometimes called the ‘black box’ – where all compensation information is kept confidential. Amid the cultural pull toward transparency and the need for an amiable work environment, more firms are taking a ‘middle-ground' approach where partners can see where they stand on a compensation spectrum rather than the specific dollar amount of every partner at the firm.

• Revenue for the legal services industry grew by 8% in the fourth quarter of 2024, per the US Census Bureau, in an industry that is in high demand due to complicated regulatory requirements and a boom in companies looking for cyber security and data privacy legal services. Other emerging practice areas ripe for growth include healthcare law, intellectual property, and environmental and scientific compliance. Also fueling revenue growth is a 9% jump in billing rates in 2024, per the American Bar Association, with the need for specialized legal expertise in emerging areas driving the cost increases. These issues have all combined into a robust market for legal services, which have pushed the industry to near-record profitability. This does, however, add pressure to law firms in that they will need to almost double profit growth consistently to counter rising operational costs and still meet market demand.
• Federal judges in May 2025 blocked executive orders (EO) from the White House targeting law firms Perkins Coie, Jenner & Block, and Wilmer Hale. The rulings were the biggest repudiation yet of the Trump administration’s strategy of using EOs to target firms that previously worked for Trump’s political rivals or acted as legal opponents in his civil trials. The EOs are roiling the legal industry and triggering a variety of responses. Several big firms, including Paul Weiss and Skadden, have agreed to about $1 billion in pro-bono work for the Trump administration in exchange for dropping the orders, which stripped them of federal security clearances, banned their lawyers from federal buildings, and cancelled government contracts for legal services. The challenges from targeted law firms accused the federal government of retaliation against them based on who they choose to represent and employ.