Budget constraints forcing departments to bring work in-house
In the face of increasing workloads and stagnant budgets for the law department, a high number of in-house teams are looking at how they can restrict utilising external providers, according to new research.
The Thomson Reuters Institute has released the seventh Legal Department Operations (LDO) Index, comprising real-world legal spending analytics gathered from Thomson Reuters’ Legal Tracker, and sourced from more than 1,500 corporate legal departments, and a Thomson Reuters survey conducted in August and September 2022, to which 107 legal departments responded.
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According to the report, two in three (65 per cent) of law departments have seen increases in the volume of work they are required to do, but almost the same number of respondents (60 per cent) say that their departmental budget has either stayed the same or decreased, despite that elevated workload.
Moreover, almost one-third (28 per cent) are dissatisfied or very dissatisfied with their budget and resourcing allocations.
As a result of this, law departments are prioritising controlling their spending on outside counsel, with 85 per cent of respondents listing this as a high priority. Further, one in two (49 per cent) of law departments say that they are prioritising bringing more work in-house.
This said, 80 per cent of departments still say that a quarter of their work is still handled by external providers.
Reflecting on the results, Thomson Reuters general manager for corporate legal Hillary McNally said: “The trends we’re seeing in the legal industry are reflective of the current economic realities. Faced with economic uncertainty and an increasingly complex regulatory environment, legal departments are understandably looking for innovative solutions to meet today’s demands.
“While it is pleasing to see that investment in legal technology remains a priority, it is critical that these tools are properly adopted and utilised. If legal departments are to keep up with the current financial pressures, these technology solutions must be fully implemented.”
Elsewhere, 71 per cent of law departments consider the implementation of time-saving technology tools to simplify workflow and manual processes as a high priority, but nearly half (47 per cent) say that the pace of advancement in technology and process in their department was either slow, with few changes made each year, or non-existent.
In addition, more than 20 per cent said that their legal department’s existing technology is underutilised in at least 13 different technology categories, including systems like electronic billing and legal research, but also other key operational systems such as contract management, document management, practical know-how, knowledge management and legal workflow automation.