External legal spend is down, value added by the legal department is up, and technology is changing the way in-house teams do business.
These some of the biggest insights delivered by the annual Thomson Reuters’ State of Corporate Law Departments Report and the Buying Legal Council’s Buying Legal Services Survey.
According to both sources, controlling legal costs is still a big driver for in-house teams. As a result, more work is being moved in-house, external legal spend is decreasing and the uptake of new technology is slowly but steadily growing.
In terms of spend, Thomson Reuters’ research shows that budgets allocated for in-house legal work has increased to 43% (up from 37% in 2013), while external legal spend is down from 63% in 2013 to 57% in 2017.
The number of firms legal departments are working with is also decreasing, with 53% of departments reducing their legal panels over the last four years.
For participants in the Thomson Reuters report, controlling outside costs was their top priority. This was closely followed by using technology to simplify workflow and manual processes, focusing on internal data security and legal operations and allocating work to outside firms proactively showing their value.
However, when it comes to technology, only two in five departments see themselves as having innovated the way they handle legal work in the last year. Instead, the innovation focus has been on developing systems, specifically contract, project and document management and e-billing.
According to the Buying Legal Council survey, data collection and analysis is becoming more prevalent, with 63% currently conducting data analytics, with a third planning to use it in the future.
They’ve also noted the rise in panel establishment or a preferred list of vendors, with 72% of organisations currently using panels or preferred provider lists and 25% planning to use them in the future.
In line with this, 75% of survey respondents have developed sourcing and purchasing strategies for legal services, with 18% planning to do so. All of which indicates a growing commitment to both examining and refining sourcing and engagement processes over time.
According to Lisa Hart Shepherd, Chief Executive Officer of Acritas, “Modern legal departments are becoming much more proactive in their roles within the organisation. They seek to add value to the organisation, rather than be viewed as a cost centre. As such, many are promoting a culture of ongoing improvement and innovation, and leveraging data-driven decision making to enhance their role in supporting their organisations.”
With the Buying Legal Council reporting savings of 14.6% on offer when procurement is involved, it seems this new focus is paying off. However, it’s an investment that takes time.
So for organisations beginning the legal operations transformation, hang in there, the results will be made clear as your commitment continues. And for those already well versed in the benefits this transformation can bring, keep your eye on the ball and keep driving the change the industry is crying out for.
Find out more about the upcoming Legal Procurement Conference with exceptional local and international speakers and leading thought leaders across the industry.