40 Asian Legal Business | November 2024 Most corporate law departments report increasing matter volumes and are looking to leverage technology as a means to simplify their workflows; however, budgetary realities may pose additional challenges for those departments looking to upgrade their tech stack. Survey respondents from almost eight in 10 (79 percent) corporate law departments report an increase in the volume of legal matters their department is handling in just the past year, according to the Thomson Reuters Institute’s recently released 2024 Legal Department Operations Index (LDO Index) report. This reality — coupled with the rapid growth of law firm billing rates (6.5 percent on average through the midpoint of this year) and a desire to bring more work in-house as a cost-saving measure — has many department leaders looking for ways to increase their in-house capacity. Yet, for most in-house legal teams, increased capacity is not coming by way of more attorneys hired to share the workload. Two-thirds of respondents said their law departments had reported flat or declining attorney headcount. Likewise, as corporate general counsel have become increasingly attuned to issues of attorney well-being and the potential for burnout, the challenge of increasing matter volumes likely won’t be solved by simply expecting the existing in-house team to shoulder more of the load. The technology solution To address this dilemma, many GCs are looking to technology to help them simplify workflows and increase their team’s capacity. In fact, 75 percent of survey respondents said their corporate law departments are placing a high priority on using technology to simplify current processes and manual workflows. By streamlining how work gets done, many GCs hope to remove lower-value tasks from regular workflows. Many departments have already begun these efforts, the report shows. More than six in 10 respondents said their law departments had made greater use of legal technology tools over the past year. At the same time, however, the portion of the budget earmarked for legal technology may not be keeping up with these increased tech needs. Only 36 percent of respondents in the LDO Index said they saw an increase in their legal department technology budgets. Nearly half said their technology budget was flat, and 9 percent said that their technology budget had actually decreased. The desire and use case for new technology is evident in the trends. However, it is not yet apparent in budget allocations. This may be on the verge of shifting, however. A majority of respondents said that they anticipate an increase in their technology spend in the future, and a plurality (35 percent) said they expect a relatively modest increase of between 1 percent and 10 percent. However, a significant portion anticipates larger increases. Reducing outside spending This reduction in outside counsel spend could well become a reality for many in-house law departments, even as law firm billing rates continue aggressive growth. First, many GCs have expressed a desire to shift toward greater use of alternative fee arrangements, a move which could help create budget predictability and favourability for clients while bringing costs in line with department budget needs. Second, many law departments have joined the trend of increased tiering of legal work, moving some work to lower-cost firms. For a GC, moving work from a large law firm to a midsize law firm gives them the benefit of lower cost, despite the pace of growth in the midsize firm’s rates themselves. It is also important to recognise that reductions in one budget area are not necessarily in proportion to an increase in another. For example, a 2 percent reduction in outside counsel spend, if reallocated completely to increased investment in legal technology, may well represent much more than a 2 percent increase in technology spend due to the differing levels of expenditure on outside counsel and internal technology. For example, if a hypothetical law department spends $100 on outside counsel and $20 on legal tech, moving $2 from outside counsel spend to legal tech would represent a 2 percent reduction in outside counsel spend, but a 10 percent increase in tech spend. Asian Legal Business is seeking thought-provoking opinion pieces from readers on subjects ranging from Asia’s legal industry to law firm management, technology and others. Email ranajit.dam@tr.com for submission guidelines. How in-house teams are prioritising budgets By William Josten The Back Page William Josten is Manager of Strategic Enterprise in Thought Leadership for the Thomson Reuters Institute. William consults with law firms nationally on issues related to law firm profitability, pricing and cost recovery. A version of this piece was originally published by the Thomson Reuters Institute. Reprinted with permission.
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