Key insights:

• • • More focus on implementation, training, and integration is needed 鈥� Many legal departments need to be more prepared before accelerating their AI adoption plans.

    • Legal departments are looking to AI-driven tech tools to help them improve efficiency and reduce costs 鈥� Most corporate legal professionals say they consider their departments under-resourced but feel that technology can make processes more efficient.

    • Use of legal technology is expected to increase 鈥� Many legal departments report increasing or stable budgets for technology investments.

Corporate legal departments are racing to add new technologies. The rapid advancement of AI not only means that promising new solutions are emerging just about every day, but also that organizations and their legal departments may feel compelled to engage in a technology arms race in order to keep up with competitors.

There are vital lessons and warnings that legal departments should heed, however, as they rush to adopt AI and other emerging technologies.

The race is on

The emergence of AI-driven tools comes as legal departments stand at an important crossroads. They are under increasing pressure to take on more tasks while controlling costs. Indeed, more than half of the in-house legal professionals surveyed say their legal departments are under-resourced, according to the 2025 Legal Department Operations (LDO) Index, published by the 成人VR视频 Institute (TRI) in conjunction with Buying Legal Council.

At the same time, however, survey respondents ranked greater use of technology as one of the top ways to improve efficiency and reduce costs. It鈥檚 not surprising then, to find that 59% of respondents say they are increasing their use of technology tools, and an overwhelming 88% say they have stable or increasing tech budgets to make that happen.

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As a result, the number of legal departments that are looking to implement fast, large-scale technology deployments is surging. Although it鈥檚 currently only 12%, that鈥檚 a four-fold increase from just 3% last year, and it鈥檚 likely to continue climbing as the race to adopt AI tools intensifies.

Not surprisingly, AI-powered tools are some of the fastest-growing solutions being adopted by legal departments. Yet, adoption does not necessarily mean effectiveness 鈥� and as the LDO Index reveals, there are some important warning signs flashing as legal departments rush headlong into the AI future.

Underutilized tech tools

One of the most significant parts of this sobering reality is that many legal departments are not even taking full advantage of the technologies they鈥檙e already deployed.

In fact, many technologies are being used widely across legal departments 鈥� such as legal research, spend management, and e-discovery 鈥� however, for many of these automation tools are underutilized and not being used effectively, despite the fact that the tools are considered valuable when used, according to the report.

That means that many technologies that have proven their worth within a legal department remain largely underutilized, collecting digital dust even though they could help the department achieve greater efficiencies.

Legal department software solutions are underutilized

The reasons for underutilization are many-fold, including inadequate training, lack of awareness, and failure to properly integrate technology solutions.

And the early signs for more advanced AI-driven tools is that they are following the same troubling pattern. Contract AI tools are currently more than twice as likely to be considered underutilized than being used effectively. Generative AI (GenAI) tools also are struggling to achieve an even split between underutilization and effective usage.

The underutilization of existing technology in legal departments isn’t just a current operational challenge 鈥� it’s a warning signal about departments鈥� readiness for the AI era.

The good news, however, is that AI tools are still in the relatively early stages of adoption. Legal departments are more likely to report that they have not yet adopted GenAI tools but are looking to procure them over the next 24 months, so there is still time to prepare. Therein lies the opportunity for legal departments to take steps now to ensure that they have not only chosen the right technologies but are deploying them properly to help ensure effective usage.

Some of these steps toward proper preparation include:

Conducting a technology audit 鈥� Assess the current utilization of existing legal tech solutions and use this assessment to prioritize investment towards those tools that address the department鈥檚 most pressing needs. This will enable strategic investments in the specific technologies that are most likely to drive efficiency and value.

Ensuring the department is ready 鈥� Deploying new technologies requires resources, and department leaders need to make sure there is sufficient implementation bandwidth.

Understanding that AI implementation is different 鈥� Unlike other technologies, AI is likely to require new processes, policies, and governance frameworks in order to be most impactful. In addition, AI adoption will require more substantial changes to departmental workflows, role definitions, and work practices than previous technology deployments.

Providing effective training and education 鈥� Attorneys and staff need to feel confident they know how to use a tool to get the most out of it and additional training on these tools can provide that. And by sharing use cases and best practices, leaders can reinforce training and continually drive awareness.

As the LDO Index report shows, successful technology adoption requires careful planning and execution. Corporate legal departments can’t simply purchase AI tools and expect them to magically generate efficiency from day one.

However, with proper planning and change management, new advanced technologies and AI-driven tools can transform legal department operations. By following the outlined steps to ensure better preparedness, leaders can help their legal departments prevent their AI investments from turning into expensive technology budget line items that ultimately disappoint by failing to deliver promised efficiency gains.

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Key takeaways:

• • • Cost centers to strategic business enablers 鈥� In-house legal departments and general counsel in particular are increasingly focused on aligning their goals with broader company objectives, moving beyond traditional cost containment to emphasize service enhancement and business growth.

    • Current success metrics are still heavily focused on spend 鈥� Although GCs and legal operations professionals want to prioritize service and enable their businesses, most law departments continue to track and report metrics related primarily to costs and spending.

    • Updated metrics are essential for future success 鈥� To truly support business objectives, law departments must evolve their metrics and implement new data strategies to better capture service quality, business impact, and enablement.

In recent years, and especially in the AI age, corporate law departments have been tasked to increase efficiency, doing more with less and contributing back to the business at large. This has contributed to the rise of corporate legal operations as a discipline 鈥� what was fairly recently a niche concept for only the largest companies has morphed into a regular part of the corporate legal equation, and one that is increasingly tasked with keeping up with a burgeoning technology ecosystem and aligning the in-house legal function with larger company goals.

Increasingly, corporate law departments are fully embracing their role in enabling larger business objectives, and general counsel in particular are more focused than ever before on service enhancement for the business, according the 2025 Legal Department Operations (LDO) Index, published by the 成人VR视频 Institute (TRI) in conjunction with Buying Legal Council.

鈥淭eam mission: We are a trusted partner and strategic enabler, empowering [our company] and its builders to innovate with confidence,鈥� answered one technology company GC about their team goal for legal operations. 鈥淲e provide clear, practical legal guidance that removes friction and unlocks opportunity 鈥� driven by thoughtful leadership, collaboration, and operational excellence. The legal team intentionally tracks its greater vision to be the same as our company-wide mission.鈥�

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However, are law departments actually reaching that goal? That answer becomes a bit murkier, not the least of which because corporate law departments aren鈥檛 actually measuring what they identify as their goals. While GCs and corporate legal departments are gradually moving away from cost containment as their top priority, the primary success metrics they track by and large all deal with legal spend and spending impacts.

The message is clear: Law departments want to move away from being a cost center, but in order to truly accomplish that goal, they need to update their metrics and data gathering to actually move more in line with the business.

Aligning goals and metrics

Recent TRI research categorizes in-house legal departments鈥� role into four distinct categories: effectiveness, efficiency, protecting the business, and enabling growth. Each of these should be a focus of the department, but historically not all four have been given equal time. Many business leaders, for instance, traditionally have believed the legal department鈥檚 role to be more centered on protecting the business rather than enabling growth, leaving key business enablement to other internal teams in the company.

That shift is slowly changing, however. GCs are increasingly focused on aligning the department鈥檚 business goals with that of the larger organization, shifting the department from a cost center to a business generator, the LDO Index shows.

This is particularly true when comparing GC survey respondents with those respondents who hold a legal operations title. Among GC respondents, 47% say they are more focused on service enhancement than cost reduction, while just 7% say they are more focused on cost reduction. For legal ops professionals, that sentiment shifts, with a higher proportion focused on cost reduction (22%) and fewer focused on service enhancement (36%). This tracks with what is asked of each role, as legal operations professionals are typically tasked with more efficiency-centric and technology tasks, but GCs are conduits to the larger business.

Overall, however, both sides agree on one aspect: The legal department is shifting to become more service-focused than being simply about cost savings. It is interesting, then, that when asked what metrics are routinely reported on in their legal department, spend still remains far and away the top one. This is particularly surprising given that GCs are often the ones establishing these metrics, even though they hold a stronger stance towards service enablement than most legal operations professionals.

Indeed, spend by law firm and spend by matter type clearly dominate available metrics across many corporate law departments. Further, even many of the next most commonly tracked metrics available, according to one-third of respondents 鈥� forecasted versus actual spend, total spend by business unit, and total spend by practice group 鈥� still center around costs. Many of the service-centric metrics 鈥� such as quality of legal outcomes, cycle time, and costs avoided 鈥� are captured by less than 20% of respondent legal departments, the survey shows.

This also brings up one note about the survey: Respondents to this question leading to the chart above were given a choice from a list of predetermined metrics, meaning that conceptually, there may be service-centric metrics in use that are not listed here. However, additional open-ended research found in backs up the assertion that many in-house legal departments are still primarily measuring costs, despite wishing to focus their overall priorities elsewhere.

Moving to better metrics tracking

There is recognition that the law department needs to evolve in order to serve constantly shifting business needs. And for many departments, meeting these needs starts by developing data sets that can be shared across the organization.

鈥淚 see my role evolving into a more strategic, innovation-focused function 鈥� leading digital transformation, leveraging [generative] AI for smarter legal service delivery, and aligning legal operations with enterprise-wide goals,鈥� said one energy industry legal operations professional. 鈥淚 anticipate deeper collaboration across departments, greater emphasis on data analytics, and a continued shift from process execution to proactive business enablement.鈥�

In fact, many respondents 鈥� particularly those at companies with newer legal operations functions 鈥� did note that better metrics tracking is on their roadmap for the future. And some said their primary goal at first was simply to become established, and more business-centric goals would come next.

鈥淲e have just started to develop the legal operations function at the company over the past year and a half,鈥� said one financial industry legal operations professional when asked how they see their role evolving. 鈥淒uring the first part of this second year, we have been focused on legal spend and tracking our work with outside counsel to see where we can reduce our overall spend and ensure we are receiving the best service from our outside counsel. The second half will be focused on furthering our knowledge management base internally with shared resources and regular tracking of regulatory risks鈥� so as to better be able to support the business.鈥�

Yet, this focus is not universal, and especially for law departments that have not updated their data gathering and metrics capabilities, the time for thoughtful action is now. The LDO Index concludes with 10 practical actions that legal department leaders can undertake, with one of them explicitly calling to implement key metrics for data-driven decision making. This goal should be a top priority for all legal departments, regardless of whether the action comes from a GC or a professional with a background in legal operations.

Entering 2026, GCs and legal operations professionals alike should look into supercharging their metrics for success, focusing on how they can better measure business enablement and promote service enhancement more than ever before.

You can download a full copy of the听听here

Key findings

• • • Legal operations work is evolving 鈥� Moving beyond its origins as primarily a cost-control function, legal operations efforts are expanding to focus more strongly on systems, processes, and technology.

    • Many legal departments are under-resourced 鈥� More than half of legal department professionals surveyed report that they see their department as under-resourced, although company size and resources may influence whether respondents identify their department as under-resourced.

    • Using technology to automate 鈥� Almost three-quarters of respondents say they plan to use advanced technology to automate legal tasks and reduce costs, yet almost half also characterize the pace of technology advancement in their departments as slow.

While it鈥檚 become clich茅 to say that legal department operations (LDO) teams are under increasing pressure to not only reduce costs and accomplish more with less, this evergreen mandate is now being pushed more firmly as corporate general counsel (GCs) are facing additional pressure to show the value that their in-house legal departments can offer the organization.

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2025 Legal Department Operations Index

Indeed, our latest data shows that LDO teams are increasingly being enlisted to join their GCs in this pursuit of value and its articulation to management.

To examine this phenomenon further, the 成人VR视频 Institute, along with the Buying Legal Council, has published the that illustrates how the LDO teams inside each corporate legal department are being tasked with finding ways that their departments can improve efficiency and effectiveness to better serve the rapidly evolving needs of their organizations.

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The findings in the report are based on a survey that was conducted in July of 128 corporate legal department professionals and GCs, including those responsible for legal operations, at corporations across the United States.

The report shows that LDO professionals 鈥� who in some cases are corporate GCs themselves 鈥� are increasingly acting as the point of the spear on many initiatives, even as they are still hindered by ongoing challenges of being under-resourced and facing flat or falling departmental and technology budgets.

Where GCs and LDO professionals diverge

Interestingly, the divergence in priorities, tech use, and spending between those in-house legal departments in which legal operations are overseen by a professional with a legal ops background, and those run by a GC who has been tasked with legal ops on top of other duties was a reoccurring theme throughout this report. Of course, this may reflect the reality that many corporate legal departments operate without dedicated legal ops professionals, which in turn may be influenced by company size. And when we compare GCs with professionals with LDO backgrounds, some of the disparity also may reflect differences in department size, resources, and maturity.

For example, legal departments with legal ops professionals overseeing operations saw an increased use of legal technology tools, along with a growing budget for these solutions 鈥� as well as a more sophisticated management of the department鈥檚 legal spend, according to respondents. Those with legal ops backgrounds also more commonly use alternative legal service providers and alternative fee arrangements, compared to GCs tasked with legal ops.

Of course, this could simply point to another ongoing complementary dynamic: Legal ops backgrounders push for efficiency and stronger cost-control, while GCs tend to prioritize client service and the quality of legal work. While together, these two roles seem to support each other and could result in a more well-rounded legal function, it is important to remember that these disparities may be influenced by differences in department size, resources, and maturity.

The report also examines the changing role of LDO professionals within in-house legal departments, the metrics they鈥檙e using to track departmental progress, the trends that are influencing how they will operate in the future, and how they are currently managing the changing legal tech landscape.

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a full copy of the here

Given the rise of the legal operations discipline as a whole and a general move towards in-sourcing work, this trend may be unsurprising. However, at the same time, it鈥檚 clear that law departments do not regard all legal tech tools the same way.

Digging deeper into their use of various tech tools, the report found that some of the more common tools such as e-signature, e-spend & billing management, and legal research software are not only present but are widely utilized throughout the organization. Some newer categories of tools, however, are struggling to achieve widespread utilization, leading to less adequate return on investment (ROI) for many new technologies.

Particularly with the introduction of new foundational (and potentially expensive) technology like generative artificial intelligence (GenAI), legal departments will increasingly need to be focused not only on initial technology adoption but maximizing ongoing technology utilization. And for legal operations professionals, the answer may be in how they find and explain the practical value of new software to a constituency accustomed to their traditional, tried-and-true tech.

A place for new technologies

Today鈥檚 corporate law departments use a wide variety of tools, covering the practice of law, internal business and knowledge management, and interaction with other internal company stakeholders. In fact, the LDO Index measured 11 different categories of technologies, ranging from e-signature software to document and process automation, that are in use at more than 40% of legal departments. There are also a number of other types of technologies, particularly those involving AI, that are expected to see large jumps in use within the next 24 months.

But not all technologies are created 鈥� and used 鈥� equally. The LDO Index also asked respondents whether those technologies they have within their department already are valuable or underutilized. Some technologies 鈥� particularly those dealing with the practice of law such as e-signature, e-billing and contract lifecycle management 鈥� were seen as largely valuable. However, many tools that are not for direct client work or are used more for back-office purposes 鈥� such as legal business intelligence, document and process automation, and knowledge management 鈥� had more respondents saying these tools were underutilized rather than valuable.

This trend also was present for technologies that have only recently been introduced to the marketplace. While 22% of respondents said their legal departments had included GenAI into their technology stack, for example, just 8% called it valuable, while 14% said it was underutilized. Bots/robotic processing automation and contract-related AI were similarly categorized as more underutilized than valuable.

It could be that respondents don鈥檛 see these and other new technologies as having a place in the modern legal department, or simply that they haven鈥檛 not yet experienced the value these tools are expected to bring. However, given the fact that many departments are still looking to purchase these tools, it鈥檚 likely that department leaders do see some value here.

A more likely answer is that those within corporate legal departments are still working to catch up to new technologies. When asked about the pace of technological advancements within their departments, very few respondents called their organizations fast 鈥� meaning large-scale advancement each year. Most see their departments as either having moderate or slow technological advancement on average.

This may have worked during the previous pace of technological change; now, however, new technologies are becoming available to the corporate world at a rapid pace. Take GenAI for example: ChatGPT became publicly available just two years ago in November 2022, but already, more than half of corporate legal professionals have said they believe it can and should be used for legal work.

For legal departments that want to get the most out of their technology investment, their overall pace of technology utilization will need to catch up with technology advancement itself. Otherwise, legal departments will be stuck looking to invest in new technologies while still not gleaning the most out of the newer technologies they have already recently adopted.

The question then becomes how operations professionals can encourage their legal departments to prioritize their underutilized tools. The answer comes with proving new tools鈥� value, and that proof comes by using new ways of measuring success.

Finding the value in tech

According to the LDO Index, 71% of respondents said their legal departments are increasing their spend on legal technology and more than one-third of respondents said their departments have increased their legal tech spend by more than 10% within the past year. Given this, it鈥檚 reasonable that many departments will want to see a direct ROI in new technologies in order to prove their value.

However, legal department operations professionals should recognize that the benefits of many technology tools will be varied, and often realized over time rather than immediately. Pure year-over-year ROI will likely not give the true reflection of the value of new technology.

鈥淲e expect that it will take time to fully understand for which workflows our GenAI tools can be deployed and the efficiencies gained from the use of those tools,鈥� said one survey respondent. 鈥淭herefore, the percentage savings will be modest initially and grow over time.鈥�

This is where legal operations professionals can have a distinct role in measuring the true value of technology. Indeed, they should take the lead on not only defining what success looks like, but in developing measurements for that success and making sure those metrics are collected throughout the tool鈥檚 lifecycle.

Take for example those tools that are determined to be underutilized. Operations professionals should not only collect technology usage and general satisfaction data, but expand upon those data points to get next-level insights, including:

• • • Is the underutilization a matter of unavailability of the tool, unfamiliarity with the tool, or the utility of the tool itself?
    • How has tool usage changed since initial adoption, and if there is fall off, where or when does it occur?
    • Is the department鈥檚 level of technology investment in line with both modern standards and the short- and long-term goals of the department?
    • And crucially, is there a way to reverse the underutilization trend for technologies that operations professionals see as useful, but attorneys and other staff may not?

As the LDO Index makes clear, legal operations professionals can play a pivotal role in interpreting why a technology has the reception that it does, and in doing so, prove their own value to the organization. Modern operations leaders need to not only track technology patterns but gain insights that can help make strategic decisions for the department at large.

Technology as a key decision point is not going away, and the pace of technological change is not slowing down. The time is now for legal operations professionals to begin gaining more utilization out of newer and back-office technologies 鈥� and the way to start is through gaining more insight into why underutilization occurs in the department in the first place.

You can download a full copy of the 成人VR视频 Institute鈥檚听听here.

Yet, for most in-house legal teams, increased capacity is not coming by way of more attorneys hired to share the workload. In fact, two-thirds of respondents said their law departments had reported flat or declining attorney headcount. Likewise, as corporate general counsel (GCs) have become increasingly attuned to issues of attorney well-being and the potential for burnout, the challenge of increasing matter volumes likely won鈥檛 be solved by simply expecting the existing in-house team to shoulder more of the load.

The technology solution

To address this dilemma, may GCs are looking to technology to help them simplify workflows and increase their team鈥檚 capacity. In fact, 75% 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 so that their teams have the ability to take on more high-value work.

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% of respondents in the LDO Index said they saw an increase in their legal department technology budgets. In fact, nearly half said their technology budget was flat, and 9% 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%) said they expect a relatively modest increase of between 1% and 10%. However, a significant portion anticipate larger increases.

This raises an important question about exactly where law departments anticipate finding these extra funds. Notably, a sizeable portion of respondents said they anticipate some reduction in their outside counsel spend 鈥� money which could be reallocated internally.

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 favorability 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 an Am Law 100 law firm to a Midsize law firm gives them the benefit of lower cost, despite the pace of growth in the Midsize firm鈥檚 rates themselves. Given Midsize firms lower overall rates, moving work to these firms still represents a potentially substantial cost savings for the GC.

It is also important to recognize that reductions in one budget area are not necessarily in proportion to an increase in another. For example, a 2% reduction in outside counsel spend, if reallocated completely to increased investment in legal technology, may well represent much more than a 2% 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% reduction in outside counsel spend, but a 10% increase in tech spend.

It seems certain that something needs to give for in-house counsel to be able to handle a seemingly inevitable increase in workload. And since the options of increased reliance on outside counsel or working the existing in-house team harder are both unpalatable for obvious reasons, the option to work smarter not harder seems the most logical choice.

The unanswered question, however, is whether companies will ultimately move to align their in-house law departments budgets with their stated needs for increased technological capability.

You can download a full copy of the 成人VR视频 Institute鈥檚听2024 Legal Department Operations Index听report here.

Clearly, this reflects the seemingly endless pressure to contain outside counsel expenditures in an era in which outside law firm billing rates have been growing by an average of 6.5% and in some cases much more.

Efforts to contain outside legal costs are not just hampered by increasing law firm rates, however. Corporate law departments are finding themselves in a difficult paradox 鈥� facing high pressure from company management to keep costs down while also dealing with increasing matter volumes and little in terms of additional in-house resources.

For many corporate general counsel (GCs), the intention to bring more work in-house plays a key part in their cost-reduction strategies. However, among the legal operations teams supporting those GCs, the report shows that only a little more than one-third (36%) say that an increasing share of work being handled in-house. Of course, this apparent disconnect may be easy enough to explain.

For nearly 8 in 10 corporate law departments (79%), legal matter volumes increased over the past year. At the same time, nearly two-thirds of corporate law departments reported flat or decreasing attorney headcounts. As a result, law departments may be finding themselves in a situation in which a lack of capacity is impacting their ability to absorb more work.

However, as matter volumes increase, that work will have to go somewhere, and outside law firms are currently the most logical choice.

According to the majority of respondents in the LDO Index survey, at least 25% of their legal work is handled by outside counsel. Indeed, nearly half of respondents (46%) said that half or more of their legal work is handled by outside law firms.

However, the juxtaposition of increasing matter volume and decreasing in-house lawyer headcount does not mean that GCs are without options. In fact, their most likely option to help absorb some of the excess work is also among their highest priorities.

While controlling outside counsel costs is the top high-priority item for corporate law departments, a close second (75%) is using technology to simplify workflows. In some instances, this could mean the introduction of advanced technologies driven by artificial intelligence (AI) to help produce legal work product 鈥� however, those appear to be relative outlier use cases at this point. Just 14% respondents of law firms and corporate law departments report currently using generative AI (Gen AI) technologies, according to the most recent research from the 成人VR视频 Institute.

Instead, a desire to leverage technology to automate manual tasks and streamline relatively low-value work is the more common approach. The Top 5 potential use cases for GenAI technology in a corporate law department are: contract drafting, document review, legal research, document summarization, and extracting contract data. These are all necessary tasks, certainly, but also are ones which can readily be streamlined and simplified by GenAI and then reviewed by experienced eyes 鈥� allowing that time spent doing that non-streamlined work to be repurposed to higher-value tasks.

Through the deployment of Gen AI and other advanced technologies, corporate law departments are seeking to boost the capacity of each individual member of their teams, and thereby, enhance the productivity of the team as a whole. As the adoption of such technologies becomes more widespread, corporate law departments will likely find new ways to balance their increasing matter volumes and budgetary constraints. If each member of the law department can increase their personal output capacity by 10%, that is much less work that will require the hiring of outside counsel.

Of course, outside counsel will remain vital for their experience and expertise. Indeed, expertise is one of the chief reasons outside lawyers are hired today and the value of that expertise is unlikely to diminish as the law gets more complex. However, corporate law departments will likely use all tools at their disposal to handle their increasing matter volumes in the most cost-effective ways possible.

You can download a full copy of the 成人VR视频 Institute鈥檚 2024 Legal Department Operations Index report here.

Among the four key focal areas of special interest to in-house legal departments 鈥� effective operations, cost efficiency, protecting the broader enterprise, and enabling strategic growth 鈥� effectiveness and efficiency most directly implicate the operations functions of in-house legal departments.

Unsurprisingly, the need to control outside counsel costs tops the list of high-priority challenges for legal operations teams, the report shows. While this challenge perpetually tops the list of department priorities, it is particularly noteworthy this year for the 6-percentage-point jump in the number of respondents characterizing cost controls as a high priority compared to last year.

Among other high priority focuses for law departments are such challenges as using technology to simplify workflows and manual processes, focusing on legal operations, and ensuring internal data security.

Nearly every survey respondent said their corporate law department was seeing increasing matter volumes (79%) or flat volumes (14%). At the same time, more than half (58%) report flat to decreasing total department budgets, and two-thirds (67%) report flat or decreasing attorney headcount.

While this recipe for do more with less is not a new problem for corporate legal departments, however, as the problem has continued year after year, law departments have seen little if any relief from the constant pressure to keep up with an increasingly complex business world. As a result of this pressure, many law departments are looking to technology to alleviate some of the burden, chiefly by increasing team capacity through productivity and efficiency gains without the need to add headcount.

Standing as a potential hurdle to this progress is the reality of law department technology budgets. While 36% of respondents reported that they were seeing increasing legal tech budgets, 57% said that their tech budgets were staying flat or even shrinking. Those departments with budget challenges are not necessarily without options, however. Many departments are exploring tech upgrades as replacement costs, in which upgraded technology takes the place of other items in the department budget, enabling the budget to remain flat, or in some cases even decrease, rather than showing new tech investment as a net-spend increase.

Also noteworthy in the report is the finding that a relatively small percentage of respondents report that their departments are seeing an increase in the percentage of work handled in-house. Only 36% of respondents reported an increasing proportion of in-house matters, while 50% said that their share of in-house legal work had remained flat, and 5% said their proportion had actually shifted toward outside counsel.

Examining how progress is measured

While nearly every corporate law department is tracking key metrics, according to respondents, when they are asked which metrics their departments track, it became readily apparent that in-house legal teams are tracking metrics related to cost efficiency almost exclusively. Indeed, metrics that track other key areas of focus are much less common. In particular, qualitative metrics such as the quality of matter outcomes, law firm diversity, or outside counsel evaluation results are tracked by just one-quarter or less of law departments, according to the survey. Even potentially insightful cost metrics like savings from technology or benefits from alternative fee arrangements are only tracked by about 1-in-10 law departments.

Among the metrics tracked, forecasted spend compared to actual spend ranked as the most important metric, with total spend by law firm following as the second-most often cited by respondents as most important metric.

However, nearly every highly ranked metric dealt with total spend, often just broken down in various ways. The exception was quality of legal outcomes, which was ranked as quite important by those respondents who reported that they were using that metrics 鈥� however, only about one-quarter of respondents said their law departments use it.

As the report demonstrates, prioritizing cost control, technology adoption, and comprehensive metrics tracking will help in-house legal departments better navigate budgetary pressures, enhance their overall performance, and provide greater value to their organization.

You can download a full copy of the 成人VR视频 Institute鈥檚 here.

The most recent Law Firm Financial Index from the 成人VR视频 Institute showed law firm worked rates growing at a remarkable 6.3% in the third quarter of this year. That is an incredibly strong performance. By comparison, 2022 was considered a strong rates year, and worked rates finished that year up by an average of 4.7%. We now sit more than one-and-a-half percentage points above that mark.

This is putting clients in a bind. They are under constant pressure to control costs 鈥� a difficult task when the largest portion of their budget 鈥� outside counsel costs 鈥� keeps getting more expensive every year. Many in-house legal professionals, both general counsel and legal operations teams, say that they would like to bring more work in-house as a means of controlling costs. However, as our recently published found, most law departments are facing increasing matter volumes with flat to declining budgets and headcount. This raises serious questions about their ability to absorb a greater share of an increasingly heavy legal workload.

If reducing reliance on outside counsel is unlikely to accomplish the goal and outside counsel costs keep increasing, what is a client to do? Many clients appear to have landed on an answer 鈥� tiering their legal work.

This is not a new strategy. We reported in the 2022 Legal Department Operations Index that, even as law firms continued to raise rates, many segments of in-house law departments had been able to find effective ways to save on higher rates. The theory to explain the change at the time was a shift in work from higher- to lower-cost law firms.

Evidence throughout 2023 has borne out that this, indeed appears to have been happening to an appreciable extent.

There has been a clear shift in demand for law firm services from larger law firms toward midsize firms 鈥� a trend that has been going on for more than a year. As a result, cost savings for clients have added up.

As of June 2023, average law firm worked rates had grown by 5.7%, a pace since eclipsed in the most recent quarter. Yet even as law firm rates grew, the effective rates paid by clients actually contracted. In fact, every size-segment of corporations paid effectively lower rates across all timekeeper classes. These two results seem diametrically opposed and yet the data are clear 鈥� both are happening. But how can this be?

It may be easiest to explain by analogy. Assume a family owns two cars. One takes only premium gas while the other runs on regular. The cost of both types of gas can go up, and the industry can rightly report on the increasing cost per gallon of gas. Our hypothetical family, however, can realize savings-per-gallon by simply driving the premium-only car less. Every gallon of regular gas substituted for a gallon of premium is a net savings to the family. The increase in the cost of the gallon of regular gas is less material because to the family, it鈥檚 still cheaper than what they had been paying. The family can continue to realize and even increase their cost savings in this way up to the point they stop driving the premium-only car altogether or the cost of regular gas catches up to premium 鈥� both unlikely events.

The same holds true for corporate law departments. They can continue to realize cost savings via tiering work out to more cost-effective law firms. Note carefully, cost-effective is not synonymous with cheap. There is certainly crossover between those terms, but even a relatively expensive law firm can be cost-effective in comparison to its peers, based on the quality of work product, the general favorability of outcome, the speed of matter resolution, or the many value-added benefits it brings to a client relationship.

It seems likely that 2024 will bring with it continued high law firm rate growth. At the same time, clients show no signs of easing up on their cost consciousness. Law firms that fail to convey the value they deliver risk appearing expensive, increasing the likelihood they鈥檒l be on the downside of a tiering trend in legal work that clients seem poised to continue.

And for clients, the benefits of tiering are clear, and it seems likely they鈥檝e only scratched the surface of just how they can leverage it to their advantage.

However, there is another team of professionals that plays a similarly important role in ensuring the legal protection of the enterprise 鈥� the legal operations professionals tasked with bringing the priorities of GCs to operational reality.

At the same time, legal department operations (LDO) professionals must also structure their efforts in a way that reflects the broader realities around them, including technology trends, economic influences, and the changing strategies and alignments of outside counsel law firms.

To better understand how LDO teams are balancing these often-competing interests, the 成人VR视频 Institute, in collaboration with the , has published the latest iteration of our . This report is based on a survey 鈥� conducted through an online survey done in the U.S. in June and July 鈥� of LDO professionals from businesses ranging in size from under $500 million in annual revenue to more than $10 billion in revenue from a variety of industries. The report is structured to help ascertain what LDO professionals view as their biggest challenges and priorities.

Among the key findings in this report:

• • A large majority of corporate law department are experiencing an increase in the volume of legal work, while at the same time, are trying to handle an increasing share of their workload in-house rather than using outside counsel.
  • Nearly two-thirds of law departments report that total department budgets are either flat or decreasing, further reinforcing the do-more-with-less In a related finding, attorney headcount is unchanged for the majority of departments, meaning the increased work volume is placing a greater strain on in-house lawyers. And while LDO professionals want to place a greater focus on legal operations, these headcount and budget pressures are making that difficult.
  • A majority of law departments also report an increased use of legal technology tools over the past year, despite a generally slow pace of new technology adoption. Further, many departments are increasingly using these tools to help manage workflows.

Not surprisingly, controlling outside counsel costs remains the top high priority item on LDO agendas. Fortunately, efforts to control costs 鈥� particularly with regard to law firm rates 鈥� appear to be bearing fruit, although more innovative ways to price and track legal work remain uncommon.

However, most law departments also report the share of their budget devoted to legal technology is remaining flat, which means that corporate law departments looking to increase operational efficiency via technology need to get a higher return on their technology investment to see increasing value out of their spend.

LDO professionals must structure their efforts in a way that reflects the broader realities around them, including technology trends, economic influences, and the changing strategies and alignments of outside law firms.

The report also points out that the particular metrics tracked by LDO teams cover the financial aspects of the law department well, but such measurements may not be comprehensive enough to provide a broad overview of all areas of responsibility. And additional questions around how legal teams work, the threats posed by data security issue (which are an increasing concern for LDO professionals), and return-to-office policy remain common, with many law departments seeing their policies set at the corporate level.

This report also shows how a better understanding between GCs and LDO teams 鈥� around issues of where they may be in alignment, where there may be a difference in perspective, and how to benchmark themselves against their peers 鈥� would be a boon to individual law departments. It also sheds light onto areas of potential improvement, particularly related to tech adoption and budgeting, as well as the metrics used to gauge and report department performance.

Similarly for law firms, this report provides needed insight into which areas in-house law departments are looking for assistance. Law firms that can step up to provide some of this assistance 鈥� for example, by helping to track key performance metrics beyond just cost factors 颅鈥� could potentially bring value to their clients well beyond just the legal matters for which they鈥檙e engaged.

You can download a copy of the here.

Despite cost control being top of mind, however, executing on this goal is no mean feat.

,听available on the听听channel, we discuss what the LDO Index, an annual look at the state of affairs within corporate legal departments from those professionals tasked with managing the operations, says about department leaders鈥� thinking in the current environment. This year鈥檚 report compiled a wide range of responses from 107 different companies, from small businesses to those making in excess of $10 billion in annual revenue.

As the podcast looks into the key findings of the Index report, it sheds great light on where law department leaders are seeing their greatest challenges and opportunities. For example, the Index report showed that matter volumes are increasing for the vast majority of responding law departments, even as they cope with flat budgets.

You can access听, featuring a discussion about , here.

Indeed, few law departments report adding lawyer headcount. The end result is a situation where perhaps the only option to deal with the increasing workload is to send more work to outside legal counsel, even as those external law firms continue to raise rates.

Again, as discussed in the podcast, this is not an easy situation for corporate law departments to manage.

To help shed some light on some of the pain points as well as possible solutions, the 成人VR视频 Institute Insights podcast invited a panel of experts to join us from among the membership of the (LVN), which partnered on the LDO Index. The Legal Value Network is a group of professionals with the mission to accelerate evolution in the legal industry, connecting business of law professionals from across the legal industry who are focused on designing, building, and implementing innovative models of legal service delivery.

In this week鈥檚 podcast,听we speak to:

• , a pricing an analytics officer with Shell鈥檚 legal operations team. With her 20 years of experience in the legal industry, Guajardo functions as the right hand of the legal ops team at Shell.
• , director of alternative fee intelligence and analytics at GlaxoSmithKline. An outspoken critic of the billable hour, Ergler has established himself as a thought leader and expert in the use of alternative fee arrangements for complex legal matters.
• , director of pricing and legal project management at Katten Muchin Rosenman. Bringing his 20 years’ experience focusing on strategic growth and profitability initiatives, Maziarek seeks to bring the voice of the client into his firm and helps guide firm strategy towards sustained profitability.

As the podcast illuminates, how corporate law departments control costs is an involved and complicated topic, with nearly innumerable necessary components. This podcast features a great discussion from both the in-house and law firm side of the equation and in doing so, reaches a key conclusion: No matter which steps a corporation or law firm may decide to take, three things are indispensable 鈥� transparency, communication, and trusting relationships.

Without those, controlling costs will become much more difficult, if not an impossible task.

For more from the Legal Value Network, you can follow their podcast,