Key Insights from the Report:

• In-House Work Surge: A significant number of corporate law departments report an uptick in legal work volume. Interestingly, many are opting to manage a larger chunk of this workload internally, reducing their reliance on external counsel.

• Budgetary Constraints: Despite the increased workload, about 2/3 of law departments indicate stagnant or shrinking budgets. This trend underlines the growing pressure on in-house attorneys, especially when LDO professionals are keen on emphasizing legal operations.

• Tech Adoption: While the pace of new technology adoption has been generally slow, a majority of law departments have reported a rise in the use of legal tech tools over the past year. These tools are primarily being utilized to streamline workflows.

• Cost Control: Managing external counsel costs remains a top priority for LDO teams. Efforts to regulate these costs, especially concerning law firm rates, seem to be yielding positive results. However, innovative pricing and tracking mechanisms for legal work are still in their infancy.

• Tech Budgets: Despite the emphasis on technology, most law departments report a static budget allocation for legal technology. This indicates a need for higher ROI on tech investments to derive more value from their expenditure.

A large majority of corporate law departments surveyed are experiencing an increase in the volume of legal work. This is corroborated by the fact that 70% of legal departments report higher matter volumes, according to the 2023 Legal Department Operations Index, a report from the Thomson Reuters Institute and the Legal Value Network. 

The report, based on a survey conducted in the U.S. in June and July, with participants from businesses of various sizes and industries, provides a comprehensive look into the challenges and priorities of legal department operations (LDO) professionals. 

The Index shows that even with the increased workloads, nearly two-thirds of legal departments reported that their total budgets were either flat or decreasing. This scenario reinforces the “do-more-with-less” challenge that many legal departments are currently facing. This has led to a situation where efficiency is more paramount than ever as the volume of work continues to increase.

The Technology Conundrum

While new technologies, including AI, could help improve efficiencies, legal departments are facing what the report terms a “technology conundrum.” A majority of law departments report an increased use of legal technology tools over the past year. However, only 32% of legal departments’ budgets for legal technology are increasing. This presents a challenge for legal departments in making the up-front investments in technology needed to keep pace with expanding workloads.

The report also highlights the role of technology in improving efficiencies. A majority of general counsel surveyed (57%) say that leveraging technology automation is one of their top cost-control strategies. As a result, using technology to improve workflow efficiency is their second-highest priority, ranking behind controlling outside counsel costs.

The Role of AI

Another recent Thomson Reuters report, The Future of Professionals Report found that 60% of legal professionals surveyed believe AI will result in corporate legal departments moving more work in-house over the next five years, owing to improved efficiency and reduced costs. However, legal professionals also have concerns about AI, including the accuracy of outputs and the need for regulation to govern the ethics of AI.

Controlling Outside Counsel Costs

Controlling outside counsel costs remains the top high priority item on Legal Department Operations (LDO) agendas, the Index shows. Efforts to control costs, particularly with regard to law firm rates, appear to be bearing fruit. However, more innovative ways to price and track legal work remain uncommon.

The Role of LDO Professionals

The report underlines the critical role of LDO professionals in balancing these challenges and bringing the priorities of general counsels to operational reality. As legal departments continue to face these challenges, the role of technology and efficient operations will undoubtedly become even more crucial.

The 2023 Legal Department Operations Index highlights the myriad of challenges faced by LDO professionals. As they strive to balance increasing workloads with shrinking budgets, the role of technology, particularly AI, will be crucial in shaping the future of legal departments.