01 Dec 2017

Corporates investing in technology to cut outside counsel costs

As global organisations' legal needs increase, corporate law departments are adopting more innovative practices to better control outside counsel costs says a new report whose participant base primarily includes Fortune 500 level companies.

Fortune 500 companies investing in innovation to cut outside legal costs and become more efficient. nito

The 2017 HBR Consulting (HBR) Law Department Survey found that the majority of law department respondents (82 per cent) expected their legal needs to increase in the next year – up from 79 per cent reported in last year’s results. The top areas requiring increased legal attention over the next year include commercial contracts, regulatory compliance and international business units. The report said: ‘The past decade has seen a profound shift in law department spending. As companies bring more work in house in an effort to decrease outside counsel costs, their internal teams require additional technology to be more productive and efficient.’

Tech investment on the up

As a result, spending on legal tech solutions has increased over the past year with the study highlighting that the top tech investment areas for law departments are: e-Billing with  78 per cent of companies surveyed have implemented an e-Billing tool; matter management with 78 per cent having implemented matter management technology; document management -  66 per cent have already adopted a document management tool while 21 per cent have plans to implement one within the next two years and legal spend analytics platforms: with nearly half (46 per cent) having a legal spend analytics platform and another 24 per cent are considering adopting a similar tool within the next couple of years

Building internal capacity

‘Law departments are building internal capacity, increasing capabilities and effectively managing demand by training internal clients to be more self-sufficient. By leveraging available technology, law departments are optimising internal resources and automating routine tasks,’ said Lauren Chung, Managing Director and survey editor for HBR. ‘Law departments are driving change across the legal vertical by creating a well-leveraged organisational structure, streamlining inefficiencies and adopting new innovative technologies to be more agile in supporting growing legal needs.’ According to HBR’s 2017 survey, median inside legal spending increased by 4 percent, up 1 percent from the 2016 results.

Reduce costs 

To streamline operations and reduce costs, the report said that cutting-edge law departments are implementing centers of excellence or contracts. Most law departments (79 per cent) manage contracts through individual legal resources within the law department, it said, but the use of a contracting CoE is gaining traction among leading law departments as a method to drive significant efficiency in contracting. Some 32 per cent of law departments said they have a dedicated CoE for standardising and centralising contracts, allowing senior-level attorneys to focus on more strategic work.

Legal process outsourcing

The survey also found that companies were using legal process outsourcing (LPO) and alternative service providers. ‘To efficiently manage increased legal demand, law departments are increasingly opting for alternative service providers – the process of sending legal work to a non-law firm entity for a lower cost than would be feasible in-house. The 2017 Law Department Survey found that 21 percent of law departments currently outsource some legal processes, which is up from 18 percent last year. This steady increase indicates law departments’ interest in decreasing overhead while maintaining high-caliber levels of work,’ stated the repot.

Increasing use of tech and analytics

Finally, the annual survey also showed that companies were increasing use of technology and analytics. ‘More law departments are adopting data analytics to manage increased legal needs while controlling costs. In this year’s survey, 46 per cent of respondents reported having a legal spend analytics platform, up from 39 per cent last year. Additionally, 24 per cent of law departments are considering implementing a spend analytics tool within the next one to two years. When armed with the right business intelligence tools, law departments have better visibility into legal spend, which ultimately allows organisations at large to make more strategic management and operational decisions. In addition to analytics, workflow tools, contract management, artificial intelligence and document management tools round out the top five technology areas law departments are planning to implement,’ the study said.

About the survey

The HBR Law Department Survey now in its 14th year, provides comprehensive data on legal spending, staffing, operations, technology, outside counsel management and compensation. This year, the survey had nearly 300 participants representing approximately 20 industries and over 10 countries.