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Dive Brief:
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More than one-third of in-house legal departments are using artificial intelligence (AI) legal software, with e-signature and contract-management tools remaining the most popular automation technologies, according to a global survey of more than 400 companies.
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The median company is spending $1.8 million this year on external services, most of it for outside counsel and other professionals such as auditors and accountants, the 2024 Management Benchmarking Report found. The survey is conducted by the Association of Corporate Counsel and legal recruiting firm Major, Lindsey & Africa. By company revenue, the top quarter of departments is spending at least $11.2 million externally, while the top 10% spends more than $41 million.
- Legal departments’ allocations between internal and outside counsel remain relatively balanced and steady over the past three years, with 52% of budgets spent in-house and 48% externally.
Dive Insight:
Legal teams are gradually — but clearly — adopting new tech for specific legal tasks, the survey found. More than a third of departments use compliance and matter-management systems (37% and 36%, respectively) while 34% of the companies said they’re using AI-powered legal solutions.
“We are also almost certain to see a dramatic increase in the percentage of departments that are using standalone AI tools,” Veta T. Richardson, the ACC’s president and chief executive, said in an emailed statement to Legal Dive.
Popular e-signature software remained the top tech deployed across departments, with 71% employing it and 59% using contract management software. Just over half (51%) of in-house counsel reported using legal research services for legal analysis. The median legal department uses six legal technologies, with that number increasing with company size.
The fifth annual survey, released Wednesday, was conducted online earlier this year and includes responses from 421 legal departments in 32 countries across two dozen industries; 68% were in the U.S. and 10% in Europe.
Companies with revenue under $1 billion allocate the highest percentage (56%) of their legal budget internally, according to the survey. The proportion steadily decreases as company size increases, and companies at $20 billion or more split their spending roughly half between in-house and outside.
Among those using outside counsel, the median was 14 firms, although a substantial group, 180 of the departments, weighted toward the largest by sales, “relies heavily on a large number of law firms,” the survey found.
“This could be driven by the complexity of their legal needs or a preference for specialization across different legal matters, which is the result of company growth into wider markets and more diverse business areas,” the report said. About half of the departments said they’d kept their same roster of firms from the prior year.
Privacy (57%) and compliance (56%) remain the top two areas for which legal departments are responsible. However, the survey found that in-house counsel are overseeing a greater number of business functions over time, including areas such as government affairs, ESG and public affairs.
“Legal departments will continue to oversee a significant number of other business functions,” Blake Garcia, ACC’s senior director of business intelligence, said in an email. “Law departments are continually being tasked to do more, including an expansion in the business areas/functions they manage.”
In terms of diversity, equity and inclusion initiatives, the results found a slight increase in the number of legal departments tracking internal diversity metrics since 2022. The number grew to 32% this year, from 28% last year and 29% in 2022.
“Among departments that track internal diversity metrics, the percentage with a formal strategy to improve those metrics has declined over the past three years” from 45% in 2022 to 36% this year, according to the report.
“This suggests that many departments may be collecting data but are struggling to translate it into concrete steps for fostering a more diverse and inclusive legal team,” the report concluded.
