4 Key Areas US In-House Legal Teams Will Reduce Costs

Everlaw partnered with the Association of Corporate Counsel (ACC) to publish a new report that revealed an increase in budgetary constraints, with corporate law departments prioritising cost containment through various strategies. In the lead are bringing more matters in-house, shifting work to smaller firms, and leaning more on technology– including AI – to help scale.

The report, "The State of Collaboration in Corporate Legal Departments" was unveiled at the ACC 2023 Annual Meeting. Respondents included more than 370 chief legal officers, general counsel, other in-house counsel and legal operations professionals from U.S. corporate law departments.

Key findings include:

In facing budgetary constraints, in-house teams will look to cut costs in the next year:

• 66% will bring work in-house to reduce costs, compared to 59% in 2022.
• 39% say they will shift work from big firms to smaller firms.
• 33% look to technology/AI to control costs – up from 12% last year – which nearly tripled
• 28% will expand their alternative fee arrangements

In-house teams look to do more with less regarding their outside counsel:

• Outside counsel needs to raise their game around costs, with only 42% of in-house legal professionals saying they're happy with cost transparency and just 38% with cost predictability.
• One in four say they'll cut the number of law firms they work within the next year, with the top reason overwhelmingly being (79%) to increase cost-effectiveness.
• While only 41% say they've always felt comfortable requiring their law firms to use modern technology for better efficiency, 68% say they've at least sometimes felt comfortable doing so.

The desire to collaborate within the corporation exists, but legal teams face obstacles:

• 70% say the top goal is to better align with other business departments across the company; those in other business units still often say that legal slows down projects (58%) and is overly risk averse (41%).
• Nearly half (47%) say they get engaged after strategic decisions have been made, limiting their ability to provide strategic advice.
• While 33% say they need new technology to centralise data and collaborate more efficiently, 71% cite a lack of bandwidth for process improvements as the main obstacle to stronger collaboration within their organisation.
• In 2022, most participants (56%) believe there needs to be stronger collaboration between the legal department and CIO and in 2023, only 20% said that they work closely with IT, but 32% said that they want to align with IT closely.

"In-house counsel want to collaborate with other business departments, but they feel hamstrung by a lack of automation," said Chuck Kellner, strategic discovery advisor at Everlaw. "A true digital transformation of the legal department will get them through this last mile for greater parity with other departments. GenAI may become the killer app to drive the needed cost savings and create efficiency improvements."

"In-house legal teams have made great strides to improve internal and external collaboration in their organisations, but there is clearly a long way to go," said Blake Garcia, senior director of business intelligence at ACC. "Legal teams continue to be seen as roadblocks on projects, and nearly half reported they are consulted too late in strategic corporate decisions. With legal teams' responsibilities increasing, yet continually being asked to do more with less, technology adoption is likely the most efficient way teams can improve communications with every corner of the organisation."