Legal department workloads continue to grow, and budgets aren’t growing with them. In response, general counsel (GCs) are getting more sophisticated in their approach to managing costs, especially when it comes to outside counsel spending. Do you have the tools in place to effectively manage your spending with outside counsel?
It’s likely you’re preparing for 2025. If you’re anticipating an increased workload and struggling to find the resources to get the work done, consider implementing a tool that can help you squeeze as much as 15% savings from your annual legal spending.
Increasing rates of legal demands
In-house legal teams face no shortage of work. Seventy percent of legal operations professionals reported an increasing volume of legal work in the 2023 Legal Department Operations Index report – and that was up from 65% the previous year. “High workloads for corporate legal departments are a near universal reality,” according to the report from the Thomson Reuters Institute.
Legal budgets are not keeping up with the growing workload. The 2024 State of the Corporate Legal Department report found that 69% of general counsel globally are under moderate to significant cost pressure from business leaders. They are adopting several strategies to manage their budget, including keeping more work in house, automating some work, and making their processes more efficient. Many law departments are looking at their arrangements with outside counsel to control costs. That includes moving work to lower cost firms or alternative legal service providers. And GCs are looking to drive greater value from firms, with 67% asking for more discounts on rates and 52% seeking alternative fee arrangements.
Rising regulatory burdens drive increase in workload
Much of the increase in workload comes from new regulations. “Unsurprisingly, given the ongoing increase in regulations, the vast majority of GCs predict the need for spending on regulatory advice to at least remain at current levels; almost one-third (30%) predict an increase.
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These regulations put a tremendous burden on the legal team. One GC told us, “This is really the tsunami of regulations that we are managing. How we implement it pragmatically in the organization via processes, is our main activity at the moment.”
Having the right systems in place to manage regulatory change within the organization and your spending on outside counsel will be critically important as this wave continues to grow. Companies that can’t keep up will face greater risk of fines and higher operational costs.
Taking a modern approach to spend management
The pressure to do more with the same or smaller budget is likely to continue for corporate legal teams. If you haven’t upgraded your approach to spend management, you may be kicking yourself, wishing you had better data and tools in place to make the most of our outside counsel spend.
You know what they say: “The best time to plant a tree was 20 years ago. The second-best time is today.” The good news is – you can get started now and start to see operational and financial benefits going forward.
With a modern spend management system, you can get away from the feeling that your outside counsel spend is “out of control.” You can allocate spend using data-driven decisions, proactively manage rate requests, better predict future spend, and negotiate the best prices.
What if you already have a system in place to manage your outside counsel spend? You very well might – spend management is often one of the first tech solutions a legal department implements. If you rely on it primarily for e-billing, you may be missing out.
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As you put together your budget for next year, consider whether your spend management system needs an upgrade to give you the best possible results. Consider this:
- Do you know the benchmarks that can help you negotiate hourly and flat rates to your advantage?
- Can you efficiently enforce billing guidelines?
- Are you able to see your law firms’ performance and experience to select the right firm for your matters?
Getting ready for 2025
Spending money on tech to save money on services can feel like an unpredictable solution. How do you know that it will be worth the effort? We have found that companies that implement the Thomson Reuters spend management system, Legal Tracker Advanced, save up to 15% on total legal costs. Melissa Bodner, senior manager of Legal Support & Operations for Atricare had similar success.
“Essentially, Legal Tracker Advanced is paying for itself,” she said. “It saves a huge amount of time. And the insights it gives us help us negotiate better rates with law firms.”
Start your research into spend management systems now. Look into systems and tools that can help you use your outside counsel budget most effectively to meet the legal and regulatory demands facing your business in the years to come.
Legal departments that use Legal Tracker Advanced from Thomson Reuters gain greater control of their outside counsel spend. Find out for yourself
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The content appearing on this website is not intended as, and shall not be relied upon as, legal advice. It is general in nature and may not reflect all recent legal developments. Thomson Reuters is not a law firm and an attorney-client relationship is not formed through your use of this website. You should consult with qualified legal counsel before acting on any content found on this website.
