Building a business case for legal tech: A primer for in-house counsel

All in-house lawyers face the never-ending pressure to “do more with less.” This obligation can be challenging because legal departments are responsible for delivering high-quality legal services, mitigating risk, and ensuring compliance — all while living with static or decreasing budgets.

One of the most effective ways to succeed in such a scenario is by investing in technology, more commonly referred to as legal tech. Getting approval for such investments, however, is not a spur-of-the-moment request. It requires a well-constructed business case demonstrating how spending money on legal tech will deliver a positive return on investment (ROI).

This white paper explores how to build a compelling business case for legal tech. To do so means framing the investment in terms of ROI, efficiency, and strategic value.

Identify your pain points

It’s essential to start the process by identifying the current pain points within the legal department. What inefficiencies or risks could you mitigate — or benefit from — through technology? For most legal departments, the following areas rise to the top:

• Manual processes. Tasks like contract review, document management, and compliance tracking are often labor intensive and prone to human error when done manually. These processes can be automated, freeing up valuable time and resources.
• Risk management. Many legal departments are responsible for risk management, such as ensuring compliance with a myriad of local and international regulations, including data privacy. Manually tracking regulatory changes and managing compliance can be time consuming and increases the likelihood of mistakes.
• Outside counsel or vendor spend. Many legal departments struggle with controlling outside counsel and vendor spend due to a lack of visibility and effective management tools, a lack of willingness to shift work to lower-cost firms, and an inability to bring work inside where the cost is significantly less expensive.
• Contract lifecycle management (CLM). Inefficient contract creation and management can lead to delays in getting deals done, or not at all; increased risk of errors, such as unwarranted auto-renewals; and missed deadlines, which all mean negative business outcomes. All this goes to creating shorter contracting times from start to signature and limiting or reversing revenue leakage from poorly managed contracts like forgotten price escalators. A proper CLM solution can alleviate all those issues.
• Due diligence pain. Lack of automation makes contract due diligence harder, longer, and more expensive.
• Other process improvement. Use a “Six Sigma” or process improvement checklist to identify additional areas where automation through technology would speed up the work and reduce the drag on the legal team’s time, freeing them up to focus on higher-value work, such as using generative AI. 

Once you’ve identified your pain points, try to quantify them. Math matters when it comes to getting the CFO and the CEO to sign off on legal tech. Can you quantify how much time the firm wastes on manual tasks and the financial cost of errors, delays, or non-compliance? What is the value of contracts not getting signed? Providing concrete data around inefficiencies will help set the stage for your business case.

Prove how the investment ties into the company’s business strategy

When presenting your case, demonstrate how the investment in legal technology aligns with the company’s broader strategic goals. Doing so will make your case more compelling and show that the legal department focuses on contributing to the overall success of the business, not just that of the legal team.

Reduce legal spend

By implementing legal technology, you can demonstrate how the department can reduce its reliance on external counsel. Tools like contract lifecycle management systems, e-discovery platforms, and compliance tracking software allow in-house teams to handle tasks that would otherwise require costly external support. A CLM system can streamline the entire contract process, from drafting and negotiation to approval, signature, storage, and management.

Improve risk management

Risk management is an essential function of the legal department, and technology can enhance your ability to identify, track, and mitigate risks, such as environmental, social, and governance (ESG) risks. Whether data privacy regulations or managing anti-bribery and corruption risks, legal tech provides tools for tracking regulatory changes, monitoring compliance, and generating reports you can share with leadership. Such an approach can also prevent costly penalties, litigation, or reputational damage, making it an appealing investment for the C-suite.

Enhance operational efficiency

One of the most immediate benefits of legal technology is operational efficiency. By automating routine tasks and creating standardized processes — even just simple checklists — the legal team will be able to focus on higher-value work. For example, contract automation and generative AI review tools can dramatically reduce the time spent on contract review and approval. E-billing systems simplify legal spend management while providing transparency and control over budgets. Efficiency gains translate into cost savings and faster turnaround times, which support business growth and improve overall productivity.

Show your math — ROI matters

The financials matter; a business case for legal technology must include a cost-benefit analysis demonstrating the investment's ROI. Here’s how to structure your analysis:

• Initial costs
  • Technology costs. These include the purchase price, licensing fees, implementation costs, and any customization costs.
  • Training and onboarding. These are the time and resources required to train your team on the new system. While this is a one-time cost, it’s crucial.
  • Integration with existing systems. Any costs related to integrating the new platform with your company’s existing systems.
• Ongoing costs
  • Maintenance and support. Most technology vendors charge annual fees for maintenance and support, so factor those into the total cost of ownership.
  • Software updates. Periodic updates or enhancements may come at an additional cost.
• Expected benefits
  • Time savings. Calculate how much time will be saved by automating tasks like contract review with data analytics. Convert that time into monetary value based on the average hourly cost of legal staff.
  • Reduction in legal spend. Estimate the potential decrease of outside counsel costs by leveraging technology to handle tasks like contract management, e-discovery, or compliance tracking. This tech will free up the lawyers’ time to bring work in-house.
  • Risk mitigation. Quantify potential savings from avoiding penalties, fines, or litigation due to improved compliance and risk management.
  • Benefits to other parts of the business. If other business departments can use the technology, highlight that fact. For example, procurement may be able to use the CLM tool, the sales team could create their own contracts or use the e-signature module, the finance team will get better data from the e-billing system, or research tools may also support the tax department. Even better — get those groups to weigh in by supporting the purchase.
• Calculated ROI

Use all the above — and more — to provide calculations for the return on investment. Show how the investment will pay for itself within a specific timeframe, typically 12 to 18 months. Utilize a model that includes projected annual savings, efficiency gains, and risk avoidance. If you are unsure how to do this, ask someone in finance to help you. Most importantly, it is not always the lowest-cost option that provides the most value. Ensure that cost considerations do not compromise the ROI of the legal tech investment.

One word of caution here: make sure your numbers are defensible. You do not need a Master of Business Administration to perform the calculations but you should stay on the conservative side. Consider getting help from the finance team to create the model because it will have the imprimatur of approval and legitimacy.

Address the concerns of the business

When presenting your business case for legal technology, a roadmap can help you anticipate the concerns and questions that may arise and prepare to address them. For example:

• How quickly will we see a return on investment? Be ready to provide data on the expected payback period and how the technology will lead to measurable cost savings.
• What are the risks of implementation? Acknowledge potential hazards, such as disruption during implementation or user adoption challenges, and provide strategies for mitigating these risks.
• How does this align with our business goals? Emphasize how the technology will support business growth by enabling faster deal closures, improving compliance, and reducing legal risks.
• Does this give us a competitive edge? Highlight how the technology will enhance the legal department’s ability to support the company’s strategic initiatives by reducing the drag on the lawyers and freeing them to be strategic partners — not just drones in the hive. This step will give the business a competitive advantage.

Create a viable implementation plan

A solid and realistic implementation plan is critical to gaining approval for the investment. Outline how you will roll out the technology to show that you have done your homework and are creating a situation for success:

• Pilot program. Start with a pilot program involving a small team to test the technology and resolve any issues before full implementation. These team members can become your champions and super users, able to help others use the technology.
• Training. Ensure all legal staff are trained on the new system to maximize adoption and efficiency.
• Full rollout. Provide a timeline for the full rollout of the technology, including any milestones or critical deliverables.
• Metrics. Once you’ve implemented the technology, track its success. Propose key performance indicators (KPIs) to monitor the ROI and impact of the investment:
  • Legal spend reduction. Track savings on external counsel fees and other legal costs.
  • Efficiency gains. Measure the time saved by automating tasks and improving processes.
  • Risk mitigation. Monitor compliance metrics and the number of risks identified and mitigated.

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Building a strong business case for legal technology requires a thorough understanding of the legal department’s pain points, a clear alignment with business strategy, and a detailed cost-benefit analysis. A well-structured business case will address the concerns of the C-suite and show a positive ROI, allowing you to secure the support you need to implement legal technology and drive the department forward. If you have access to Thomson Reuters materials and Practical Law, you already have the tools to make the case for more.