Rise in investment comes despite frozen or falling budgets and a coronavirus-fuelled rise in workloads
Nearly a third of legal departments globally are upping their spend on technology, with 44% increasing their use of tech tools, according to new research from Thomson Reuters.
Some 30% of departments are investing more in tech, the 2021 State of Corporate Law Departments report found, and they are doing so against the background of frozen or declining overall budgets and rising workloads, both as a direct result of the Covid-19 pandemic.
The report found that 58% of in-house teams saw their workload increase as a result of the pandemic, yet despite being busier only 6% of corporate legal departments saw their legal budgets rise to cope with the extra work while 29% said they had to do more with less as a result of their budgets being cut.
For 11% of the 223 in-house legal departments that responded to the survey, pressure on costs extended to a decrease in tech spend – however just 2% of the respondents said they were using fewer technology tools.
‘With AI or machine learning tools, we can automate the contract review, negotiation and approval process,’ Insight’s deputy GC Karim Adatia told The Global Legal Post's sister title The Robotics Law Journal.
"We can also automatically scan, tag, analyse and report on key language and provisions in contracts (regardless of format), creating real efficiency for us and value to the business by managing contract obligations."
Further reading: 'Automation is a given today and it’s exciting to be a lawyer who can help commercialise innovation' - Insight’s VP and deputy GC Karim Adatia on how automation is revolutionising industry and how lawyers are managing risk and leveraging knowledge. The Robotics Law Journal
Lisa Hart Shepherd, vice president of research and advisory services at Thomson Reuters, said: “While corporate law department leaders have previously guided teams and businesses through recessions, sales shortfalls and restructurings, the global pandemic put unparalleled pressure on these departments to adapt.”
A shift to remote working underscored critical gaps and shortcomings within legal departments, with many departments responding to those issues by implementing new processes and technologies, Hart Shepherd said.
She added: “Law department leaders who quickly realised traditional methods of work could evolve and still meet department goals were able to pivot faster and more successfully during this year of unexpected challenges.”
Hillary McNally, general manager of Thomson Reuters’ corporate legal business, said: “For law departments to be able to keep more of their work in house, they need to invest in additional resources… but with budgets under more pressure, strategic investment in efficiency and cost saving technology will be critical to meet the expectations of the business.”
Many in-house teams are also expecting an increase in disputes activity as a result of the pandemic, with 40% of legal departments globally predicting that outgoings to resolve these disputes are likely to be higher over the next six months compared to pre-pandemic levels.
The report also found that UK corporates are spending less on legal advice than their US counterparts, with businesses on mainland Europe spending even less. UK corporates spent roughly 56% of what US companies spend on legal support. On average, UK corporates spent just 0.18% of their annual revenue on in-house and external legal services, compared to 0.32% by US corporates. European companies spent even less, at just 0.15% of annual revenue.
On average, European companies allocated half of their overall legal budget on external counsel, compared to 60% in the US and 55% for corporates globally.
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