Legal Departments Are Decreasing Outside Counsel Spend, Study Finds

General counsel are more focused than ever on finding the right resources to do legal work at the right price, according to a just-released global survey of in-house legal departments.

The 13th annual law department survey by HBR Consulting, which advises corporate legal departments, professional services and law firms, included 275 law departments. They were part of 22 industries located in 10 countries. The detailed benchmarking report is for sale, but HBR shared some of the numbers.

The survey shows a slight 1 percent increase in legal spend year over year, HBR says. That includes a 2 percent increase in spending on technology to handle increased legal demands, especially for document management, legal spend analytics and contract management, the survey says.

Lauren Chung, HBR managing director and survey editor, said in a statement that general counsel are "investing in new technology to increase the automation of routine tasks, enhance work processes and support data analytics that allow improved decision-making on outside counsel fee arrangements. All of these efforts are having a direct impact on legal spending and operational effectiveness."

In addition, 47 percent of companies reported increasing the total number of in-house lawyers.

But the news was not so good for outside counsel. The survey shows corporate spending on outside counsel decreased by 2 percent, as 85 percent of responders reported using alternative fee arrangements. That's up 5 percent over last year's numbers, confirming a trend spotted by others.

And 80 percent of the law departments said they want to increase their use of alternative fees next year. Fixed fee per matter and flat fee for all matters in a field of work were the most common used arrangements this year.

HBR's Chung says, "The survey confirms what we are seeing in our consulting engagements with law departments, where there is heightened attention on resource optimization—the right resources, doing the right work, in the most cost-effective and efficient manner."