What are the latest legal operations trends affecting corporate legal? According to the Corporate Legal Operations Consortium’s (CLOC) 2021 State of the Industry Survey report, the median external spend increased by 84%, more work has moved in-house and legal departments continue to grow.
In collaboration with the Association of Corporate Counsel, the survey solicited responses from 200 organizations, 48 of which were Fortune 500 companies, across more than 22 industries in 31 states and 21 countries. Respondents spanned a wide range of industries, with the most (26%) coming from the technology sector.
1. External Legal Spend Up by 84%, But Internal Legal Spend Catches Up
While outside legal spend varied widely across survey participants, the overall results showed a marked increase in external legal expenditure in 2020 as compared to 2019. Median outside spend nearly doubled in the past year, up to $14.5 million from $7.9 million the previous year. (For those looking to control legal costs, here’s a good place to start.)
The median internal legal spend wasn’t far off, coming in at $13.3 million. While there was some variation based on the size of the companies, overall legal spend across all survey participants broke down exactly 50-50 between internal and external legal expenditure. In the previous year, the split came in at 60-40 in favor of external spend.
2. In-House Counsel, ALSPs Taking on More Work
Despite increased external spend, companies are bringing more work in-house – something indicated by past legal operations trends founded by CLOC. In fact, 39% of respondents reported moving more work in-house in 2020, compared to 28% the year before.
The prominence of alternative legal service providers (ALSPs) continued to slowly increase over the past year, highlighting other significant legal operations trends. For example, when it came to ALSPs, 71% of respondents reported using the same number of ALSPs as in the previous year. However, 24% increased the number of ALSPs they used and 21% reported shifting more work to ALSPs as opposed to law firms. Three-quarters of the participants said that the law firm/ALSP balance remained the same as in the previous year.
3. Legal Operations Trends Point to Larger Legal Departments
Among the companies surveyed, the average size of the legal department was 104 full-time employees, with smaller companies reporting fewer legal department employees and larger companies reporting larger legal departments. The entertainment/media, insurance and biotech/pharma/life sciences sectors reported having the most full-time employees in their legal departments.
Increases in legal department headcount mirrored those of last year – 40% of respondents in 2021 said they increased their number of dedicated legal operations full-time employees, just as they did in 2020. The most notable increases in headcount were seen at mid-sized companies. The average size of legal operations teams also increased across both industry sectors and company sizes.
4. Clarity Around Legal Operations Responsibilities – Proof of Function’s Maturity
Not surprisingly, the top-five most common services provided by legal operations were the same in 2021 as they were in 2020, according to survey participants. This signals the growing influence and prevalence of legal operations on the whole – meaning there’s a consensus in the industry on the role and value of the responsibility.
The most common legal operations services include:
- Process development and project management
- Data analytics
- Technical and process support
- Vendor management
- Financial management
5. Priorities for 2021 and Beyond
According to the legal operations trends uncovered by CLOC, in-house legal departments are also looking ahead to shifting priorities. Implementing a Diversity and Inclusion program was ranked as the top priority in 2021 for 61% of respondents, up from a fifth-place ranking the previous year. Other priorities included automating legal processes (as exemplified by this contract lifecycle management case study), implementing new technology and right sourcing legal work.
You can read the entire survey report here.
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