Legal departments are expected to triple their technology budgets by 2025 to support workflows and meet productivity requirements, Gartner explains in a new report titled Predicts 2021: Corporate Legal and Compliance Technology.
While spending on legal technology has grown over the past five years, increasing 1.5x from 2.6% of internal budgets in 2017 to 3.9% in 2020, Gartner predicts it will increase by Year to around 12% of internal budgets will triple in 2025 compared to 2020.
A combination of factors, including those caused by the pandemic, has increased the urgency of the legal departments to get involved in technology, with the General Counsel facing unprecedented pressures, both in terms of legal workload management and driving performance in their departments.
While the pandemic has created more work for internal legal departments at a time when the number of employees is likely to remain unchanged, there is a long overdue need for “modernization, digitization and automation of legal work” for legal departments, says Zack Hutto, director, consulting at the Gartner Legal and Compliance Practice.
“Even if you ignore the new pressures caused by the pandemic, the trend towards higher spending on insider advice is a tailwind for internal legal technology spending,” says Hutto. “Many legal professionals do not currently have room to grow their staff or spend on outside lawyers, so they are likely to use technology to maximize the productivity of their existing human resource investments.”
Gartner says developing a comprehensive, multi-year technology strategy that can adapt to changes in the business environment and advances in the technology market will be critical to success.
Legal departments should replace 20% of generalists
In addition to the increased spending, Gartner’s report predicts that the legal departments will replace 20% of generalists with non-lawyers by 2024, allowing the legal departments to do more with scarce resources. From 2018 to 2020, the proportion of legal departments with a legal department responsible for technical employees increased from 34% of the legal departments to 58%.
At the same time, some departments in large corporations are increasing the percentage of full-time full-time employees by replacing the expertise of law firms to firstly identify the areas with the highest spending on outside lawyers and secondly to anticipate legal and regulatory changes.
“The legal specialist work is usually less extensive, but more complex. So it is not the best starting point for standardization and automation, ”says Hutto. “For higher volume, less complex work that is typically done by generalist lawyers, non-lawyers will increase efficiency for the department by digitizing critical workflows and expanding the use of automation.”