Corporate legal spending increased for the second straight year, but the overall rate of growth slowed, according to a new survey.
Huron Legal’s Law Department Benchmarking Survey, conducted in partnership with the General Counsel Forum, a community of more than 700 general and senior managing counsel, polled 119 companies from around the world.
It found that, on average, corporate legal department spend rose 1.7 percent in the 2014-2015 fiscal year, down from 2013-14, when the spend increased by 2.2 percent, on average.
“It has increased at a slower pace, so whether that goes down to a zero percent or it goes down to a decreasing percent, the trend is to go down,” said Bret Baccus, managing director of Consilio, which owns Huron Legal and conducted the survey.
Baccus said he expects legal spend will likely decline because there are now more programs in place within corporate law departments to help manage budgets and reduce legal spend. Those programs include matter-management e-billing technology, increased use of alternative fee agreements that achieve cost predictability and increased collaboration between law departments and law firms, he said.
Moreover, Baccus said many corporate law departments are whittling down the list of law firms they work with: Nearly 60 percent of survey respondents used a smaller number of firms to handle 80 percent of their work, and offered preferred provider programs for outside counsel.
“All of those programs are becoming more established, which are helping law departments better manage costs,” he said.
Amar Sarwal, vice president and chief legal strategist at the Association of Corporate Counsel, said the cost-cutting measures the report cited mirror what he’s seen in the industry. Chief executive officers and chief financial officers are ordering across-the-board reductions and law departments are responding to renewed scrutiny, Sarwal said.
“There’s a ruthless search for inefficiencies to root through, no doubt about it,” Sarwal said. “I don’t think lawyers are immune from those pressures.”
Law departments could further trim costs by implementing discovery management programs, which are already common at the largest companies, the report said.
The main challenges law departments face are internal resource constraints, industry economic pressures and regulatory requirements including issues surrounding data security and privacy laws, the report said.
“Law departments are continuing to evolve and fine tune their operations to meet the needs of their clients and the fast-changing legal environment,” the report said. “While they must continue to focus on costs, many have reached a stage where they can look beyond the costs and focus on the value of services they deliver and the manner in which they deliver them.”