In-house legal tech budgets to grow 200% by 2025

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Gartner’s latest predictions focus on delivering value through technology and process innovation.

As general counsels face extraordinary pressure to manage a greater workload, while operating more efficiently, leading research and advisory company, Gartner, predicts that budgets for legal technology will increase threefold by 2025.

Gartner’s latest predictions focus on delivering value through technology and process innovation. The forecasts predict:

  • A sharp rise in legal technology spending to around 12% by 2025, a 3X increase from 2020
  • In-house legal departments will replace 20% of generalist lawyers with non-legal staff
  • In-house legal departments will miss 70% of the potential benefit of contract life cycle management investments

In-house legal departments need to use technology to work smarter, faster and scale how they deliver their services to keep up with the growing pressures. Zack Hutto, director, advisory in the Gartner Legal and Compliance practice, said:

“Legal departments will increase spending on technology to reduce the dependency on outside counsel, address COVID-19, and satisfy a long overdue need to modernize, digitize and automate legal work.”

This drive for efficiency can be met through improving team collaboration, learning to automate legal services and adopting digital processes to improve speed and business awareness across legal teams.

Legal technology spending already increased 1.5 times from 2.6% of in-house budgets in 2017 to 3.9% in 2020. Gartner predicts legal technology spend will increase to approximately 12% of in-house budgets by 2025, a threefold increase from 2020 levels.

Legal tech spending continues to rise despite the pressures of 2020, even as spending on new hires and external resources are limited. This will drive technology adoption to help fill in the resource and knowledge gaps. Automation of workflow, eDiscovery, document management and smart contracts will all help deliver productivity boosts across the business, allowing legal leaders to invest in strategic-level solutions to handle complex legal processes.

Legal Tech Budgets

The growth of non-legal employees across operational and technical roles supports in-house legal departments in delivering services digitally. Service automation, digital applications and marketplaces will all play a role in how in-house legal teams interact and deliver their advice to the rest of the business.

Gartner saw the number of legal operations managers rise from 34% to 58% from 2018 to 2020, indicating the need for business and technical expertise, especially among larger and Fortune 500 companies.

Another change sees in-house legal departments hiring more in-house specialists to replace external law firms, giving them greater control over legal spend. The Gartner 2021 Legal Planning & Budgeting Survey saw outside counsel’s share of legal spending down 6% since 2018. Gartner notes that:

“Higher-volume, lower-complexity work that is typically carried out by generalist lawyers is where non-lawyer staff will drive efficiency gains for the department, by digitizing key workflows and expanding the use of automation.”

This prediction leaves a sizeable 70% benefit in contract management for firms to capture, with automation presenting a key opportunity to improve outcomes and deliver a better ROI. The legal ops manager can deliver valuable insight. By adding business know-how and supporting the needs of end-users, they can bolster the technology roadmap and adoption plans.

However, Gartner warns against in-house legal departments following “big bang” approaches to contract life cycle management (CLM) solutions where advanced features could limit success and only achieve a fraction of the expected value. Zach Hutto explained:

“To get the best return on CLM investments, build a deliberate, practical plan for CLM technology adoption by investigating, documenting and prioritizing desired business outcomes and the necessary operational capabilities to achieve them.”

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