Gartner: Legal tech spending to increase threefold by 2025

Legal departments are expected to increase their technology budgets threefold through 2025, in order to support workflows and meet productivity demands, states Gartner in a new report, titled Predicts 2021: Corporate Legal and Compliance Technology.

While spending on legal technology has been on the up in the last five years, increasing 1.5 times from 2.6% of in-house budgets in 2017 to 3.9% in 2020, Gartner predicts it will increase to around 12% of in-house budgets by 2025, a threefold increase from 2020 levels. 

A combination of factors, including those brought on by the pandemic, have increased the urgency for legal departments to embrace technology, with general counsel facing unprecedented pressure both in terms of managing legal workload and driving efficiency in their departments. 

While the pandemic has created more work for in-house legal departments at a time when headcounts are likely to remain flat, there is also a long overdue need for legal departments to “modernise, digitise and automate legal work”, says Zack Hutto, director, advisory in the Gartner Legal and Compliance practice. 

“Even discounting the new pressures brought about by the pandemic, the trend of increased spending on inside counsel is a tailwind for in-house legal technology spending,” says Hutto. “Many legal leaders won’t have any scope to further increase headcount or outside counsel spending right now, so they are quite likely to look to technology to maximise the productivity of their existing investments in personnel.”

According to Gartner, developing a comprehensive, multi-year technology strategy that can adapt to changes in the corporate environment and advancements in the tech market will be critical to success. 

Legal departments to replace 20% of generalist lawyers

In addition to increased spending, Gartner’s report predicts that by 2024, legal departments will replace 20% of generalist lawyers with non-lawyer staff, allowing legal departments to do more with scarce resources. From 2018-2020, the percentage of legal departments with a legal operations manager, responsible for tech staff, grew from 34% of legal departments to 58%. 

Simultaneously, some departments at large firms are increasing the percentage of in-house specialist full-time employees, replacing laws firm expertise, firstly to in-source the areas of highest outside counsel spending and secondly, in anticipation of legal and regulatory changes. 

“Specialist legal work is typically lower in volume but higher in complexity, it is therefore not the best starting point for standardization and automation.” states Hutto. “The 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.”