Legal Technology Budgets Will Increase Threefold by 2025

Legal technology budgets will increase threefold through 2025 as general counsel face unprecedented pressure both in terms of managing legal workload and driving efficiency in their departments, according to Gartner. The COVID-19 pandemic has created more work for in-house legal departments at a time when headcounts are likely to remain flat, at best, due to economic constraints.

“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,“ said Zack Hutto, director, advisory in the Gartner Legal and Compliance practice.

Below is a selection of the top predictions for corporate legal and compliance technologies through 2025.

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

Legal departments are expanding their use of technology to support workflows and meet productivity demands. Therefore, developing a comprehensive, multiyear technology strategy that can adapt to changes in the corporate environment and advancements in the technology market will be critical to success.

Increasingly, nonlawyers housed within the legal department provide technical and operational support. As these operational and technical roles increase, it will allow legal departments to do more with scarce resources. From 2018 to 2020, the percentage of legal departments with a legal operations manager (responsible for technical staff) grew from 34% of legal departments to 58%, with much higher use of the role among Fortune 500 companies.

At the same time, some departments at large enterprises are increasing the percentage of in-house specialist full-time employees (FTEs) to replace law firm expertise and control costs. The increase in specialization is for two main reasons. Firstly, to insource the areas of highest outside counsel spending and secondly in anticipation of legal and regulatory changes.

Organizations that fail to consider how a technology might advance operational capabilities or improve business outcomes are less likely to achieve a return on investment than those that do. Many legal departments pursue technology roadmaps, lacking sufficient regard for business requirements and end users’ needs. They also often neglect crucial context regarding the investment strategy necessary to inform trade-offs in a solution’s design and gain end users’ acceptance.