Legal Department processes aren't keeping up with rising Legal Tech demand

Legal’s growing comfortability with technology is perhaps one of the most significant trends as the industry settles into its “new normal” post-pandemic.

But limited legal departments’ budgets and planning, and a fragmented legal tech market, is hindering the adoption of in-house legal technology, according to the Legal 500 Global Edition of GC: In-House Tech Survey 2023.

The survey was conducted between mid-June to early September 2022, and includes responses from 211 general counsel, chief information officers and senior in-house counsel spanning Africa, Middle East, North America, Latin America, Europe, Asia Pacific. For this report, Legal 500 partnered with the global law firm network World Services Group.

While tech’s hold on legal is unsurprising in 2023, Herman Raspe, the chair of World Services Group, noted that none of these survey numbers would exist without the pandemic. What’s more, when age-old workflows see such a rapid change in a relatively short amount of time, traditional corporate budgets tend to face the brunt for longer than many realize.

To be sure, 66% of respondents said that budgetary constraints are the main obstacle to legal tech adoption for their in-house teams.

While some general counsel believe the process of replacing manual tasks with tech is too cumbersome, others are waiting for the market to become more consolidated before buying new technology, according to the survey summary.

“Law department and law firm budgets are built on historic experiences,” Raspe said. “So when you look at a budget for a legal department you’re going to find some antiquated entries in that. … We are really being forced into rethinking on how you put a budget together for a legal department with less paper and more technologically driven solutions.”

As a result, budgets have simply not caught up to the need for legal technology, especially considering that “technology is expensive, that’s a fact,” Raspe added.

Unsurprisingly then, many legal departments do not plan for future tech procurement.

For example, 64% of respondents said that their corporate departments had no clear roadmap for legal tech adoption, while 36% said theirs did. Some GCs told surveyors that budgetary constraints, limited team sizes and increasing pressures of ESG compliance are factors that redirect their attention from tech transition.

Still, a majority of GCs, at 55% agreed that their departments had increased their dependence on technology in recent years. Among those, nearly 70% noted they use their legal tech for document management, while 61% said they used it for legal research. Accounting and billing came in next at 47%, followed by case management and legal AI systems at 40%.

Over 70% also noted that increasing workload is their primary impetus toward tech adoption while 89% said that they valued the efficiency delivered by a legal tech tool. What’s more, 42% of respondents additionally said reduction of costs is a valuable deciding factor in choosing legal technology.

Regardless of legal departments’ struggles with tech adoption, a large majority of 92% of respondents said it’s “very important” to them for an external law firm to be up to date with technology.

“I think pre-pandemic if we had looked at the same question, the number would have been much lower,” Raspe said.

When it comes to choosing a legal tech provider, most GCs reported that the final say is with the IT department.

However, a majority of respondents, nearly 33%, said they look for tools that are compatible with the department’s existing tools. Meanwhile, nearly 20% said they depend on peer reviews and word of mouth, followed by value for money at around 18%, and free trials and tests and the tools chosen by other departments at 7% and 6%, respectively. The remaining, around 17%, said they choose legal technology products based on their “own criteria.”

However, 77% of all respondents said the sheer number of legal tools in the market is what makes choosing the right solution challenging for their departments.

In the coming years, when asked if technology would replace in-house people, 32% of respondents said no, while 23% said yes and 25% were unsure. Another 20% believed that organizations would grow to integrate the people with the tech.