The COVID-19 pandemic has brought severe disruption to legal functions everywhere, both in terms of how legal teams carry out their work and also in terms of what work they need to do. Moreover, the economic effects of the pandemic have created cost constraints in many organizations.
Two-thirds of respondents in a 2020 Gartner poll of legal leaders said they expected overall legal department headcount to remain flat in 2021, and half expected further budget reductions.
“Heads of legal expect legal operations managers to address the emergent challenges of remote working and cost management”
So while many legal departments relied on trusted law firm partners to help interpret the regulatory changes in the early months of the pandemic, they see increasing the specialization of their teams and bringing that work in house as more cost-effective long-term solutions.
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With more work to do, in a disrupted work environment, without any additional money to do it with, many in-house legal departments have already turned to legal operations managers to help them meet these challenges in 2020.
“Legal departments that can use technology solutions and legal operations to drive greater efficiency in-house will be the winners”
“Responding to the pandemic and its aftershocks revealed some significant weaknesses for the legal function,” says Caroline Van Allen, Senior Research Specialist, Gartner. “Low legal technology adoption and insufficient knowledge management capabilities left many legal departments unprepared to immediately switch to remote work.”
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The expansion of legal operations shows that heads of legal expect legal operations managers to address the emergent challenges of remote working and cost management. Maintaining legal technologies and building knowledge management processes are two of their top responsibilities, at 76% and 74% adoption respectively.
“In an environment where legal leaders want to reduce spending and yet carry out more complex, unpredictable legal work, legal departments that can use technology solutions and legal operations to drive greater efficiency in-house will be the winners,” says Van Allen.
Another trend that emerged from this research was the increasing specialization of in-house legal functions. In the simplest terms, reducing reliance on outside specialists helps legal departments to reduce their outside spend without having to compromise on work quality. Indeed, outside counsel’s share of legal spending is down 6 percentage points from 2018.
Gartner has seen its clients increase the number of specialists in their teams by 21% since 2018, and this is driven largely by two factors. The first is insourcing the areas of the highest outside counsel spend (litigation and IP). Second, although many legal departments turned to outside counsel to help them navigate shifting regulations in 2020, legal leaders are now hiring their own specialists in regulatory compliance and government affairs to manage this work in-house instead.
“We’ve seen legal departments gradually shifting more work in-house over the past few years, but this year we’re also starting to see them make longer-term in-house investments to try and offset some of the lost access to expertise that comes from reducing their reliance on outside counsel,” Van Allen says.
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