Eight in 10 law departments surveyed by Harbor anticipate an overall increase in demand for their services heading into 2024—but for many, that won’t entail a comparable jump in headcount or in spending, particularly when it comes to outside counsel.
What does this mean for in-house legal departments and the law firms they hire? How can they best prepare? And what can technology solutions, from automation to artificial intelligence, do to help?
The 2023 Harbor Law Department Benchmarking Survey offers answers, benchmarks, and insights surrounding these and other critical questions facing the legal industry in the year to come. Here’s a preview of the topline findings, based on responses from 170 companies. (To access the full benchmarking data, sign up for the Insights Portal here.)
Areas of legal demand growth
Data privacy, cybersecurity/IT governance, and regulatory matters are the top three areas where respondents expect to see demand grow – each was cited by more than 70% of respondents. This makes sense given the exponential growth in data collection across organizations and the litany of impending regulations.
Yet despite this anticipated demand, fewer than one-third (31%) of law departments expect to increase legal staffing. Legal spend is similarly static, with 34% anticipating no significant change and 18% expecting a decrease. This could, in part, be attributed to headcount growth in 2022, during which time 52% of law departments grew in size.
How law departments are responding: Use of automation and AI
When asked how they would handle growing demand, respondents are largely trying to get more out of existing resources and technologies.
“Law departments are just becoming smarter about how they speak about resourcing, how they think about their outside counsel partnership, and how they use technology," Lauren Chung, Harbor's Chief Practice Officer and editor of the survey, told Law360 Pulse in November.
Technologies currently used by law departments
Tellingly, however, many law departments report plans to optimize the use of contract lifecycle management, workflow, and legal data analytics tools in the year to come. One-quarter also say they are automating routine tasks to handle demand, up from 16% in 2022.
As for what they’ll be considering in the next year or two, AI unsurprisingly tops the list, selected by 40% of respondents (up from 23% last year). “In the year to come, departments are really going to start parsing out what’s real and what’s mere hype when it comes to AI tools,” said Kevin Clem, Harbor’s Chief Growth Officer.
What about outside counsel? Decreased spend, more emphasis on firm selection
Amid mounting cost pressures, law departments are understandably becoming more diligent about their use of outside counsel. Spend relative to revenue has decreased from 0.17% to 0.14%, while only 22% expect to increase their use of outside counsel to handle rising demand.
Those who do will focus their attention on the selection process, including how and when they engage outside counsel.
Initiatives law departments are exploring
As a result, Chung said, “law firms really need to be proactive in engaging with the law departments that are going through this journey [to figure out] how do they best deliver legal services in this challenging environment."
This is the first in a series of blog posts exploring trends highlighted in the Harbor Law Department Benchmarking Survey 2023. Stay tuned for deeper dives into legal staffing, AI and automation, and the evolving relationship between law departments and outside counsel.
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