Powerful economic forces are reshaping the legal spend management (LSM) terrain in 2025, presenting challenges and opportunities for corporate legal departments.
Among the most significant drivers of increased legal spend and workload in the new year is a continual uptick expected in litigation, and the complex regulatory environment. We're seeing a surge in legal actions across various sectors, putting pressure on corporate legal departments to manage a growing caseload efficiently.
There is an expected increase in the use of outside counsel for their expertise, which can put additional pressure on budgets and staff to manage this.
Also, the potential for change implied by a new administration in Washington, D.C., could lead to even more changes across various industries, further complicating matters for Corporate Legal Department leaders working to adapt to change while controlling costs.
These and other unknowns are forcing corporate legal departments to do more with less.
Many are facing the challenge of managing an expanded workload with only modest budget increases. According to the 2024 ACC Chief Legal Officers Survey, 42% of CLOs say “their legal department received a cost-cutting mandate over the past year” that affected hiring, with rate hikes making the situation more unwieldy.
It's a delicate balancing act requiring innovative approaches to legal spend management.
LSM and Legacy Issues
Many Corporate legal leaders may feel they checked LSM technology off their firm’s to-do list when their organization perhaps made an investment in a LSM technology platform in the recent past.
Legal departments must critically reevaluate their processes and technology stacks to ensure they're not overlooking potential savings and efficiencies. Expert Bill Review (EBR) services, for example, are proving an invaluable tool in this regard. By leveraging human intelligence coupled with digital speed and accuracy, firms can uncover significant deductions and ensure billing reasonableness while optimizing billing compliance.
This approach allows for a more nuanced and effective management of legal spend, which looms as one of the most important trends playing out for law firms in 2025.
The Role of Gen AI Coming into Focus
Generative AI (Gen AI) is poised to make a significant impact on legal spend in 2025. While Gen AI can create new efficiencies in law firm practices, it's important to note that these productivity gains may not always translate evenly into expectations for client bills.
There's a complex interplay between increased efficiency and billing practices that needs to be carefully navigated. As Gen AI becomes more prevalent, our industry will grapple with ways to reconcile productivity gains with fair billing practices. Expert Bill Review services are central to ensuring billing reasonableness, and for managing compliance in this new AI-augmented legal landscape.
Analytics and Reporting Making a Mark
We're tracking a significant shift in 2025 towards more rigorous data management and reporting in corporate legal. There's an increasing appetite for detailed analytics and performance metrics that can support decision-making and demonstrate the value of legal operations.
This trend is driven largely by the need for greater visibility into legal spend, and the desire to optimize operations. Advanced analytics tools are providing an unprecedented level of insight into spending patterns, case outcomes, and operational efficiencies. Legal departments that embrace these tools will be better positioned to make data-driven decisions and justify their budgets.
Given these trends, how can corporate legal departments improve their spend management capabilities in 2025? Here are a few key focus areas:
- Recognize and address outdated systems and processes. Many departments are leaving significant money on the table by clinging to legacy systems and processes.
- Leverage partnerships and Expert Bill Review services. These can provide specialized expertise and technology that might be out of reach for individual legal departments. Because EBR can work with other LSM tech platforms, this significant value can be applied with no upfront investment and minimal disruption.
- Focus on balancing compliance and cost optimization with a dedication to service. It's crucial to maintain good relationships with law firms while also ensuring billing reasonableness.
- Invest in technology that provides detailed insights and supports decision-making. The right tools can dramatically improve visibility and control over legal spend.
I anticipate a dynamic (and potentially volatile) year ahead for legal spend management. The increased litigation and regulatory workload will continue to put pressure on corporate legal departments to adopt enhanced capabilities for greater efficiency.
However, this challenging environment also presents opportunities for significant savings and operational improvements. By focusing on efficacy, leveraging expert services, and embracing data-driven decision-making, legal departments can navigate these challenges successfully.
The key is staying agile, continuously evaluating processes and technologies, and being willing to adopt fresh approaches to legal spend management. This year presents its share of trials for legal spend management – no pun intended – and it also offers exciting opportunities for innovation and optimization.
By staying on top of LSM trends and proactively addressing them, corporate legal departments can not only manage costs more effectively but also elevate their strategic value within organizations.