San Jose, CA, July 1, 2020 — Corporate Legal Operations Consortium (CLOC) today released their 3rd Annual State of the Industry Survey of internal and external expenditure for legal services.
Participants: More than 140 companies (including 27 Fortune 500) in 17 countries (including 33 US states), covering more than 30 industries, from biotech to consumer goods.
- Demand for legal services continued to grow through 2019.
- Organizations were realizing higher ROI from increasing headcount and technology adoptions.
- The role of legal ops continued to expand.
- Organizations of all sizes prioritized the implementation of new technologies and the automation of legal processes.
- Total external expenditure by respondents: $3.6B
- Median external vs internal expenditure: $7.9M vs $5M
- Median internal expenditure per legal department FTE was $200K, down from $290K in 2018
- Median external legal expenditure per in-house attorney was $404K, down from $451K in 2018
- Average total legal spend as a percentage of revenues was 1.12%, sharply up from 0.44% in 2018
BREAKDOWN AND ANALYSIS
Industries leading in total expenditure were Technology and Biotechnology. Lowest expenditure was reported in the Energy/Oil/Gas/Utility and the Entertainment/Media industries.
Moving work in-house was the general trend across industries. 28% of respondents reported moving more work in-house, compared with only 20% who outsourced more legal work. More than half of the organizations that responded stated that the ratio between work retained in-house and outsourced work remained unchanged, but this figure varied with company size, from 30% among small companies to 67% among large ones.
Average headcount (FTEs) in legal departments varied from 38 in small companies to 180 in large ones. The biotechnology industry led the field with an average of 191 FTEs.
Legal ops continues to expand in scope and function. The average legal ops team has 6 FTEs, with large companies averaging 14 FTEs and industries like Biotech averaging 26 FTEs. The average legal ops FTE supports 15 legal team members, with the ratio of legal ops-to-attorney ranging from 1 to 6.5 in small companies to 1 to 11 in large ones.
The use of technology and the automation of legal processes has been steadily growing. The most common use of technology remains in the area of eBilling, implemented by more than three quarters of respondents, but the use of eSignature and Document Management has increased substantially in the last year, overtaking Contract Management, which dropped from 65% the previous year to 56% in 2019.
71% of respondents reported that automating legal processes and implementing new technology solutions were high priorities for 2020.
69% of respondents reported that their legal departments are well integrated with the organizational strategy and business objectives of the firm, and 67% reported that their legal ops teams were a strategic partner of the legal department.
ABOUT CORPORATE LEGAL OPERATIONS CONSORTIUM (CLOC)
CLOC is a 501(c)6 non-profit professional association. Its mission is to help legal ops professionals and other core corporate legal industry players (tech providers, law firms, LPOs, law schools, etc.) optimize the legal service delivery models needed to support small, medium, and large legal departments.