In-House Legal Departments Are Turning to AI to Manage Spend

Many in-house legal departments face challenges in controlling and reducing legal spend due to limited budgets, scarce resources, and high workloads. Although this often leads to increased reliance on outsourcing, a growing number of legal departments are turning to artificial intelligence (AI) as a solution to cut costs and enhance efficiency, as reported in an article by Bloomberg Law.

According to the latest Bloomberg Law Legal Ops and Tech Survey, legal departments have begun integrating AI tools into their workflows, either by purchasing existing tools or developing their own generative AI solutions. The implementation of AI technology is expected to help corporate legal departments manage their budgets in 2024 and keep more work in-house. This shift allows them to be more selective in outsourcing to outside counsel and structure fees under alternative fee arrangements (AFAs).

Currently, fifty percent of in-house attorneys who outsource legal work reported that outside providers handle half or more of their document review, data analysis, and legal research, with 87 percent of that number outsourcing to outside law firms. Generative AI is anticipated to play a pivotal role in changing this. 

The technology is already being used by some in-house legal departments in various tasks traditionally outsourced, such as legal research, document review, and due diligence.

Interestingly, in-house legal departments are outpacing law firms in keeping up with AI, allowing them to keep more of their work internal, providing negotiating leverage for alternative fee structures. 

As legal professionals continue to embrace AI technology, it is expected that the relationship between in-house legal teams and outside counsel will be reshaped with regard to workload and billing practices.