Dive Brief:
- Nearly all general counsel say their budgets are up slightly after wrestling with widespread cuts last year. And most of them, 61%, say they expect slightly larger budgets next year as well, an average of 5% more, according to the 2025 In-House Legal Budgeting Report from Axiom and Wakefield Research. Technology was ranked as the top in-house investment priority for both 2024 and 2025 for larger companies.
- Legal managers predict their companies will boost investment on technology and real estate/facilities in 2025, while reducing outlays for human resources and mergers and acquisition activity, according to the survey. This mix of changing priorities might disrupt legal budgets.
- Among the planned legal tech spending, the top three areas for investment are virtual legal assistants/AI-powered chatbots (35%); e-billing and spend-management software (31%); and contract management platforms (30%).
Dive Insight:
An enormous number of GCs – 96% – said they expect “AI will meaningfully reduce costs within their legal department,” according to the Axiom white paper accompanying the survey results.
An equally large percentage of legal managers said they need to revamp their department’s budgeting buckets in the new year to account for AI investment, plus the need to address emerging risks.
About two-thirds of managers (61%) said they’re considering or actively planning to shift from a traditional zero-based budgeting approach, in which the annual budget is constructed from zero, to help justify each expenditure. This shift is seen as a way to boost agility and responsiveness as threats and opportunities arise, according to the survey.
More than half (52%) of legal managers said they forecast budgets quarterly, while 37% do so monthly. About 9% conduct bi-annual forecasting.
“The unpredictability of recent years — marked by economic fluctuations, political instability, and rapid technological advancements — has exposed the limitations of rigid budgeting frameworks,” Axiom said in the white paper.
The legal tech spending isn’t uniform. GCs from small to midsize companies with revenue of $250 million to $1 billion said they prioritized legal operations and staff salaries over technology. Larger companies with more than $1 billion in annual revenue spent more of their budgets on technology.
Not surprisingly, when it comes to money, more than three quarters of GCs (77%) said they’d experienced tension with their chief financial officer.
The top sources cited for this conflict was cost-cutting; followed by misalignment on corporate strategy, with legal being excluded from key decisions; and a lack of partnership, with finance not recognizing legal as a key business partner.
