Lawyers using technology. Photo by Indypendenz/Shutterstock.com.

Empowered by technology and seeking to cut costs, legal departments have been bringing more of their legal services in-house. But departments doing so are hitting limits and running into efficiency challenges, according to Exterro's “2017 In-House Legal Benchmarking Report: Optimizing Legal & E-Discovery Activities.”

The report, a survey of 86 in-house professionals, including general counsel, corporate attorneys, litigation support staff, paralegals and legal directors, found that 51 percent of legal departments conducted at least half of their organization's legal services in-house.

Of those, 17 percent conducted at least 75 percent of such work in-house, while eight percent conducted all their legal services on their own. Over one-third of respondents also said they increased the amount of work they handled in-house over the past year.

Mike Hamilton, director of marketing programs at Exterro Inc., noted that the move toward insourcing is a “trend that has been taking place over the past four or five years. But I think what you're seeing now is that legal departments are looking for that hybrid place, trying to find that happy medium” between bringing work in-house and outsourcing.

For the most part, legal departments are split on how best to find this balance. When asked how they expect their use of outside service providers to change over the next two years, one-third said it would stay the same as it is currently, while 29 percent predicted less use of service providers. However, 21 percent believed they would use more service providers in the years to come.

Interestingly, some of the most and least outsourced operations were those involving e-discovery. A majority of respondents said their legal department's least outsourced services were data preservation and collection, 56 percent and legal hold work, 69 percent. On the other hand, more than a third said the most outsourced services were data processing, 34 percent, data review, 36 percent, and data production, 38 percent.

Hamilton noted that the “most outsourced legal services still fall on the latter-half side of the [Electronic Discovery Reference Model],” because to bring these in-house legal departments “would need to drastically modify their resources, specifically bringing in new personnel and technology.”

And often times, this can be too much of a financial burden for many corporations. “In a lot of their minds, this is not cost-effective,” he added.

Moving more e-discovery operations in-house was also not likely, given that many legal departments struggled to effectively manage their e-discovery costs. Though controlling e-discovery costs was cited by respondents as the top challenge, only 38 percent tracked or measured them.

Hamilton noted that creating such e-discovery cost metrics can be a significant challenge for legal departments because they “can only do it when they have spent the time, the energy, and the resources to build the foundation to create repeatable and consistent e-discovery processes.”

And most legal departments are not there yet. Indeed, many are still slow to turn to technology to more efficiently management their legal projects in the first place.

The survey found that when managing legal projects, 46 percent of legal departments used matter management software in 2017, compared to 44 in 2016, while 25 percent used legal management, a slight increase from 24 percent the past year.

“One of the reasons why there is such slow crawl with adoption with project management tools is that change is hard, and it's hard especially in a field like legal,” Hamilton explained. While efficient project management has become the norm in other industries, he added, it's still the exception rather than the rule in legal.

“Only in the past couple of years have legal departments started to take the idea of efficiency seriously. And really this comes from the top down.”

Lawyers using technology. Photo by Indypendenz/Shutterstock.com.

Empowered by technology and seeking to cut costs, legal departments have been bringing more of their legal services in-house. But departments doing so are hitting limits and running into efficiency challenges, according to Exterro's “2017 In-House Legal Benchmarking Report: Optimizing Legal & E-Discovery Activities.”

The report, a survey of 86 in-house professionals, including general counsel, corporate attorneys, litigation support staff, paralegals and legal directors, found that 51 percent of legal departments conducted at least half of their organization's legal services in-house.

Of those, 17 percent conducted at least 75 percent of such work in-house, while eight percent conducted all their legal services on their own. Over one-third of respondents also said they increased the amount of work they handled in-house over the past year.

Mike Hamilton, director of marketing programs at Exterro Inc., noted that the move toward insourcing is a “trend that has been taking place over the past four or five years. But I think what you're seeing now is that legal departments are looking for that hybrid place, trying to find that happy medium” between bringing work in-house and outsourcing.

For the most part, legal departments are split on how best to find this balance. When asked how they expect their use of outside service providers to change over the next two years, one-third said it would stay the same as it is currently, while 29 percent predicted less use of service providers. However, 21 percent believed they would use more service providers in the years to come.

Interestingly, some of the most and least outsourced operations were those involving e-discovery. A majority of respondents said their legal department's least outsourced services were data preservation and collection, 56 percent and legal hold work, 69 percent. On the other hand, more than a third said the most outsourced services were data processing, 34 percent, data review, 36 percent, and data production, 38 percent.

Hamilton noted that the “most outsourced legal services still fall on the latter-half side of the [Electronic Discovery Reference Model],” because to bring these in-house legal departments “would need to drastically modify their resources, specifically bringing in new personnel and technology.”

And often times, this can be too much of a financial burden for many corporations. “In a lot of their minds, this is not cost-effective,” he added.

Moving more e-discovery operations in-house was also not likely, given that many legal departments struggled to effectively manage their e-discovery costs. Though controlling e-discovery costs was cited by respondents as the top challenge, only 38 percent tracked or measured them.

Hamilton noted that creating such e-discovery cost metrics can be a significant challenge for legal departments because they “can only do it when they have spent the time, the energy, and the resources to build the foundation to create repeatable and consistent e-discovery processes.”

And most legal departments are not there yet. Indeed, many are still slow to turn to technology to more efficiently management their legal projects in the first place.

The survey found that when managing legal projects, 46 percent of legal departments used matter management software in 2017, compared to 44 in 2016, while 25 percent used legal management, a slight increase from 24 percent the past year.

“One of the reasons why there is such slow crawl with adoption with project management tools is that change is hard, and it's hard especially in a field like legal,” Hamilton explained. While efficient project management has become the norm in other industries, he added, it's still the exception rather than the rule in legal.

“Only in the past couple of years have legal departments started to take the idea of efficiency seriously. And really this comes from the top down.”