As legal departments move to build out their internal operations, many recognize the value of legal technology tools and processes in helping them control their spend, according to the 2nd Annual Study of Legal Spend Management, a survey of 59 in-house legal professionals conducted by The Blickstein Group and Exterro.

The survey found that, this year, almost the same number of legal departments are increasing their outside legal spend as decreasing it. More legal departments, however, are increasing their inside legal spend, rather than decreasing it or keeping such spend steady.

Still, outside legal spend accounts for a higher nominal amount of most legal departments' overall budget than internal legal spend. Almost half, 46 percent, of legal departments budgeted $25 million or more on outside legal spend, compared with 36 percent who budgeted the same on internal legal spend.

Most of that outside legal spend was directed at law firms. The survey found that 62 percent of respondents spent more than 80 percent of their outside legal spend on their outside counsel.

Bill Piwonka, chief marketing officer at Exterro, noted this could be partly because legal departments are slow to turn away from relying on outside counsel, which they have done for most of their history. But it could also be because “a number of law firms are offering additional services,” he added, pointing to law firms like Reed Smith that are offering more technology and managed services akin to alternative legal providers.

Legal departments had a number of ways of controlling and minimizing the amount they spend internally and externally. Most effective, however, were those centered on technology. Respondents ranked e-billing enforcement of guidelines, for instance, as one of the most helpful tools in controlling budgets.

E-billing is useful in managing spend, Piwonka said, because it “is going to give you insight where you are spending and start giving you ideas about how you can start optimizing that and gain efficiencies.”

Brad Blickstein, principal at Blickstein Group, added that such a tool was also particularly helpful for enforcing compliance with outside counsel guidelines, noting that, “without e-billing, there is just no way to tell if they are being lived up to.”

Other tech tools and processes were also ranked highly for their ability to control spend, such as key performance indicators to track law firm performance and automated invoice review. But unlike e-billing, these tools were not widely used by many legal departments.

Blickstein, however, noted that it may only be a matter of time before corporate law becomes more sophisticated with how they control cost, “especially with legal operations people taking more power in law departments. They are starting to manage those departments like other divisions or departments in the company.”

Many legal departments are looking to control their spend by moving some operations in-house, with most aiming to insource contract review, followed by litigation services and IP work.

The survey also found that most legal departments, 56 percent, moved to rein in their e-discovery spend due to the C-suite's demands for cost controls, while 12 percent of departments did so because of directives from their general counsel.  On average, the biggest impediments to controlling e-discovery costs were undefined e-discovery processes that needed to be re-worked, and lack of reporting on e-discovery-related expenses.