Legal spend is top of mind for many in-house legal departments—and tracking budget versus spend is cited as a top metric by 65% of senior law department decision-makers in measuring legal function efficacy, according to UnitedLex’s Litigation Survey.
With cost-effectiveness a top priority for legal departments in 2025—fueled by an uptick in legal work, legal issues around the emergence and use of AI, political unrest, and the economic environment–there’s never been a better time for law department leaders and legal operations professions to take control of their balance sheet.
Legal spend management is the practice of controlling and efficiently managing the costs associated with legal service. Corporate legal departments traditionally have looked at law firm spend as levers to reduce costs, from alternative fee agreements and rate negotiations to conducting RPFs and creating panels.
But by strategically looking at spend management, and creating metrics-based goals, there’s also the opportunity to create value to both the department and organization, including revenue generation, risk mitigation, enhanced transparency and accountability, increased efficiency through streamlined processes, optimized resourcing, data-driven decision-making, and improved legal service delivery.
Start with legal spend analytics
Legal spend analysis, the foundation of any effective legal spend management program, begins with understanding exactly what is being spent, how, and with whom. This analysis involves collecting, analyzing, and interpreting data on a company’s legal expenses to pinpoint where the money goes, identify opportunities for cost reduction (or shifting spend to more efficient, lower-cost partners), and make informed decisions about legal services. Factors considered include the amount spent, the quality of work received, opportunities for rate or fee negotiations, and the performance of different legal providers.
By engaging in a holistic spend analysis exercise, law departments can review and analyze billing data to identify hidden trends and patterns across staffing, workflow, law firm, and other external service providers—the foundation improving internal legal processes, spend, and other decisions.
Disaggregate legal services
Once a baseline is established, law departments can look holistically at legal task allocation, who does what and how much it costs, determining which relatively lower-value or routine “run the business” legal work can be shifted from high-value internal counsel and staff, or expensive external counsel, to more cost-effective expertise.
In fact, a majority of in-house legal leaders are focused on strategically overhauling their sourcing approach and improving resource allocation (58% and 52% respectively). This involves strategically dividing work, assigning repeatable, lower risk tasks to specific firms or vendors, while reserving complex legal analysis for preferred law firms.
Currently, 52% of in-house teams are shifting “run the business” work to specialized service providers as part of legal spend management, reducing law firm spend while gaining speed and precision through partner expertise and technology. These tasks range from eDiscovery document review and other eDiscovery tasks, to managing routine, low-risk matters like third-party subpoenas and SRR/DSAR requests, case and fact management, drafting responses to high-volume, repetitive pleadings, ongoing contract review, IP prosecution support, and M&A filing support and related investigations.
By breaking down complex workstreams into specialized clusters and assigning each to the most suitable vendor, law departments can optimize efficiencies and substantially reduce spend.
Establish billing guidelines and a legal invoice review program
Once a baseline has been established and legal work is more effectively bifurcated, it sets the foundation for effective legal invoice review as part of a legal spend management program. It’s important to have billing guidelines in place, which are formal policies that outline the expectations, billing practices, and operational procedures vendors must follow when providing legal or legal support services to their clients.
In invoice review, every invoice from outside counsel and other vendors is audited for compliance and accuracy before payment. This not only reduces the risk of overcharges and frees up spend for legal work in other areas; it fosters greater accountability with law firms and other vendors.
Emphasize a culture of continuous improvement
Finally, and perhaps most importantly, cultivating a culture of continuous improvement is essential for long-term success in legal spend management. This is not a one-time fix, but rather an ongoing journey that requires a holistic perspective, integrating insights on cost, efficiency, service delivery quality, and partner performance.
True success hinges on a commitment to constant adaptation and refinement of strategies. This involves actively fostering collaborative relationships with strategic law firm and service provider partners, openly sharing best practices and valuable insights gleaned from data analysis. A key component of this continuous improvement process is a focus on carefully selected metrics. These metrics should provide actionable data that allows the legal department to track progress, identify areas for optimization, and justify strategic decisions.
By establishing attainable and, crucially, measurable objectives throughout this journey, organizations can effectively manage their legal spend, enhance the efficiency and effectiveness of their legal operations, and ultimately achieve significantly better business outcomes. This commitment to ongoing improvement ensures that legal spend management remains a dynamic and value-driving function within the organization.
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