Everlaw In-House Innovation Report: Teams Reduce Outside Counsel

• Over 50% of in-house legal teams have reduced work sent to outside counsel, with another 44% planning to do so within the next year.
• This reduction is largely attributed to increased confidence in technology, particularly generative AI-powered tools, for handling legal matters.
• In-house teams primarily use outside counsel for business insights (56%) and complex matter management (54%) for specific, high-value services, not routine tasks.
• A significant 81% of in-house teams expect most legal work to shift to outcome-based pricing within five years, moving away from billable hours.
• The Everlaw In-House Innovation Report, based on a survey of 300 professionals, highlights these major shifts in legal service delivery.

A substantial 81% of respondents believe that within the next five years, the majority of legal work will transition to an outcome-based pricing legal services trend, moving away from the conventional billable-hour model.

A significant majority of in-house legal teams are actively reducing the volume of work they delegate to external law firms, according to the recently published Everlaw In-House Innovation Report. More than half of all corporate legal departments have already scaled back their reliance on outside counsel, with an additional 44% indicating their intention to implement similar reductions within the next year. This trend signals a notable shift in how in-house legal teams manage their caseloads and allocate resources.

This move towards insourcing is largely driven by a growing confidence in technological capabilities, particularly the increasing adoption of generative AI legal department impact tools. Gloria Lee, Everlaw's chief legal officer, highlighted to Law.com that the enhanced functionality provided by these advanced technologies empowers internal teams to handle a broader range of legal matters independently. This strategic integration of legal tech in-house counsel strategy is fundamentally reshaping the traditional relationship between corporate legal departments and their external providers, impacting overall Everlaw report legal spend.

Despite the overall reduction in outsourced work, in-house legal teams continue to engage outside counsel for specific, high-value services. The Everlaw In-House Innovation Report indicates that 56% of internal legal departments primarily seek external firms for their business and commercial insights. Additionally, 54% rely on outside counsel for expert assistance with the complexities of managing intricate legal matters. Conversely, only 27% of in-house teams report requesting external support for routine legal tasks, underscoring a clear preference for handling such work internally.

As in-house legal teams reduce outside counsel engagement, they also anticipate a fundamental transformation in billing practices. A substantial 81% of respondents believe that within the next five years, the majority of legal work will transition to an outcome-based pricing legal services trend, moving away from the conventional billable-hour model. Nearly half of these respondents expect this significant shift to occur even sooner, within the next three years, signaling a strong desire for more predictable and value-driven fee structures.

The findings from the Everlaw report, which surveyed 300 in-house attorneys and legal operations professionals in collaboration with Wakefield Research, paint a clear picture of an industry in flux. The increasing proficiency of in-house legal teams, bolstered by advanced legal technology, is enabling greater self-sufficiency and a more strategic approach to external engagements. This means outside counsel must adapt their service delivery and pricing models to remain competitive in a market where in-house legal teams are increasingly sophisticated and cost-conscious.

For external firms, demonstrating expertise in specialized areas like complex matter management and offering unique business insights will become even more critical. Furthermore, embracing and integrating outcome-based pricing legal services trend will be essential to align with client expectations and secure future work. The widespread adoption of generative AI legal department impact tools by in-house teams also suggests that outside counsel who can effectively leverage and integrate similar technologies into their offerings will hold a distinct advantage, as the landscape of legal service provision continues to evolve rapidly.

Outside counsel must adapt their service delivery and pricing models, potentially embracing outcome-based billing and demonstrating proficiency with AI tools, to remain competitive as in-house legal departments increasingly insource work and leverage technology. In-house counsel should evaluate their current technology stack and explore generative AI solutions to further optimize internal workflows and reduce reliance on external firms.

Source: Original reporting via Everlaw’s In-House Innovation Report