Insights are drawn from the LegalVIEW database, which has now crossed the milestone of celebrating more than $150 billion in invoices.
In 56 percent of corporate legal departments (CLDs), the top 10 biggest legal matters account for between 20 percent to 40 percent of spend. But according to Wolters Kluwer's ELM Solutions, which published the third in a series of four quarterly LegalVIEW Insights reports today, there are still a variety of simple cost-saving measures a department can implement in order to reduce the budgetary impact of these matters over the long-term.
Insights into CLD spend are sourced from ELM Solutions’ LegalVIEW database. Already the most comprehensive legal spend database in the world, LegalVIEW’s substantial collection of invoices recently crossed the $150 billion threshold. The wide scope of that data bolsters ELM Solutions’ ability to continue identifying key trends - and provide expert guidance - within an ever-changing legal industry.
Megamatters, or legal matters that accrue more than $1 million USD in lifetime costs, account for much of the volatility found in corporate law firm spend. However, the ELM Solutions report indicates that some organizations are still not taking full advantage of technology and managed services that can help reduce spend. For example, the use of alternative legal service providers (ALSPs) can drive significant improvements in cost control. But the most recent LegalVIEW Insights report showed that ALSPs have still captured only a small percentage of megamatters overall, fielding just 2.2 percent of the available megamatter work coming out of CLDs.
“There is always low-hanging fruit in every type of legal matter, and the scope of these matters means that the simple effort of picking the low-hanging fruit from a single matter could save millions,” said Nathan Cemenska, Director of Legal Operations and Industry Insights for Wolters Kluwer's ELM Solutions.
Additional highlights from the third LegalVIEW Insights report include:
- Megamatters are bellwethers for the trajectory of a department’s overall legal spend. If annual megamatter spend rises or falls by even $1 USD, there is an 89 percent chance that the direction of total outside counsel spend will follow accordingly. The connection between megamatter and total outside counsel spend necessitates ongoing communication between all stakeholders.
- Legal departments may find that the number of megamatters on their docket can vary widely over even a six-year period. During a “high” year, megamatters as a percentage of overall outside counsel spend will be at least double what they were during a “low” year inside 38 percent of corporate legal departments. Some CLDs have previously used “low-touch” tactics such as creating matter-specific discounted rates for megamatters and enforcing outside counsel billing guidelines to manage the resulting costs.
- Three megamatter types - litigation, corporate and securities, and mergers and acquisitions (M&A) - together represent almost 40 percent of corporate legal spend. Because these types of matters recur frequently inside many CLDs, investments in people, process and technology – such as AI powered legal bill review or solutions that automate parts of the M&A process – can pay dividends long-term. Likewise, CLDs can save on megamatter costs by using technology to create and manage law firm panels, negotiating special panel rates, and discouraging in-house attorneys from hiring off-panel firms.
- CLDs that refuse to engage regional law firms on megamatters could be forfeiting significant cost savings in the form of reduced hourly rates. Unranked law firms outside of the Am Law 200, for instance, appear to be playing a central role in how some corporate legal departments are handling their megamatters. Together, unranked firms account for about 28 percent of megamatter spend, which remains less than the 40.3 percent of spend they capture in matters accruing less than $1 million USD in lifetime costs.
In conjunction with the LegalVIEW Insights reports, ELM Solutions is producing an ongoing series of LegalVIEW Insights blogs, webinars and other content discussing the emerging trends from the LegalVIEW Data Warehouse. Earlier this year, ELM Solutions released the first and second installments in its LegalVIEW Insights report series. Previous highlights include that 90 percent of CLDs reduced their active provider relationships in 2020, while also holding their spending flat for up to three consecutive years despite overall legal spend volatility and the trend of escalating costs. Both reports and other associated materials are available on the LegalVIEW Insights page.
