Legal Department Budgets: Finally Trending Up!
During a year of inflationary pains, global crises, and economic pressures, 96% of GCs suffered budget slashes in 2023, by an average of 11%. But the latest findings show hope—legal departments are now reporting a moderate, yet positive, shift in 2024, as more than half of GCs reported a budget increase this year, albeit by an average increase of 4%. Even better, only 10% saw a decrease, while a little more than a third (36%) saw no change at all.
Most legal leaders (96%) reported that they’ll need to update their current budgeting buckets for legal resources and expertise to account for AI or other emerging risks. This could account for why, in addition to technology, they plan on increasing their investments in external resourcing options like flexible legal providers or virtual law firms. Fortunately, the majority (61%) also anticipate another increase in legal department budgeting for 2025.
GCs Anticipate Meaningful ROI from Legal AI and Tech Investments in 2025
Once considered leaders of the most unlikely department to embrace change, legal leaders now indicate a growing emphasis on technology within legal departments. In 2024, 44% of GCs prioritized technology in their budget allocations, with a significant focus on legal operations (38%) and in-house staff salaries (36%).
This trend is expected to continue into 2025, with 96% of GCs acknowledging the need to update their budgeting buckets to address AI and other emerging risks. Technology investments, particularly in AI-powered tools like virtual legal assistants, predictive analytics, and contract review, are anticipated to drive meaningful returns on investment (ROI) in the coming year.
Most GCs Plan to Shift from Current Budgeting Model in 2025
While the majority of legal leaders reported they currently use the zero-based budgeting model (ZBB) for their legal department, most GCs said they’re considering or actively planning to shift their budgeting model in 2025, and more than a third already have. The top reasons for the shift are to become more agile and responsive, to meet regulatory and compliance requirements, and because the legal ops function within legal departments has evolved.
Even though the ZBB model took precedence in 2024, most of the GCs who implemented it are planning to, or have already, shifted their model to become more agile. GCs who had already adopted an agile, rolling/continuous legal budgeting strategy saw larger budget increases in 2024 and largely avoided cuts altogether.
As 2025 approaches, legal departments are gearing up for significant shifts in their financial strategies, driven by emerging challenges and opportunities in technology and compliance.
The traditional zero-based budgeting (ZBB) model, long a staple of legal departments, is being reconsidered by most GCs. The unpredictability of recent years—marked by economic fluctuations, political instability, and rapid technological advancements—has exposed the limitations of rigid budgeting frameworks.
At last, it appears legal budgets are growing. Looking ahead, 61% of GCs expect further budget increases in 2025. The primary areas of investment will be in technology, with a particular focus on AI-driven tools that can enhance efficiency and mitigate risks. To complement investment into LegalTech tools, GCs are also increasing their reliance on external legal talent.
This is where modern, tech-savvy partners like Axiom step in. Axiom can ensure a level of collaboration, knowledge, and inhouse experience equivalent to that of an actual member of the in-house team; and can support your organization’s transition to trustworthy, AI-enabled workflows to drive legal team innovation, efficiency, and job satisfaction.
The traditional zero-based budgeting (ZBB) model, long a staple of legal departments, is being reconsidered by most GCs. The unpredictability of recent years—marked by economic fluctuations, political instability, and rapid technological advancements—has exposed the limitations of rigid budgeting frameworks.
Consequently, 61% of GCs are either planning to shift or have already shifted to more dynamic models, such as the rolling/continuous budgeting model, which allows legal leaders to continually evaluate and adjust the legal team’s budget throughout the year based on the present performance and economic environment. This shift is motivated by a need for greater agility in responding to regulatory and compliance demands and the evolving role of legal operations.At last, it appears legal budgets are growing. Looking ahead, 61% of GCs expect further budget increases in 2025. The primary areas of investment will be in technology, with a particular focus on AI-driven tools that can enhance efficiency and mitigate risks. To complement investment into LegalTech tools, GCs are also increasing their reliance on external legal talent.
Previous studies have shown legal teams have been under-resourced and overwhelmed with legal work, on top of daily administrative burdens. In 2025, 41% of legal department leaders plan to boost their spending on flexible legal talent providers, virtual law firms, and alternative service providers. This strategy reflects a broader trend of legal departments seeking cost-effective solutions that offer high-caliber expertise without the administrative hassle and rising rates associated with traditional law firms.This is where modern, tech-savvy partners like Axiom step in. Axiom can ensure a level of collaboration, knowledge, and inhouse experience equivalent to that of an actual member of the in-house team; and can support your organization’s transition to trustworthy, AI-enabled workflows to drive legal team innovation, efficiency, and job satisfaction.
Axiom gives small, mid-market, and enterprise clients a single trusted provider who can deliver a full spectrum of legal solutions and services across more than a dozen practice areas and all major industries. Axiom’s large global bench of AI legal talent is helping in-house legal teams design and implement AI data governance, privacy, and compliance programs; conduct AI regulatory assessments and AI bias reviews; evaluate AI’s impact on IP protection; and drive AI technology selection decisions, implementation, and usage.