Emerging Budgeting Trends for GCs in 2025: Strategies for Cost-Savings & Legal Department Efficiency
With over 20 years of in-house legal experience across various industries, I have witnessed numerous budgeting trends and gained valuable insights into how to maximize every dollar for efficiency while ensuring legal operations contribute to the overall success of businesses. As we approach 2025, for the first time in quite a while, many legal leaders report modest increases in their budgets. This shift prompts reconsideration of budgeting models and unlocks strategic investments in AI and legal technology.
I had the opportunity to sit down with fellow legal industry leaders, Allison Dibona (Associate Director -- Contracts and Legal Operations, Alkermes), Sruthi Kosuri (Director, Legal Operations, Marvel Technology), and Jane Stahl (General Counsel, Shaw Industries) to discuss emerging budgeting trends and the strategies they utilize to ensure cost-savings and efficiency as we prepare for the year ahead. We explored how in-house legal teams can optimize their budgets in 2025, including practical tips on cost containment and resource allocation.
Legal Budgets Increasing, Spend Shifting in 2025
Axiom's 2025 In-House Legal Budgeting Report, which surveyed 200 U.S.-based general counsel (GCs) at companies with over $250 million in annual revenue, indicates a positive shift in legal spending for the upcoming year. Despite recent challenges, more than half of the GCs reported budget increases in 2024, with an average rise of 4%. Looking ahead, 61% of GCs expect further budget growth in 2025, primarily focusing on investments in technology and external legal resources, particularly AI-driven tools that enhance efficiency and mitigate risk.
It's not just the increase in spending that matters; how those resources are allocated is equally crucial. After years of stagnant budgets, legal departments have become more strategic in their expenditures.
Or as Shaw Industries GC, Jane Stahl, explained, "While legal spend is increasing, the efficiency and quality of that spend are improving, thanks to the addition of legal operations."
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For those whose budgets have remained flat, innovation remains a priority. For example, Alkermes' Allison Dibona emphasized that despite her team's budget not increasing, they leverage innovative, efficiency-building solutions to keep pace with business demands, demonstrating that effective resource management can drive value even in a constrained financial environment.
Zero-Based Budgeting
While many legal leaders currently employ the zero-based budgeting (ZBB) mode—an approach that requires building budgets from scratch annually and justifying each expense—most general counsel contemplate a shift in their budgeting approach for 2025, with over a third already making the transition. The primary motivations for this shift include the desire for increased agility and responsiveness, the need to meet evolving regulatory and compliance requirements, and the maturation of the legal operations function within departments.
Despite this trend, the ZBB model still offers some valuable benefits. It can serve as an effective exercise for identifying essential line items and eliminating unnecessary expenses. Some legal leaders feel compelled to adopt ZBB to justify their spending, particularly in discussions about technology investments. "Sometimes, you can become complacent with your technology or expenditures, and you don't thoroughly evaluate them," added Stahl. This process of reflecting on how and how often technology is being used, or how many team members benefit from certain expenditures has proven beneficial for many GCs and in-house counsel.
Moreover, partnering with legal operations professionals who understand complex processes and prioritizes efficiency can significantly enhance budget management. Their perspective can provide clarity and organization, helping to make the budgeting process more effective and aligned with overall departmental and business goals.
Prioritizing Spend on Artificial Intelligence
Legal departments increasingly utilize artificial intelligence (AI) platforms to generate first drafts of documents. Contrary to initial fears that AI might replace junior lawyers, organizations have adopted the technology conservatively, with AI primarily serving as a valuable tool for drafting assistance with lawyer oversight. As legal teams explore the technology landscape, they identify solutions that enhance operational efficiency.
When considering contract management tools, many organizations have found that a variety of options incorporate generative AI capabilities, which can significantly improve workflow and employee wellness as technology-assisted efficiency eases volume pressures. The effectiveness and cost-savings of these AI tools often drive the decision to implement them.
Additionally, a shift in service delivery models has been common, with companies embedding generalist lawyers within business units rather than relying solely on specialists for specific areas such as commercial contracts or litigation. This approach allows for a more integrated legal function and leverages the support of AI tools.
“They're still reporting to me but giving them that generative AI support as they entered into being an all-purpose lawyer instead of a specialist was really helpful,” explained Stahl about her strategy. “It gave them a lot of comfort that there was a tool out there that was going to give them a first pass at a red line.”
Generative AI can provide essential assistance, helping lawyers manage increased responsibilities with greater confidence. For instance, these tools can perform preliminary reviews of contracts, which proves particularly useful for those who may not have engaged with similar documents for an extended time. However, to fully realize the benefits of AI, organizations must invest in training and support to encourage widespread adoption among legal professionals, which remains a challenge for many.
Tips for Driving Efficiencies, with or without Budget Increases
If your legal budget hasn't increased for 2025, you can still drive efficiency. Even with a flat budget, opportunities often exist to optimize available resources and identify cost-saving measures, ensuring legal teams remain agile and efficient:
- Leverage Existing Tools: Many legal departments can find untapped potential in enterprise-level tools that the organization already uses company-wide. For instance, software like Microsoft Forms or Smart Sheets can streamline processes and improve efficiency without requiring new investments.
- Collaborate with IT: Working closely with your IT department can reveal tools and systems that may have been underutilized or overlooked. These tools can often replace outdated processes, reducing inefficiencies and improving workflow without additional spending.
- Simplify Processes: Sometimes, introducing a new way of using existing tools can expose unnecessary steps in your current processes. By re-evaluating your workflows, you can identify opportunities to cut out redundant actions, further improving efficiency.
- Focus on Change Management: When updating or revising processes, clear communication and proper change management are essential. Helping your team adapt to small shifts in how they use existing systems can lead to big improvements in productivity.
Ultimately, the goal is to optimize what you already have to ensure your legal department can meet its needs, even on a flat budget.
Planning for Outside Counsel Spend
Legal leaders facing flat budgets for outside counsel in 2025 must employ strategic approaches to maximize their financial resources. By implementing innovative cost optimization techniques, they can effectively manage external legal expenditures without compromising quality or outcomes.
Utilizing existing automation tools, such as AI-assisted contract review, can help streamline processes and reduce costs associated with routine legal tasks. For larger, specialized legal matters—such as mergers and acquisitions or intellectual property litigation—legal leaders may feel tempted to turn to outside counsel from large law firms. However, for many legal needs, leveraging smaller, MWBE, or more modern firms can lead to significant cost savings without compromising quality.
Engaging flex legal talent through alternative legal service providers (ALSPs) like Axiom can offer access to high-quality legal talent for routine tasks, allowing internal teams to focus on more strategic initiatives. During my career, I have successfully leveraged talent from Axiom, and I can attest to the exceptional quality of the professionals I collaborated with. I have also spent time as an Axiom lawyer, providing services to in-house clients, before making the shift back in-house. Partnerships with ALSPs not only enhance operational efficiency but also enable organizations to take on significant projects that align with their goals in a way that can flex to meet budgetary and operational objectives. Integrating these resources into your network can be a game-changer for driving value and innovation within your legal department and enhancing legal service delivery within the wider organization.
It's also critical to understand where your outside counsel budget is spent and regularly review and negotiate fee arrangements with outside counsel, particularly those that receive the largest shares of your spend. Engaging in open dialogues with law firms about their pricing structures and available discounts can lead to more favorable terms. Legal leaders should scrutinize their existing agreements, especially regarding tiered discount structures, ensuring they align with current spending patterns. Exploring alternate fee arrangements (AFAs), where appropriate, can also provide flexibility and predictability in budgeting, making it easier to manage costs over time.
By taking these steps—leveraging technology, utilizing flex legal talent, negotiating effectively, and considering AFAs—legal leaders can maximize their outside counsel spend and drive efficiencies, even in a tight budget environment.
Regardless of Budget, Collaboration is Key
To effectively manage a legal department's budget and resources, in-house counsel must align their work with the overall business strategy. One way to do this involves working closely with the CFO. Collaboration and cross-department partnerships between Legal and Finance can increase value from legal budgets. This alignment not only enhances the value of the legal team's contributions but also strengthens the case for necessary technology investments or additional resources. By understanding how their work supports strategic initiatives, legal professionals can better articulate the value of their contributions, making it easier to secure funding for essential tools and technologies.
Regularly reviewing and structuring budgets is crucial. Legal leaders should closely monitor spending patterns to identify areas of inefficiency or underutilization. If they cannot substantiate certain costs, those funds may represent potential savings they can redirect toward more impactful initiatives. Encouraging a culture of financial transparency within the legal team can foster a greater understanding of budgetary constraints and the rationale behind spending decisions. When team members comprehend the pressures on the budget, they are more likely to support prudent resource management and make informed decisions about the tools they use.
Ultimately, fostering a collaborative environment that emphasizes the connection between legal work and business goals will not only drive efficiency but also enhance the overall effectiveness of the legal department. By ensuring your team remains informed about both the strategic vision and budgetary realities, legal leaders can cultivate a sense of ownership and responsibility that contributes to the success of the organization.
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