Axiom's 2025 In-House Legal Budgeting Report, released Tuesday, also found that a growing number of general counsel and their chief financial officers are reallocating resources toward legal tech tools and high-caliber, cost-effective legal talent, such as those with legal artificial intelligence skills and tech experience.
By the numbers
In-House Budgets Up
Where funds went in 2024
44%
Technology
38%
Legal operations
36%
In-house staff salaries
Source: Axiom
"This year's study uncovers an unmistakable trend towards more agile, value and technology-driven legal departments," Axiom CEO David McVeigh said in a statement accompanying the report. "Beyond the research, clients consistently tell me they are at the end of their rope on law firm costs and annual rate increases."
Unlike in past years, legal leaders ranked law firms as their lowest spending priority for 2025.
McVeigh said budget allocation is shifting away from traditional law firms and toward more "innovative, value-driven law firms, flexible legal talent and technology to improve lawyer productivity."
In-house leaders — once hesitant to embrace change — now indicate there is a growing emphasis on technology within legal departments. In 2024, 44% of general counsel prioritized technology in their budget allocations, with a significant focus on legal operations (38%) and in-house staff salaries (36%), the report said.
Sixty-one percent of general counsel surveyed said they likely will see budget increases in their next budgeting cycle, with an average expected increase of 5%. Only 10% of general counsel experienced a budget decrease in 2024, compared to 96% of general counsel who reported their budgets had been reduced an average of 11% at the beginning of 2024, the study showed.
Meanwhile, 96% of general counsel surveyed said AI investment will meaningfully reduce costs in their legal departments, with virtual legal assistants such as AI-powered chatbots being the most popular planned purchase. The next-biggest legal tech investment targets were AI-driven predictive analytics tools (27%) and AI-powered contract review (26%), according to the report.
Over 60% of general counsel said they are considering or actively planning to shift their budgeting strategy in their next budgeting cycle to move away from traditional models — including zero- or precedent-based blueprints — in favor of the rolling/continuous model to improve budgeting flexibility. Thirty-five percent of general counsel said they had already shifted their budgeting strategy to become more agile and responsive.
Rolling models are becoming the preference, because they allow legal leaders to continually evaluate and adjust the legal team's budget throughout the year based on the present performance and economic environment, according to the report.
"This shift is motivated by a need for greater agility in responding to regulatory and compliance demands and the evolving role of legal operations," Axiom said in the report.
Another key takeaway from the report is that there are increasing problems between general counsel and chief financial officers. According to Axiom, 77% of general counsel said there were areas of tension in their relationship with their chief financial officer, mostly due to conflicting priorities between cost-cutting and risk management.
"Left unresolved, this tension impacts budgeting, strategic business alignment, performance metrics and forecasting accuracy," Axiom said.
The study was based on a comprehensive survey of 200 general counsel and chief legal officers from U.S. companies with minimum annual revenue of $250 million, according to Axiom.
--Editing by Nicole Bleier. Graphics by Jason Mallory.
For a reprint of this article, please contact reprints@law360.com.
