Legal Departments turn to AI and matter management technology to rein in outside counsel costs – Gartner – January 13, 2025.

Legal departments are increasingly relying on technology—and artificial intelligence in particular—to address chronic cost overruns tied to outside counsel, as traditional oversight methods prove insufficient for managing complex legal work at scale, according to new research from Gartner.

In-house lawyers report that legal matters sent to outside counsel fall within planned budgets only about one-fifth of the time, Gartner found, underscoring what analysts describe as a structural breakdown in how matters are scoped, tracked, and governed across their lifecycle.

At the same time, legal leaders are accelerating investments in technology as workloads grow more complex and budget pressure intensifies. Gartner research shows that 64% of legal and compliance leaders plan to increase spending on legal technology, including AI-driven tools, as they seek to improve productivity and cost predictability.

“Excess spending on outside counsel is a pressing challenge for legal departments because it diverts resources away from innovation and business growth,” said Rosemarie Griffin, senior principal research analyst in Gartner’s Legal and Compliance practice. “Passive oversight doesn’t drive cost-effectiveness. General counsel must help their teams adopt an active approach to matter management that sets clear expectations, provides continuous oversight, and evaluates performance at every stage.”

Technology platforms that standardize matter intake, budgeting, scoping, and performance tracking are increasingly viewed as essential to that shift. Gartner estimates that advances in generative AI and automation could improve legal department productivity by 10% to 20% over the next two to five years, particularly by reducing manual effort, duplication of work, and administrative overhead.

A Gartner survey of 200 in-house and law firm lawyers conducted through December 2024 found that more than half agreed in-house teams lack effectiveness in key activities related to managing outside counsel. That gap, analysts say, is driving overspend and inefficiency.

“This lack of effectiveness is a major contributor to excess legal spend,” Griffin said. “Without proper guidance and structured oversight, outside counsel work can fail to meet expectations and incur additional cost.” Gartner estimates the average legal department spends $162,000 annually paying lawyers to duplicate, at least in part, work already performed by external firms.

As a result, general counsel are increasingly looking to technology to enforce consistency and transparency across the matter lifecycle. Gartner research shows that 36% of general counsel are prioritizing AI adoption, AI skills development, or AI risk management as part of their legal operations strategy—reflecting a shift from experimentation toward deliberate, enterprise-wide deployment.

Gartner refers to the resulting operating model as active matter management, an approach that emphasizes continuous governance from matter initiation through closure. Lawyers who are effective at active matter management are twice as likely to keep matters within budget, according to the research.

Rosemarie Griffin

Yet adoption remains uneven. Gartner found that fewer than half of in-house lawyers understand budget ranges at the start of a matter, and only slightly more than half have clarity on timelines or objectives—gaps that technology-enabled workflows are designed to close.

To support active matter management, Gartner recommends that general counsel standardize processes across the matter lifecycle and equip lawyers with digital tools such as budgeting templates, scoping checklists, process maps, and training programs embedded into daily workflows.

“Budgeting templates help both parties align financial parameters from the outset, while scoping checklists enable lawyers to communicate critical details such as timeline, risk tolerance, and objectives,” Griffin said. “These resources also help lawyers clarify their own expectations before engaging external firms, reducing rework and cost overruns.”

AI is increasingly being applied within these systems to assist with budgeting, identify early signs of scope creep, analyze historical matter data, and surface patterns that predict overruns or duplicated effort. While Gartner cautions that technology does not replace legal judgment, analysts emphasize that it provides the structure and visibility required to manage outside counsel more effectively.

As legal departments face mounting pressure to deliver predictable costs and measurable value, Gartner’s research suggests that technology-enabled active matter management is becoming less optional—and more foundational—to modern legal operations.

To learn more, visit www.gartner.com