The average corporate law department spends just under $30 million annually on external legal, or 61% of the total legal budget. With that kind of money you could afford roughly 2 million hamsters. That might sound like a lot, but don’t forget that Elon Musk reckons you’d need 50 billion hamsters to fill Tesla’s Gigafactory. At that rate it would be 25,000 years before you need to find a new hamster habitat. We could be living on Mars by then.
Looking at the data from the CLOC 2020 State of the Industry Report a few interesting stats jump out.
First, spend on technology and alternative legal service providers (ALSPs) is relatively modest. Compared to an average $528K technology outlay, legal departments spend about twenty times (20x) on their in-house team ($19.2M), and about thirty times (30x) on external legal fees ($29.8M). Average ALSP spend is under $1M.
Second, although most industries are still spending more externally than internally, that is no longer true for tech companies. The technology sector appears to have made the switch to spending the majority of its legal budget internally.
Third, life sciences legal departments (including biotech and pharma) appear to be super-sized compared to most other industries. They have the largest headcount by far (191 on average) and their legal operations teams are somewhere between double and triple the size of any other industry. Not sure why this is, although there could be a COVID factor creeping in?
The report also reaffirms that companies spend on average just over 1% of revenue on legal, although small companies spend proportionately more (over 3%) than large companies (under 0.4%).
The CLOC survey is based on 146 companies, including 27 Fortune 500 companies, across 17 countries. The hamster price is based on the $15.99 price I paid for our dwarf winter white hamster called Snowball. I discounted this back to $15 a hamster (a modest volume discount).
Kassandra, Esq. 