Legal Departments Lead Industry Change with Tech and Budget Shifts
Most corporate legal departments expect budget growth and embrace new tech in 2025-2026.
Why it matters: Legal ops and in-house counsel must understand these shifts to optimize services and advise stakeholders effectively amid evolving client demands and cost pressures.
- 76% of legal departments cite geopolitics as a top challenge for 2025-2026.
- 83% anticipate budget increases next year, while 87% focus on reducing costs.
- Over 80% plan to bring work in-house or shift to alternative legal providers, who have higher client satisfaction.
- 52% of in-house counsel now use generative AI, doubling from 23% in 2024, but only 25% view it as a top priority.
Corporate legal departments are reshaping the legal industry by adopting new technologies and changing how they deliver services. An EY study finds 76% of legal teams identify geopolitics and 75% note regulatory pressures as major challenges for 2025 and beyond. These external factors are accelerating change.
Budget shifts reflect these pressures: 83% of legal departments expect higher budgets next year, but 87% still prioritize cost-cutting. To manage this, over 80% are bringing work back in-house or moving it to alternative legal service providers, which enjoy higher satisfaction ratings than traditional firms, according to a Legal.io report.
Technology adoption is growing but selectively prioritized. About 75% of departments are formulating tech or data strategies. Meanwhile, use of generative AI among in-house legal professionals jumped from 23% in 2024 to 52% in 2025, per the 2025 ACC report. However, only 25% consider AI a top priority, and about a third deploy AI broadly.
Leadership views reveal a gap: 86% of general counsel see their department as essential to business success, but only 17% of other company executives agree, according to Thomson Reuters. Staffing limits and proving strategic value remain challenges. Despite this, legal’s role as a business contributor is growing, with technology strategy importance doubling entering 2026.
By the numbers:
- 76% — legal teams citing geopolitics as a primary challenge in 2025-2026
- 83% — legal departments expecting budget increases next year (2025)
- 52% — in-house counsel actively using generative AI in 2025, up from 23% in 2024
What's next: Expect ongoing focus on balancing budget growth with cost reduction, plus increased AI deployments through 2026.