Wolters Kluwer ELM Solutions’ fifth LegalVIEW Insights Report shows that corporate legal provider counts remain low

Rhea-AI Summary

The fifth LegalVIEW Insights report from Wolters Kluwer ELM Solutions reveals ongoing challenges in the corporate law sector post-pandemic. Despite a reduction in active provider relationships, external legal spending increased by 36% in the last year. Large companies with over $20 billion in revenue have expanded their legal provider counts, while Am Law firms continue to lose market share. Unranked firms have increased their external legal department spend from 44% to 47.5%. The report highlights the concentration in the Alternative Legal Service Provider (ALSP) market, dominated by seven firms, representing only 4.7% of the total spend.

Positive

• Average external legal spending grew by 36% in the last year.
• Large companies with over $20 billion in revenue increased their use of legal providers from 436 in 2020 to 451 in 2021.
• Unranked and small law firms attracted a larger share of external legal department spend, rising from 44% to 47.5%.

Negative

• Corporate legal departments (CLDs) reduced their active provider relationships, with a median count of 122 providers in 2021, an 8.6% decrease from 2020.
• Am Law 1-10 firms lost market share, dropping from 14.1% to 12.6%.

Data from ELM Solutions’ LegalVIEW database suggests that vendor counts have yet to recover from cuts made during the pandemic

HOUSTON--(BUSINESS WIRE)-- Despite expectations that corporate law department (CLD) provider counts would recover post-pandemic, a new report from Wolters Kluwer ELM Solutions indicates that the number of actively used law firms and service providers continues to remain depressed, with even some of the larger Am Law firms experiencing client attrition. The study marks the fifth in an ongoing series of LegalVIEW Insights reports sourced from ELM Solutions’ LegalVIEW database, which contains more than $150 billion in legal invoices.

In March 2021, ELM Solutions’ inaugural LegalVIEW Insights report examined the biggest shakeup in the outside legal services market since the Great Recession, with more than 90% of corporate legal departments (CLDs) reducing their active provider relationships. The fifth and latest study indicates that trend has yet to fully reverse itself, with a typical CLD found to engage a median of close to 122 providers in 2021 – an 8.6% decrease from 2020. But dwindling vendor portfolios haven’t necessarily blunted CLD’s average external legal spend, which has grown by 36% over the last year in conjunction with the average dollar size of some law firm and client relationships.

“Law firms can grow revenue by expanding the number of clients they serve or increasing their average revenue per client,” said Nathan Cemenska, Director of Legal Operations and Industry Insights at Wolters Kluwer ELM Solutions. “Our findings show that unranked law firms lost clients but grew revenue by increasing the dollar size of the average client relationship.”

Additional highlights from the fifth LegalVIEW Insights report include:

• The average vendor count at “small” or “medium” sized organizations remains depressed. But CLDs based in large companies with more than $20 billion in revenue have continued to expand their use of providers since the pandemic, leveraging an average of 451 vendors in 2021 – up from 436 in 2020 and 433 in 2019, respectively.

• Firms in the Am Law 1- 10 failed to retain the market share gains they captured in 2020, dropping from a 14.1% share to a 12.6% share. Small and unranked firms outside the Am Law 200 enjoyed a more favorable trajectory, expanding their share of external legal department spend from 44% to 47.5% over the last year.

• Alternative legal service providers (ALSPs) continue to represent a small but potentially growing share of the market. However, that share is largely dominated by seven leading companies, with the industry’s remaining ALSPs accounting for only 4.7% of spend on alternative legal services.

ELM Solutions, part of Wolters Kluwer GRC, is a market-leading global provider of enterprise legal spend and matter management, contract lifecycle management and legal analytics solutions. The company provides a comprehensive suite of tools that address the growing needs of corporate legal operations departments to increase operational efficiency and reduce costs. Corporate legal and insurance claims departments trust its innovative technology and end-to-end customer experience to drive world-class business outcomes. The other legal solutions business of Wolters Kluwer GRC is CT Corporation. The division’s banking and regulatory compliance businesses are Wolters Kluwer Compliance Solutions and Wolters Kluwer Finance, Risk & Regulatory Reporting.

Wolters Kluwer ELM Solutions was named a leader in both the IDC MarketScape: Worldwide Enterprise Legal Spend Management 2020 Vendor Assessment and IDC MarketScape: Worldwide Enterprise Matter Management 2020 Vendor Assessment. The company’s award-winning products include Passport®, one of the highest rated ELM solutions in the latest Hyperion MarketView™ Legal Market Intelligence Report and TyMetrix® 360°, the industry’s leading SaaS-based e-billing and matter management solution. CLM Matrix, meanwhile, was named a “strong performer” in The Forrester Wave™: Contract Lifecycle Management For All Contracts, Q1 2021 report. ELM Solutions’ LegalVIEW® portfolio of legal analytics solutions is based upon the industry’s largest and most comprehensive legal spend database, with more than $150 billion in invoices.

About Wolters Kluwer Governance, Risk & Compliance

Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.

Wolters Kluwer (WKL) is a global leader in professional information, software solutions, and services for the healthcare; tax and accounting; governance, risk and compliance; and legal and regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2021 annual revenues of €4.8 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 19,800 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802005189/en/

Media Contacts for Wolters Kluwer GRC

(Including Wolters Kluwer ELM Solutions, Wolters Kluwer CT Corporation, Wolters Kluwer Compliance Solutions and Wolters Kluwer Finance, Risk & Regulatory Reporting)

Paul Lyon

Senior Director, Global Corporate Communications: Global Marketing, Communications & Planning

Governance, Risk & Compliance Division

Wolters Kluwer

Office +44 20 3197 6586

Paul.Lyon@wolterskluwer.com

Frank Ready

Senior Specialist, Corporate Communications, Legal Services

Governance, Risk & Compliance Division

Wolters Kluwer

717-205-3647

Frank.Ready@wolterskluwer.com

Source: Wolters Kluwer Governance, Risk & Compliance

FAQ

What does the fifth LegalVIEW Insights report indicate about corporate law departments' provider counts?

The report shows that corporate law departments continue to have reduced provider counts post-pandemic, with a median of 122 providers engaged in 2021.

How much did external legal spending increase according to Wolters Kluwer's report?

External legal spending grew by 36% over the last year.

What trend was observed in Am Law firms according to the report?

Am Law firms experienced a decrease in market share, falling from 14.1% to 12.6%.

What percentage of external legal department spend do unranked firms now hold?

Unranked firms increased their share of external legal department spend from 44% to 47.5%.

What is the market share of Alternative Legal Service Providers according to the report?

Alternative Legal Service Providers account for only 4.7% of the total spend on alternative legal services.