Last
year,
corporate
legal
departments
hinted
at
weaponizing
their
AI
investments
to
transform
the
fundamental
terms
of
their
relationships
with
outside
counsel.
Budgets
were
tightening,
headcount
flattening,
and
legal
ops
teams
discussed
leveraging
technology
to
squeeze
law
firms
on
everything
from
taking
work
back
in-house
to
imposing
alternative
fee
arrangements.
The
2026
CLOC
State
of
the
Industry
Report,
produced
in
collaboration
with
Harbor
digs
deeper
into
those
same
survey
results,
takes
the
raw
numbers
and
adds
more
analysis.
And
it’s
not
a
subtle
one.
CLOC
President
&
CEO
Oyango
Snell
and
Chair
Laura
Dieudonné
frame
it
as
a
profession
that
has
“moved
past
the
era
of
reactive
growth
and
into
an
era
of
intentional,
strategic
design.”
In
other
words,
in-house
legal
departments
have
captured
the
upper
hand
and
are
poised
to
use
it.
Demand
for
legal
work
is
surging,
with
63
percent
of
departments
reporting
rising
regulatory
workloads,
58
percent
cite
cybersecurity
and
IT
governance
pressures,
and
53
percent
point
to
contracts
as
a
growing
strain.
These
are
high-volume,
operationally
intensive
areas
that
used
to
require
bigger
and
bigger
checks
to
outside
counsel.
But
even
with
higher
demand,
only
47
percent
of
departments
expect
their
internal
legal
spend
to
increase,
down
from
65
percent
last
year.
Outside
counsel
spending
expectations
dropped
from
58
percent
to
37
percent.
And
just
32
percent
anticipate
growing
their
lawyer
headcount,
down
from
42
percent.
Someone
has
to
do
that
work
then.
Or
something.
The
report
finds
that
85
percent
of
departments
now
have
dedicated
AI
resources
overseeing
deployment,
governance,
and
risk.
The
top
deployed
use
cases
are
general
productivity
(74
percent),
summarization
(56
percent),
and
legal
research
(54
percent).
The
top
areas
still
being
explored
are
compliance
monitoring
(45
percent),
legal
analysis
(36
percent),
and
chatbots
(32
percent).
Clients
aren’t
necessarily
aiming
to
replace
outside
counsel
with
AI,
but
when
a
legal
department
can
handle
more
research,
contract
analysis,
and
routine
work
internally
—
even
with
a
flat
headcount
—
that’s
money
saved.
As
always,
AI
isn’t
replacing
lawyers,
it’s
reducing
the
number
of
lawyers
needed
to
do
the
same
work.
And
between
clients
and
outside
counsel,
that
can
mean
the
work
moves
inside.
Meanwhile,
corporate
legal
departments
are
getting
increasingly
serious
about
evaluating
the
firms
they
do
still
use.
The
report
shows
46
percent
now
have
structured
annual
performance
reviews
for
their
outside
counsel,
up
from
38
percent
last
year,
with
another
18
percent
planning
to
implement
them.
As
the
report’s
foreward
puts
it,
the
legal
operations
community
has
“moved
from
fighting
for
recognition
to
confidently
leading
at
the
enterprise
level.”
Outside
counsel
that
figure
out
how
to
deliver
value
to
this
efficiency
minded
constituency
will
be
fine.
The
ones
still
banking
on
inertia
and
relationship
lunches
could
find
themselves
losing
out
to
the
in-house
cyborgs.
Joe
Patrice is
a
senior
editor
at
Above
the
Law
and
co-host
of
Thinking
Like
A
Lawyer.
Feel
free
to email
any
tips,
questions,
or
comments.
Follow
him
on Twitter or
Bluesky
if
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news.
Joe
also
serves
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Managing
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Search.