Inside the digital divide: How legal departments are adapting to the tech shift

While some in-house legal departments are embracing contract lifecycle management (CLM) tools and experimenting with artificial intelligence (AI), others remain tethered to outdated manual processes thus exposing themselves to risk and inefficiencies.

This was one of the major insights of the 2025 Legisway Benchmark for Legal Departments by Wolters Kluwer, which surveyed over 700 in-house legal professionals across the U.S. and Europe. The report reveals a widening gap between teams advancing toward digital maturity and those stalled by limited resources and legacy workflows.

The Tech Chasm in Contract Management

In the U.S., where many legal teams are small and overextended, managing daily operations remains a significant challenge. Contract and entity management—core to legal operations—are largely kept in-house. However, how teams manage this work varies drastically.

Only 42% of legal departments reported using dedicated CLM software. A third still depend on generic shared drives like Google Drive or SharePoint. Alarmingly, 13% manage contracts without any structured system. For those stuck in this manual rut, visibility and risk management are major concerns.

Despite these hurdles, CLM adoption is rising. It jumped from 33% in 2024 to 42% this year. But adoption remains uneven. While 71% of legal departments with over 50 staff use CLM tools, just 16% of solo in-house lawyers do. This disparity reflects not only awareness but access to resources—34% of departments say they don’t have a dedicated legal tech budget.

Of those with a budget, spending power differs widely. A quarter of legal departments spend less than €10,000 ($11,413) on tech annually, while 16% invest more than €50,000 ($57,062). The result is a digital divide: departments already on the path to digitisation are accelerating, while others fall further behind.

Entity Management: A Mixed Bag

Entity management shows similar fragmentation. Only 34% of legal departments use dedicated software for this function. Meanwhile, 30% rely on shared drives, and 27% still use spreadsheets or even paper files—an increasingly risky strategy for departments managing multiple entities. Notably, 15% of those surveyed oversee more than 100 legal entities, heightening the complexity.

The situation is particularly challenging for lean teams. In the U.S., 76% of legal departments consist of 10 or fewer people. For solo legal counsel, the figures are even starker—89% work for companies with fewer than 20 entities, and 84% manage under 500 contracts annually. Despite their smaller scale, these teams face growing compliance and governance demands.

“We’ve partnered with an external legal adviser for years due to our small team and high workload,” said Natassia Mounetou, senior legal counsel at Nemera, a drug delivery device manufacturer. “The collaboration primarily focuses on corporate law, litigation, IP, and contracts for our subsidiaries.”

The Role of Outsourcing and AI

Outsourcing remains a go-to strategy for many legal departments. In the past year, 86% of teams engaged outside law firms, dedicating an average of 37% of their legal budgets to these partnerships. Litigation and IP work were the most commonly outsourced areas. However, only 32% used alternative legal service providers (ALSPs), despite praising their ability to handle complex, high-volume tasks.

Interestingly, very few departments turn to external partners for legal tech access—only 3% said that was a reason to engage external counsel, and just 14% cited it when hiring ALSPs. This indicates that while legal technology is on everyone’s radar, its potential remains underutilised in outsourced engagements.

AI adoption also reflects the broader divide. While 56% of respondents said they use generative AI tools like ChatGPT or Claude, only 14% have adopted AI-powered contract management systems. Meanwhile, 40% of legal departments reported no use of AI at all.

Still, for some companies, AI is already a strategic enabler. Christian Georg, senior legal counsel at Elkem, explained that his company’s complex business—from coal procurement to speciality silicones—required custom AI tools rather than off-the-shelf CLM software.

“We found that implementing a one-size-fits-all CLM solution was not ideal,” Georg noted. “The company-specific AI tools developed by Elkem’s legal and IT teams have great potential to mitigate fragmentation challenges and assist contract managers with targeted review and drafting.”

Looking Ahead: Legal Teams as Strategic Drivers

The findings suggest that in-house legal teams are evolving beyond administrative support roles. Increasingly, they are expected to contribute to M&A activities, ESG compliance, corporate governance, and risk management. But their ability to do so hinges on having the right infrastructure in place.

Whether through tailored AI tools, dedicated software platforms, or strategic outsourcing, legal departments must close the digital gap if they hope to meet rising demands and protect their organisations from operational and legal risks.

The future of legal operations is digital. The question is: who’s ready—and who’s falling behind?