Has Total Legal Spending Declined, and Law Departments Shrunk?

BTI Consulting published some figures and conclusions in Law Practice (Oct. 2004, pg. 13) that stuck in my craw.  “In 2004, overall client spending on legal affairs dipped almost 7 percent [from 2003].  Despite these cuts, spending on outside counsel continues to rise, climbing 4.4 percent in 2004.  Shrinking legal departments are a key driver both in the decline in overall spending and the push of more dollars to outside counsel. ‘Corporate legal departments have declined by 40 percent since 2001’ explains [a BTI analyst].” (emphasis added)

Setting aside my methodological questions about the solidity and representativeness of the survey respondents, I am deeply perplexed to read that overall legal spending declined (by 7%) and that law departments had shrunk almost in half. 

Nothing I have encountered lends support to either finding.  To the contrary, from my consulting experience, legal spending has steadily risen and law departments have remained stable or grown a bit.