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A three-part bucketing of IT spending and its applicability to legal spending

An article in MIT Sloan Mgt. Rev., Summer 2010 at 17, describes three broad buckets of IT expenditures: operations (day-to-day taking care of business), process improvement (bigger projects to add capabilities), and innovation (new initiatives and major changes). Executives interviewed for the research covered by the article said that spending should be about a third for each, but in actuality the spending is weighted much more toward operational plumbing and maintenance plus a chunk toward project improvement and not much for innovation.

What if we assigned the spending of typical legal departments to the same buckets – investments of time and money? Getting agreements done and basic legal advice constitutes what part of the expenditure? Enhancements to processes, such as new litigation-hold policies or wider levels of authorization of invoices, account for what? And can any legal department claim that innovation in terms of legal service delivery or management accounts for a third of its budget? A wholesale convergence effort, an aggressive RFP process, a genuine commitment to offshoring, implementation of e-billing: these and comparable innovations do not account for anywhere near one-third of a legal department’s energy. They are rare.

A distribution of 70 percent operations, 25 percent process enhancement, and five percent innovation would mark a legal department as very progressive.