Global companies will double their legal technology budgets by 2028 as they attempt to build on early gains in productivity and efficiency from AI-powered legal software, according to Gartner.
The research company did not estimate global figures for how much company legal departments spend now on legaltech or how much they may do by 2028.
Early evidence suggests that legal applications using AI agents − a type of AI that can perform tasks without human intervention – have produced gains in productivity, reduced reliance on external counsel and helped companies comply with regulations, allowing lawyers to spend more time on strategic advice, said Gartner.
Legal sector spending on AI has grown fast since 2022 because the information-dense and procedural nature of law means it is ripe for automation. Much of the initial spending has been on automating common tasks such as drafting and reviewing contracts, and researching legal cases.
By 2029, approximately half of contract reviews will be done by self-service systems that refer only one in 10 for human review, said Weston Wicks, a legaltech expert at Gartner.
In the same timeframe, six in 10 legal departments will use AI-based systems that capture all legal requests and answer half of those without human intervention, he added.
In an interview with GLP, Wicks also predicted that companies may cut jobs in legal departments and hope that AI can help remaining staff handle ever-increasing legal workloads.
“A lot of legal departments are getting told that their head count is being frozen, or even potentially, may be ever so slightly cut,” he said.
As law firms continue to increase their fees well above inflation, company legal departments may cut spending on external legal advice, Wicks predicted.
“I think there might be a slight dip in actual billable hours [for law firms]… so I could see their revenue flatlining,” he said.
Meanwhile, traditional law firms are facing growing competition from so-called ‘native AI’ law firms, which Wicks defines as firms where all work runs through AI systems first before any human is involved.
AI native law firms are using AI to keep costs down and offer more ‘menu type’ fixed pricing rather than the billable-hour pricing model of traditional law firms, Wicks said.
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