Former lawyer Dan Hauck (Chief Product Officer, NetDocuments) is passionate about delivering enabling technology to the legal industry.
A recent Gartner prediction that legal tech budgets will double by 2028, mainly around AI investment, has generated exactly the response you would expect. Vendors are quoting it, managing partners are forwarding it to operations teams, and legal technology investors are citing it as market confirmation.
While the attention is warranted, what deserves more attention is the harder question underneath the headline: Given a doubled budget, what should you actually buy?
That question is not as obvious as it sounds. The legal technology market in 2026 offers more capable AI tools than at any prior point, more specialist vendors making more specific claims and more demos that look genuinely impressive. The risk is spending it well while investing it poorly.
The Compounding Investment Vs. The Consumable One
Most legal technology purchases are consumable. You buy a tool that does a task. The tool delivers value roughly proportional to how often you use it. When the contract ends, the value ends. The tool leaves no lasting asset behind.
A smaller category of legal technology investments compound. They improve over time as they accumulate structured institutional knowledge, usage patterns and context about how the firm works. They make every other tool in the stack more useful. They create an asset that grows in value, not just a service that delivers value while you pay for it.
For example, one area that Gartner identifies as driving the predicted budget growth is multi-agent legal applications. Based on my experience leading product development for a legal technology platform, the reason these are valuable is that they are compounding investments. They build and structure the institutional knowledge that every AI application the firm deploys can draw on. The longer they run, the more useful they become.
Understanding this distinction is the most important framing a legal technology buyer can bring to a doubled budget.
Two Investment Traps—And Ways To Avoid Them
Two patterns consistently produce legal technology budgets that grow without proportionate results.
But for managing partners and general counsels directing a doubled technology budget, there are questions that are worth asking of every potential investment. Consider these two common traps:
Buying AI applications before context infrastructure is in place.
AI tools that work in document-by-document isolation, without access to the firm’s matter history, client context and practice precedent, deliver results that plateau. Each interaction starts from scratch. Even when the individual tool works, the system is unlikely to improve and the investment almost certainly won’t compound.
Before investing, ask: Is the necessary structured context available to every AI tool? The more organized and accessible the firm’s institutional knowledge is, the better every AI application that connects to it performs. Improving the foundation can produce compounding returns from everything built on top of it.
Treating governance as a configuration decision rather than an architectural one.
The legal practice is built on confidentiality, privilege and ethical walls. AI that respects those controls as a core architectural property is the only kind appropriate for legal work.
While regulatory scrutiny around the use of AI grows under frameworks such as the EU AI Act, firms that built governance into their AI infrastructure before the regulation passed are compliant without additional effort. Firms that treated governance as a settings option are not.
Another important question to ask before making an AI investment: Does AI have the same surrounding governance as your systems of record, like content management? Ask any serious AI vendor to describe how their system handles an ethical wall violation or a need to implement a data loss prevention policy that complies with outside counsel guidelines.
What To Know Before Doubling The Budget
Gartner projects that by 2029, 50% of contract reviews will be delegated to self-service AI systems, and 60% of legal departments will use AI-driven intake systems.
Those projections will prove accurate for firms that build the right compounding infrastructure now. For firms that spend the next three years on consumable AI tools without that foundation, the budget will likely double without the outcomes following.
The measurement gap makes this urgent. Thomson Reuters research suggests that fewer than 20% of legal organizations currently measure the ROI of their AI investments. That number will have to change as spending doubles and boards ask for accountability. The firms that will justify continued investment are the ones that built compounding infrastructure early, because compounding is the clearest ROI story in the portfolio.
The legal technology market is full of impressive tools. The most important investment decision is not which tool, but what those tools will be working with when you deploy them. A doubled budget directed at compounding infrastructure will produce compounding returns. The same budget spread across consumable point tools will produce a larger version of the same inconsistent results.
The firms that will lead by 2028 are the ones making that distinction now.
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