‘The market’s getting to a saturation point’: Gartner analyst predicts legaltech slowdown

A slowing market could in turn lead to consolidation among suppliers, Gartner’s Weston Wicks tells Nick Huber

The booming legal technology market will slow next year, and law firms will start to drop hourly billing as artificial intelligence software helps them complete routine legal tasks much faster.

These are some of the predictions from Weston Wicks, senior director, analyst, in the legal and compliance team at research company Gartner.

In an interview with The Global Legal Post, Wicks said the global legaltech market, which was estimated at about $27bn in 2024, is becoming overcrowded.

According to some estimates, there are thousands of suppliers in a market which began to boom in late 2022 when OpenAI launched its AI chatbot, ChatGPT.

“I think the fundraising [in legaltech] is going to slow down… because I feel like the market’s getting to a saturation point,” he said. Any slowdown may cause a consolidation in the market, with some struggling suppliers being bought at low cost – in particular for their employees’ skills or knowledge, rather than for its products or services − by larger suppliers, Wicks added.

Market share

As the market matures, some of the largest legaltech suppliers, such as San Francisco-headquartered Harvey and Sweden’s Legora, may start to “break away” and receive “huge amounts” of funding from investors, he said.

For company legal departments and law firms, a streamlined legaltech market may have some advantages. For example, it may make picking the right supplier a little easier. Having so many legal suppliers to choose from can make picking one supplier harder for company in-house legal teams and law firms, said Wicks.

Even if the legaltech market does slow down next year, AI adoption will continue to grow, Wicks said. Some law firms and company legal departments will mandate its use to increase efficiency and cut costs, he predicted.

Pricing pressure

Law firms’ long-standing pricing model of the billable hour will continue, but they will face increasing pushback from their corporate customers, said Wicks. Someone from the in-house legal department at a Fortune 500 company recently told him that it was considering asking their external legal adviser law firms for a rate reduction in 2026, he added.

The request is because the Fortune 500 company believes their law firms are using AI to complete legal tasks, such as reviewing contracts, faster than previously.

“There’s a number of use cases [in the legal sector as a whole] where some of this [legal] AI can go through thousands and thousands of contracts 100 times faster than humans can, and pull out most of the good details,” said Wicks.

Persistent and substantial rises in law firms’ fees have long proved a source of irritation to corporate clients. Some claim that the billable hour fee model is inflexible and too focused on inputs rather than results.

In the UK, the top 10 law firms increased their hourly rates for clients by almost 40% between 2019 and 2024, according to research by PwC.

Hourly rates have also climbed elsewhere. In the US, some law firm partners charged more than $2,300 per hour in 2024, according to LexisNexis.

Predictions about the death of the billable hour have proved premature. But as law firms use AI to automate more legal tasks, some will make private concessions to corporate clients, such as offering fixed fees, if the client complains about hourly rates, Wicks said.

“[Law firms] will start secretly negotiating with some companies and going, ‘Okay, we’ll do this for this amount of money, or we’ll give you 10% off’. But they’re not going to go out and advertise that.”

Legal alternatives

Elsewhere, the convergence between legal technology suppliers and so-called “alternative legal service” providers, which provide routine legal services, is also likely to continue next year.

Some suppliers are combining in-house lawyers with AI technology in their service. This trend was highlighted last month when Eudia, an AI-based legal technology supplier, announced its second acquisition of an alternative service provider. The company − Out-House − was a US business specialising in providing legal services for Fortune 500 legal departments. Its managing partner, Lynden Renwick, was previously a general counsel.

Eudia said combining human legal expertise with proprietary AI technology would help it provide better value to company in-house teams. Omar Haroun, Eudia’s chief executive and co-founder, told GLP that the company’s long-term strategy was “capturing and amplifying” the expertise of the world’s top in-house legal leaders and “using that to train the next generation of AI-native systems”.

In July, Eudia acquired about 300 legal professionals when it bought Johnson Hana, an Irish alternative service provider.