US law firms increased technology spending 9.7% in 2025, the most aggressive investment period since before the 2008 financial crisis. Knowledge management tools grew even faster at 10.5%, running seven percentage points above inflation. The narrative sounds like the entire legal industry is modernizing together. The reality reveals a widening technology divide that splits firms into distinct classes based on size and resources.
The $27,000 Per-Lawyer Gap
AmLaw 100 firms spend $15,000 to $30,000+ per lawyer on technology, with top-tier firms routinely exceeding $20,000 annually per attorney. These budgets fund generative AI pilots, enterprise data platforms, sophisticated cybersecurity architectures, and dedicated innovation groups. Small firms under 50 lawyers spend $3,000 to $10,000 per lawyer, with many clustering below $5,000. The technology stacks serving these markets barely overlap.
The spending gap translates directly to capability differences. ILTA's 2024 survey shows 74% of the largest firms using generative AI for business tasks versus only 20% of firms under 50 lawyers. AmLaw 100 firms increased tech spending by more than 10% in 2025, with much of the incremental investment flowing into AI tools, cloud platforms, and knowledge management systems that smaller firms cannot yet justify economically.
AmLaw 200 firms outside the top 100 occupy the middle ground, spending $10,000 to $22,000 per lawyer with more budget discipline than their largest competitors. These firms prioritize core platform modernization—moving document management, email, and billing to the cloud—over experimental AI deployments. Eighty-nine percent plan cloud time-and-billing in new system replacements, signaling a catch-up phase focused on infrastructure before innovation.
Midsize Firms Are Closing the Gap Faster
The surprise in the spending data comes from midsize firms with 50 to 200 lawyers. Thomson Reuters reports these firms increased technology expenses 8.6% in 2025 on top of 9.6% growth the prior year, outpacing AmLaw 100 percentage growth even from a lower absolute base. Midsize firms appear to be in an aggressive catch-up phase, boosting budgets faster than larger competitors while their per-lawyer spending remains in the $8,000 to $18,000 range.
This acceleration reflects different economics. Midsize firms face the same client expectations around technology-enabled service delivery as BigLaw but lack the infrastructure investment larger firms made over the past decade. The result is concentrated spending on cloud practice management, Microsoft 365 integration, and selective AI adoption through embedded tools in existing platforms rather than custom builds. These firms are modernizing core systems while larger firms experiment with next-generation capabilities.
The cloud transition drives much of this spending pattern across all segments. Sixty-seven percent of firms report document management libraries in the cloud, 82% use Microsoft Office 365 as primary email, and 61% run cloud-based phone systems. These shifts concentrate budgets on SaaS subscriptions and security rather than on-premise hardware, fundamentally changing cost structures and accelerating the need for ongoing investment regardless of firm size.
Different Budgets, Different Priorities
Investment priorities diverge sharply by segment. AmLaw 100 firms emphasize generative AI evaluation, enterprise knowledge management platforms, cybersecurity at board-level priority, and client-facing innovation like data-driven pricing dashboards. These firms staff dedicated innovation roles and maintain pilot budgets for unproven technologies.
Midsize firms focus on core modernization: cloud document management, collaboration tools for hybrid work, and AI added first to research and summarization through vendors like Westlaw AI and Lexis+ rather than custom development. ILTA respondents expect Gen AI used mainly for research (73%), summarization (70%), and initial drafting (69%) over the next 12 months, with adoption concentrated in tools embedded in existing workflows.
Small firms prioritize practice management systems, billing automation, and client communication platforms that bundle multiple capabilities at accessible price points. These firms rarely maintain dedicated IT staff, so technology choices favor integrated solutions requiring minimal configuration. The emphasis falls on tools that directly support revenue generation rather than infrastructure or experimental capabilities.
Strategic Implications
The spending data reveals a legal technology market fragmenting into distinct tiers with increasingly different needs, buying behaviors, and adoption timelines. Vendors serving multiple segments face the challenge of building products sophisticated enough for AmLaw 100 evaluation while remaining accessible and affordable for midsize and small firm budgets.
For law firms, the implications depend on competitive positioning. AmLaw 100 firms investing $20,000+ per lawyer create technology advantages that compound over time, potentially widening the service delivery gap with smaller competitors. Midsize firms in aggressive catch-up mode face the risk of over-investing in yesterday's infrastructure while larger firms move to next-generation platforms. Small firms must choose between accepting a permanent technology disadvantage or finding creative approaches to access sophisticated capabilities through partnerships, outsourcing, or alternative business models.
The 9.7% average spending increase masks the reality that legal technology investment is bifurcating into separate markets serving fundamentally different firm economics and strategic priorities.
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