Economic recession. Photo: alphaspirit/Shutterstock.com

While legal tech companies may not see a downturn in legal spend or the economy on the horizon, some economists are warning about an approaching recession.

But despite many not even existing when the Great Recession rocked the global economy in 2008, legal tech companies are confident they can weather any coming storm. Specifically, they note that legal tech solutions that contribute to the broader corporate compliance and risk management efforts will still be in demand during the next recession.

“When the downturn comes, it very quickly weeds out those new organizations that have valuable return on investment solutions and those that do not,” said Dan Carmel, chief marketing officer at AI and document management company iManage.

Carmel noted that while no service is immune from tighter budgets, compliance, information governance and risk management are regulatory requirements that companies must maintain despite a recession.

“Government requirements in our industry are only increasing. I think organizations through tough times segregate their expenses between the must haves and would really like to have,” he said.

Likewise, e-discovery and artificial intelligence platform Relativity noted that its expansion into compliance monitoring makes the company “at least somewhat impervious to recessions,” wrote David Horrigan, discovery counsel and legal education director at Relativity, in an email. “E-discovery may happen when you get sued, but compliance is every day,” he added.

Yet David Holme, co-founder and CEO of legal service provider Exigent, which recently launched a new legal tech fund, cautioned that solutions that only provide a service at a reduced price will be affected by the recession.

“I fear a lot of startups have really not considered the real commercial reality and return people are looking for,” Holme said.

He also noted the flush of investments in legal technology hasn't translated to higher technology adoption by in-house departments or law firms.

Indeed, less than half of in-house legal departments leverage technology, as innovation in the legal tech tools requires sizable investments. While some corporate counsel say adopting technology is part of preparing for a recession, that only works if one plans ahead. 

“A slowdown will hit legal department budgets, and if they haven't invested in legal technology during a boom it's likely they won't during a slowdown,” Holme said. 

Still, Holme asserts that data analysis platforms will have the most success during the next recession, particularly because of its wider impact to the corporation's overall finances and risk.

“Everyone in the corporate environment is talking about how to better use data,” Holme said. “[There's] still an opportunity for legal to do that because they do sit on top of this huge amount of data but it hasn't been used.”