Nearly half (47%) of law firm respondents from the Future of Professionals Report say their firms are already experiencing at least one type of benefit from AI adoption and 80% expect AI to fundamentally alter the course of their business over the next five years. Chief among those is time savings. On average, law firm professionals expect to free up 190 hours per year by using AI. At current average hourly rates, that works out to approximately $18,000 in savings per professional, per year – or a total of $20 billion for the U.S. legal industry.

Perception vs. Reality

For all the enthusiasm that exists for AI’s potential, however, there is a large gap emerging between law firms’ AI aspirations and their real-world AI strategies. Even though the majority of law firms expect AI to drive transformational change in the future and nearly half are experiencing some benefits now, far fewer (29%) expect to see high or transformational levels of change this year. When pressed further on what their firms are doing today to leverage AI, nearly one-third (32%) of law firm respondents say they feel their firms are moving too slowly on AI adoption, and just 22% say their firms have a visible AI strategy in place.

This gap between future ideals and current realities is a phenomenon “the GenAI paradox,” which occurs when businesses race to invest in AI pilot projects and buy new solutions, but struggle when it comes to implementing them and integrating them into everyday workflows. Versions of this struggle are playing out in virtually every industry right now as professionals come to grips with the fact that true transformation is not as simple as plugging in an off-the-shelf AI tool. It requires a clear strategy, a carefully planned roadmap, targeted integration of professional-grade AI solutions, and a commitment at all levels for the long haul. A firm cannot afford to sit on the sidelines any longer – it is imperative to have an AI strategy.

Key Steps to True AI Transformation

Over the course of our partnerships helping some of the world’s largest law firms not only access new AI capabilities, but , we’ve found four levers that all firms need to engage to ensure the success of their AI initiatives.

• AI Tools Without an AI Strategy will Never Reach Their Potential: Among the 22% of law firms that currently have a visible AI strategy in place, 71% are already experiencing a clear return on investment from AI. By contrast, for those firms that do not have a clear AI strategy in place, just 18% are experiencing a return on investment. That means law firms with a visible AI strategy are almost four times more likely to experience benefits compared to firms without any significant plans for AI adoption.
• AI Leadership Comes from the Top: Law firms helmed by leaders who lead by example when introducing change, firms that have added new governance roles, and those that are actively investing in AI are consistently seeing more benefits than those that don’t. For AI to truly add value, it needs to be implemented firm-wide, and that kind of sweeping change can only come with leadership support, clear goals and objectives, and widespread adoption.
• Operations is Where the Hard Work Happens: Firm-wide AI integration is impossible without first understanding the need to change and reimagining workflows. To extract maximum value, AI-powered tools must be built directly into existing systems and processes. That requires making transformative changes to underlying business models, including how firms price, staff, and deliver legal work, and how they adapt related workflows and processes, while adding new roles and skills to support their operations.
• End-User Adoption: The best AI technology and most well-thought-out strategy in the world will not mean anything if no one uses it. When users within law firms understand AI and feel empowerment, ownership, and accountability for its use, their law firms see results not only in terms of higher levels of AI adoption but in the additional benefits and ROI that they gain as well. Firms need to make sure they are educating staff, making tools readily available, and allowing time for a learning curve to take root.

While the detailed strategies and specific paths to AI implementation will vary from firm to firm, there are a handful of universal truths that apply to all. Foremost is the commitment to address the AI revolution for what it really is – a monumental transformation in the way legal work is conducted on par with the introduction of the personal computer, the internet, and the smartphone. It is not enough just to buy the latest greatest widget. Firms that want to extract real value from AI need to think hard about how it will affect everything they do and start addressing those changes now to unlock the full potential of the technology to transform their firm.

Another takeaway: two-thirds of respondents said their tax departments are reactive or chaotic in their approach to technology. This echoes what we heard from respondents in the 2024 Future of Professionals report about with their firms’ sluggish adoption of AI.��

Tax departments’ top challenges

In addition to exploring tax teams’ technology adoption rates, the report examined the biggest challenges they’re facing. Respondents ranked hiring and retaining talent as their top concern.��

Not surprisingly, tax professionals ranked compliance issues around three unrelated tax regulations – Pillar 2, the Global Minimum Tax, and Base Erosion and Profit Shifting (BEPS) 2.0 – as their second, third and fourth greatest challenges.��

Also of note, 51% – up from 47% last year – said their internal tax department is under-resourced. This is noteworthy because companies with under-resourced tax teams are more vulnerable to audits and penalties.����

The report showed that under-resourced departments had an average of $50,000 in penalties versus $20,000 for “about-right resourced” departments. Also, those working in under-resourced departments felt behind their better-resourced peers in minimizing liability as well as avoiding incurring penalties and tax audits.����

New technologies can make a positive impact��

On a positive note, about 50% expect their departments’ tech budget to increase, which may indicate companies’ willingness to modernize their tax functions. In addition, the report found that more tax departments within smaller businesses – those with under $50M in annual revenue – are spending a larger portion of their budget – 25% and up – on technology.������

These findings are encouraging because automating work processes can help improve efficiencies, which is a win-win: it helps tax departments address the talent crisis they’re facing while strengthening productivity. An added bonus is that this automation would enable tax professionals to spend more time on strategic and proactive tasks that could benefit the company.  ��

The report showed that tax professionals, on average, spend 61% of their work time on tactical rather than strategic tasks, such as providing strategic advice or managing projects that add value to the company’s bottom line. New technologies and AI tools – such as Checkpoint Edge with CoCounsel, which allows users to conduct faster tax research – empower tax professionals to spend less time on reactive tasks and dedicate more time to proactive, forward-looking work.��

For more insights on how embracing new technologies enables tax departments to be more valued partners to the business, download the full report.��

This is a guest post from Ray Grove, head of Corporate Tax and Trade, ��������.��

“When I think about efficiencies in the tax industry, especially given the staffing shortages and the uptick in retirements, efficiencies are so important and a huge driver for the development of our tax tools,” Hawkins said. “We know from our research that customers are prioritizing these efficiency gains and looking to technology to really help them unlock them.”

Wong cited findings from the latest �������� Future of Professionals report that demonstrated a shift in the tax and accounting industry’s adoption of AI tools.

“In contrast to a year ago, where we had the most excitement and the most interest from the legal industry, this year in 2024, we’ve had a much clearer signal from the tax, accounting and audit industry that they are ready and eager to apply some of the AI technology to their work to seek efficiencies,” Wong said.

He added that this shift can help the tax and accounting industry address a labor crunch.

“There aren’t enough CPAs or enough people who are willing to jump into the tax and accounting profession, and technology is seen as this sort of savior for this ever-growing pile of work within the industry,” Wong said. “AI is one additional set of tools to help the industry get to a new frontier of automation.”

Wong and Hawkins noted that AI tools must work in conjunction with the other workflow tools tax and accounting professionals already depend on.

“The exacting nature of the tax profession is extremely unforgiving when it comes to inaccuracies or mistakes,” Hawkins said. “As we put our AI-Assisted Research together, we really had that in mind – to help with making research more efficient for the new entrants into the industry.”

“Having an efficient way to research is critical,” Hawkins added. “The AI-Assisted Research that we have in Checkpoint Edge really allows someone to come in and simply ask a question, like you would to a trusted colleague down the hall and get an answer back that is easily digestible.”

Hawkins said she hears customers talk about how senior members of firms want to mentor junior members but don’t have the time. She said firm leaders are excited about how generative AI tools can help “upskill more junior members of a firm quickly to have the mature and robust conversations around tax topics.”

Watch the��of the TechConnect series, which brings diverse and dynamic perspectives from all corners of the technology world with thought-provoking questions and conversation.

They discussed the report’s findings around time-savings, noting that 77% of tax professionals believe generative AI is applicable to their industry, with potential productivity gains of up to five hours per week.

“There’s some pretty big implications of what this means for the tax and accounting space,” Wong said, noting generative AI tools could make tax season and other busy periods “way less painful” for accountants.

The report also found that 83% of tax professionals cited a lack of skilled labor.

“The talent shortage is real,” Beastrom said. “It’s been ongoing for the last few years and it’s definitely not going away. 300,000 people have left the industry between 2019 and 2022.”

She said the number of students getting bachelor’s degrees in accounting is down and cited Financial Times data on the number of people sitting for CPA exams, which hit its lowest level in 17 years.

“With less people going into the profession and more people retiring and leaving the profession, there’s a tremendous opportunity to leverage GenAI to support tax professionals to help solve that talent gap,” Beastrom said. “AI has the power to support increased efficiency, higher quality work, and greater value for our clients and our customers.”

She added: “If you’re a junior professional, AI is that springboard that can help accelerate your training and on the job learning, which is going to allow you to transition into higher value roles more rapidly. The work is more challenging and could significantly bolster your future progression within the firm.”

Wong noted AI may compress the time needed for accountants to advance in their careers, making the profession more appealing.

“I think there’s this exciting opportunity where the early stages in a career will get compressed,” Wong said. “Instead of having to wait five, six, seven years to become a senior, I foresee that with support from AI and the efficiencies you get, just the sheer amount of more work that you can do, you’ll get up to speed a lot faster. It might only take two, three or four years instead to be able to become a senior.”

Wong and Beastrom also discussed how the potential time savings from AI adoption could allow tax professionals to shift from transactional tasks to higher-value advisory roles, improving work-life balance and business growth. Overall, they expect the integration of AI will attract a broader range of talent with diverse skill sets to the accounting and tax industry, transforming it into a more dynamic and exciting field.

Watch the of the TechConnect series, which brings diverse and dynamic perspectives from all corners of the technology world with thought-provoking questions and conversation.

Respondents predicted that artificial intelligence (AI)��has the potential to save them��12 hours per week in the next five years,��or��four��hours per week over the��upcoming��year – equating to 200 hours annually. This timesaving potential is the equivalent productivity boost of adding an extra colleague for every 10 team members on staff.��Harnessing the power of AI across various professions opens immense economic opportunities.��For��a��U.S. lawyer, this could translate��to an��estimated $100,000 in��additional��billable��hours.*

The sharp uptick in interest in AI is a major catalyst for innovation across industries. Overall, 77% of professionals now predict AI will have a high or transformational impact on their work over the next five years, up 10 percentage points from last year. In addition, 79% anticipate innovation at their companies will increase.

“Professionals no longer need to speculate on the potential for AI to impact their work as they are now witnessing its effects firsthand.��As we look to the future, one thing is clear: AI-empowered professionals and their companies will outpace those who resist this transformative era,” said Steve Hasker, President and CEO, ��������. “With professionals predicting that AI will save them up to 200 hours in the next year, the potential economic impact is significant. For a U.S. lawyer, the time saved could translate to up to $100,000 a year in additional billable time, and we can expect similar productivity gains across other professions. The responsible use of AI is crucial, with nearly two-thirds of professionals stressing human oversight. As we navigate this change, we must remember the future of AI is ours to shape.”

Read the press release for more details and access the full report here.

* Professionals predict that AI could save them four hours a week in the next year and up to 12 hours per week within the next five years. �������� extrapolated this to demonstrate the potential annual impact. Assuming a professional works 48 to 50 weeks per year, this could result in up to 200 hours saved annually and is equivalent to adding an extra colleague for every 10 team members, as the four hours saved per week per professional represents approximately 10% of a full-time workload. For U.S. lawyers, that time savings could translate to nearly $100,000 in extra billable time annually. This is calculated with �������� data gathered directly from participating firms’ financial management systems, which is then anonymized and aggregated. Ultimately, the way lawyers choose to reinvest their time savings will depend on their individual priorities and goals, which may include increasing billable time, pursuing new business opportunities, or other strategic initiatives.