No time for bystanders amid AI’s increasing influence Executive summary Each year, as we speak to numerous leaders of large global law firms, AmLaw 200 firms, and majorindependent law firms, themes emerge from these in-depth interviews that shed light on what law firmleaders see as their top priorities and the pressures they face as they navigate the coming year. Most recently, one strong undercurrent came through in almost every conversation we had, evenif some law firm leaders were reluctant to admit it or were even aware of it. As they described theirpriorities and pressures, it’s clear that law firm leaders know on some level that they need to act Law firm leaders understand where this sweepingfeeling of change is originating, as major macro-trends — rising geo-political and economic headwinds,societal shifts, and of course, the impact of advancedtechnology — become top of mind. Further, many of No longer can law firms hoveron the sidelines, waiting for concerns, and assessing the impact of new technology on their firms’ existing systems. Taken together,this is a potent mix that could alter how law firm leaders of the future approach the operation of their No longer can law firms hover on the sidelines, waiting for others to try out new ideas and see whatworks. Indeed, at this time in the legal industry, there is simply no room for bystanders. To better support these leaders as they navigate this evolving environment, the Thomson ReutersInstitute wanted to more fully explore the impact of generative AI (GenAI) on the law firm business model. We chose this subject because, while managing technological adoption within a law firm is tied toleaders’ major responsibility areas, it is also strongly intertwined with other key responsibilities, suchas how firms communicate with clients, entice new hires, and price their legal services in an AI-driven Not surprisingly, our recentFuture of Professionals1report foundalmost 8 of 10 law firm survey respondents believe that the rise ofGenAI is most likely to have ahighortransformativeimpact on thelegal profession. Indeed, the rise of GenAI and its incorporationinto legal work is clearly the most impactful force that law firmswill face over the next five years — more impact than economic Current state of play To see where the legal industry is going, let’s look at where it is currently in regard to GenAI adoption. InMay 2024, almost three-quarters of law firm professionals said they believe AI is a force for good withinthe industry, and almost two-thirds said they have tried using GenAI as a starting point for contract 74%oflawfirmprofessionalsbelieveAIisaforceforgoodinthelegalindustry 64%oflawfirmprofessionalshavepersonallyalreadytriedusingAI-poweredtechnologiesasastartingpointforataskatworkmostcommonlyfordrafting,researchandsummarization. 62%founditproducedabasicstartingpointwhile20%founditdeliveredastrongstartingpoint. Source: Thomson Reuters 2025 Where does your firm fall on the AI adopter scale? We also asked law firm professionals to describe their firm’s current approach to adoption ofAI-powered technologies from a list of five statements, based on where the firm currently stands. We then grouped those classified as Laggards and Late Majority asAI Followersand thoseclassified as Early Adopters and Innovators asAI Leaders, and throughout this report we will referto those law firms that are laying the groundwork now for GenAI as AI Leaders, and those which Already, we’re seeing that AI Leaders are gaining pace and significant benefits compared toAI Followers. Indeed, those firms that find themselves behind the Early Adopter crowd may have missed the chanceto be an AI Leader if they haven’t already started the process of their firm’s AI adoption and transition. Clients are moving faster than their law firms in GenAI adoption However, the real impact may come from how corporate legal departments are driving this Over the six-month period from April to October 2024, corporate legal departments outpaced law firmsin advancing AI leadership. They not only reduced the number of AI Followers but also increased AILeaders more rapidly, resulting in a higher proportion of AI Leaders than AI Followers—a milestone law Traditionally, clients used law firms to bridge expertise or capacity gaps within their legal departments.However, with high fees and increasing workloads, corporate general counsel (GCs) have been movingto outsource volume work to more cost-effective providers and handle more tasks in-house. This shift When GCs discuss the potential impact of GenAI on how they work, they focus on two main areas: •First, they see it as a tool to increase efficiency, transforming their legal departments from costcenters to strategic assets by automating routine tasks and freeing up time for higher-value work.•Second, GCs must adapt to GenAI’s effects on their business models and the legal complexi