Legal’s AI Makeover Shows What’s Ahead for Other Professionals

The way artificial intelligence transforms the legal industry—and how deep it ultimately goes—stands to ripple across the economy as an indicator of how AI will change white collar work overall.

Lawyers are still in an awkward phase with AI, figuring how to integrate it into their business and how to make money off the technology. The legal industry also has unique concerns around privacy and accuracy that make it a harsh environment for tech adoption. Still, it’s long been viewed as a likely AI pioneer because its the kind of knowledge work AI companies are seeking to transform: text-heavy and process-driven.

Investors viewing the sector as a target for AI adoption have dumped billions of dollars into tools tailored for lawyers. At the same time, frontier model labs like OpenAI and Anthropic are pushing to get their products into legal workflows as part of a broader effort to entice companies to use their products.

“Legal is probably the first real professional industry to really move on an enterprise level on AI, besides coding,” said Kimberly Tan, an investing partner at the venture capital firm Andreessen Horowitz.

“It’s sort of a bellwether,” she added.

Challenges to adoption have made the legal industry a tech testing space before, Clifford Chance chief technology officer Paul Greenwood said. Some law firms have long had a close relationship with Microsoft because their industry’s exacting standards have been a proving ground for things like document integrity and management, he said.

“You get it right for law, you can get it right for everyone,” he said. “I think that’s also partially true with AI as well.”

An Early Push

The legal industry has a lead in generative AI adoption and investment over other professional sectors, data suggest.

Legal AI startups are bringing in about $500 million in aggregate revenue, the second-most of any industry, Tan wrote in an April report. Coding is far ahead on that metric, but legal leads real estate, finance and accounting.

“Legal was surprisingly one of the first-mover industries in AI,” Tan noted in the report. “Legal was historically known to be a difficult market for software, with lengthy timelines and a less tech-forward buyer.”

Law firms and corporate legal teams are ahead of tax firms and corporate tax departments when it comes to AI use, according to a Thomson Reuters Institute survey from February. Still, the legal industry has a long way to go: Less than half of law firms and corporate legal departments are using generative AI, according to the survey.

The big companies developing AI have made clear they view legal as a key market.

Harvey was one of four startups the OpenAI Startup Fund invested in just after ChatGPT launched. Anthropic has made a direct play to get attorneys to use its Claude AI model by rolling out lawyer-specific tools for Claude Cowork. A recent webinar on how legal teams can use Claude had 20,000 attendees, Anthropic said.

“They’ve been pretty public about their view that these types of work are great fits for their models, and I think they are,” said Dave Yuan, the founding partner of Tidemark Capital, a growth equity fund that backed legal tech companies Clio and Nexl, and the accounting-focused tech company Karbon.

Replacing Services

Yuan said the legal industry is not the only benchmark for AI adoption. The accounting industry has also seen an acceleration in adoption of AI, he said. Lawyers and accountants have demonstrated how AI can harness data through preexisting workflows, he said.

“These types of knowledge work are well suited for generative AI,” Yuan said.

The total addressable market for tech spend on AI is growing because of how much of it legal is buying, TD Cowen said in a research update.

“New services are being adopted at a record pace by legal and tax firms,” the update said.

But there’s still so much uncertainty around how companies are going to be affected by AI, said Joshua Gans, a professor of innovation and entrepreneurship at the University of Toronto. Whether AI tools will be a small boost to day-to-day work or drive profound change isn’t yet clear, Gans said.

“If they’re the latter, it could take decades for that to be apparent or work itself out, and there’s not a huge amount of evidence that’s the case just yet,” he said.

There’s nothing special about the legal industry that would make it a bellwether for how AI adoption plays out, said Gans, who has written several books about the economics of AI. But it does appear to be a strong fit for the technology, he added. Outside counsel is expensive, so if AI can drive down costs, it would deliver clear return on investment for companies, he said.

That echoes a Sequoia Capital report suggesting the future of AI lies in services, especially in cases where companies can replace outside firms with AI alternatives.

“Replacing an outsourcing contract with an AI-native services provider is a vendor swap,” the report said. “Replacing headcount is a reorg.”

Make it Anywhere

If AI can provide value in an industry with strict standards around accuracy and privacy, that’s a sign it can survive in less stringent industries, too, said Beverly Rich, vice president of AI and innovation at UnitedLex, an alternative legal services provider.

“If a legal AI company can succeed in this environment, I could easily see them succeeding in an adjacent industry such as education,” said Rich, previously an assistant professor at the University of Utah’s Eccles School of Business.

Legal processes provide multiple checks on effectiveness. AI outputs have to make it past opposing counsel and federal judges increasingly looking for hallucinations.

“Legal is a highly regulated industry, so if you can make it here you can make it anywhere,” she said.

Bloomberg Law is a legal technology provider.