The industries that invented the billable hour and EBITDA are facing their most important valuation challenge yet: defining new standards for the return on investment of artificial intelligence.

As the world's focus shifts from experimentation to determining the bottom-line value of investments in AI, businesses of every type are scrambling to find the right metrics.

For accountants and lawyers, this challenge is especially fraught because traditional technology value equations have focused on increased efficiency and cost savings — two things that could present challenges for industries rooted in billable-hour business models. 

Threat to hourly business models

In fact, despite widespread AI adoption in accounting and legal fields, and wildly bullish outlooks from practicing accountants and attorneys on the day-to-day utility it delivers, many professionals perceive the growth of AI as a possible business risk.

According to a recent report from Thomson Reuters, 40% of tax and accounting professionals and 50% of legal professionals say they see AI as a threat to their current business models and revenue streams. At the surface level, some of that concern could be justified.

Currently, 34% of tax firms and 41% of law firms are already using generative AI widely in their organizations, and the most common use cases are legal research (80%), document review (74%), document summarization (73%) and tax research (69%). All of these are straightforward examples of technology being used to save time. By that measure alone, increased AI adoption should increase efficiency and lower costs.

Measuring value per hour

In the real world, however, those efficiency gains are not quite as simple to quantify as hours + dollars = value. For example, I recently spoke with the owner of a midsize business advisory and tax planning services firm who has been using AI-powered workflow management tools to help onboard new staff and clients as part of a major acquisition.

The role of AI throughout this process has been decidedly practical, helping the firm scour its data to identify areas where new clients could be saving money, standardizing best practices and company policies for new junior staffers, and streamlining firm-wide communications. But the benefits of those workflow hacks have been far greater than just the time-savings. Clients are getting better insights, more personalized attention and the collective benefit of firm-wide intelligence in every interaction.

We see a very similar pattern emerging in the legal field, where firms using AI have been able to deliver higher settlement figures, make stronger arguments and surface critical facts that would have been impossible to achieve in a pre-AI world. 

The phenomenon is creating an entirely new value equation for firms that are using AI effectively. It’s less about time-savings and more about getting deeper, more nuanced and more comprehensive insights faster. Accurately quantifying that means being able to measure value per hour, or the sum total of a firm’s unique expertise, depth and breadth of insight, and outcome-shaping work product made possible by harnessing technology.

Client-centered success metrics

While there are countless examples of this value per hour quotient playing out in tax and legal firms around the world, few firms have managed to get a real handle on AI ROI.

According to our research, just 19% of tax firms and 15% of law firms are currently collecting any ROI metrics around AI usage. Of those that are attempting to quantify the impact of AI, most are focused inwardly on very transactional stats like cost savings (77%), employee usage (64%) and employee satisfaction (42%). Just about one-fourth of firms are measuring client satisfaction (26%) or projected external revenue generation (23%).

These are not bad metrics to track. Particularly in the early phases of AI adoption, firms should have a baseline knowledge of things like cost impact and staff utilization rates, but these types of one-dimensional stats cannot become the only barometer of AI’s real-world value in professional services. 

Early examples of firms tapping into the power of AI to not just work faster or cheaper, but dramatically up-level the service they are delivering to clients, are proving that there is much more to the AI value equation than increased efficiency alone.

It is now up to the firms leading that charge to start to share the stories and proof points that quantify the true gains their clients are getting from their investments in AI. After all, the true measure of a tax or law firm’s success is rarely ever about the inward-facing achievements; it’s about the results they deliver for clients.

That logic needs to be applied to any real-world evaluation of AI effectiveness in professional services.