1 in 5 boutique firms still shy away from AI

Yet, despite the growing momentum, a clear divide has emerged, with some firms fully embracing the change while others lag behind.

Actionstep’s 2026 Australia Midsize Law Firm Priorities Report revealed a striking divide in AI adoption, with one in five (20 per cent) boutique law firms reporting that they have yet to use or experiment with the technology.

This is markedly higher than other firm types, with 12 per cent of multi-practice firms and just 3.5 per cent of full-service firms reporting that they have yet to experiment with or use AI.

The report found that the biggest barrier to firm-wide AI adoption is data privacy, with more than half of respondents (55 per cent) citing concerns over handling sensitive information as their main reason for holding back.

Beyond data privacy, other barriers to AI adoption include concerns over unreliable AI performance (51 per cent), a lack of understanding of the technology (41 per cent), and potential compliance risks (38 per cent).

While a significant number of firms continue to hesitate, the nature of these adoption barriers is evolving.

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While data privacy remains the top concern, Actionstep revealed that the percentage of firms citing it as their primary barrier has fallen from 66 per cent in 2025 to 55 per cent this year.

On top of this, the report revealed that technical expertise as a barrier to AI adoption has fallen out of the top three constraints, with only 29 per cent of firms citing it this year, a sharp decline from 62 per cent reported in 2025

Rising through the data is a notable concern about AI reliability, which has grown by 3 per cent over the past year.

Based on these shifts in what firms perceive as barriers to AI adoption, Actionstep suggested that “as familiarity with AI increases, confidence in governance and output quality has become the primary limiting factor”.

To overcome these fears and reduce barriers to AI adoption, Actionstep suggests that the next stage of AI maturity for cautious firms will depend on strong governance, clear policies, and robust safeguards.

“For most midsize firms, the next phase of AI maturity will be defined by governance, assurance, and clarity – not experimentation,” Actionstep said.

“Clear usage policies, role-based controls, and transparency around safeguards are likely to matter more than additional features or capabilities.”

Despite lingering hesitation among certain firms, midsize practices are rapidly jumping on the AI bandwagon, with 56 per cent of professionals now reporting use of AI tools in some form, according to the report.