More than two thirds (71%) of mid-tier managing partners expect their firms to invest in artificial intelligence (AI) over the next three years, as products are refined and become more available. That’s according to a new ICAEW report.

Published in May, Evolution of mid-tier accountancy firms invited more than 100 managing partners from firms with between 11 and 249 partners to provide their thoughts on a range of pressing challenges. Some 40% took part.

To date, 38% of respondents’ firms have invested in AI solutions, of which three quarters were firms with more than 20 partners. But the figure for those looking to invest in the coming three years suggests that the shift to AI is poised to accelerate.

Alongside the effects of talent shortages and private equity, the impact of generative artificial intelligence (Gen-AI) is the one of the biggest trends currently affecting mid-tier accountancy firms. Almost a fifth (19%) of respondents cited the impact of Gen-AI as their primary, macro trend, while 40% featured it as one of their top three.

The report notes that AI and robotic process automation are “in rapid development” among mid-tier players, and will soon form part of the accountant’s everyday toolkit – if they have not already done so.

Investment in virtual infrastructure gaining pace

A widespread use of cloud computing in the mid-tier, along with the integration of automated systems, have revolutionised how accountants approach their day-to-day tasks, the report notes. More efficient data management systems, real-time financial reporting and predictive analytics have enabled firms to provide enhanced insights to better support clients’ business models.

As such, every respondent from a firm that has invested in cloud-based or virtual tech infrastructure in the past three years describes the move as either worthwhile or very worthwhile.

Respondents are eager to maintain that commitment: 69% of their firms are set to invest more in virtual infrastructure over the next three years, while 79% are planning to enhance their cloud-based software offering.

As more than half (52%) of respondents predict that clients will need greater access to current or live data, those plans make sense. In tandem, 48% of respondents anticipate a greater demand for automation among their clients, while 29% suggest that clients will require AI self-completing solutions.

Turning to physical infrastructure, more than 70% of respondents’ firms have invested in new hardware over the past three years – and all agreed that this spending was either worthwhile or very worthwhile. However, as virtual infrastructures become more developed and integrated, future investment is set to decline.

Exploring bespoke IT solutions

A significant minority of mid-tier firms have taken the leap into designing their own, bespoke IT solutions, with 43% of respondents confirming relevant spending over the past three years. Almost three quarters (72%) of that expenditure stemmed from firms with more than 20 partners.

Compared with the results for virtual and cloud-based tools, though, respondents were more hesitant on the value of that investment – with 44% describing it as very worthwhile, 39% as fairly worthwhile and 11% feeling that it is too early to say. Even so, 48% said that their firms plan to invest in such projects in the future.

Challenges: skills and funding

As they strive to move forward, some respondents are concerned about the pace of change. Almost one third (31%) cited introducing, understanding and keeping up with new technology as a major challenge – second only to difficulties around recruitment.

With that figure in mind, the report highlights a critical disconnect: only 14% of respondents selected IT skills and digital literacy as a top-three skill set for future leaders. Even fewer (12%) picked innovation.

Despite respondents’ clear recognition of technology’s future importance to their firms, none of them identified their firm as tech savvy when asked to describe their culture.

Some respondents raised concerns over the potential emergence of a two-tier funding regime. The survey uncovered a perception among a small group of firms that private equity (PE) backing would lead to a widening gap between firms that are able to invest in new tech and those that are not. Respondents who expressed that view are worried that firms embarking on the PE route may gain an edge in technology advancement that may be out of reach for their non-PE-funded rivals.

Strategy key to tech success

Overall, the report suggests that investing in technology presents major opportunities, and will be critical for firms looking to enhance efficiencies and expand their service offerings. At the same time, respondents acknowledge the risks around investing in the wrong tools, plus the challenges of keeping pace with rapid change. As such, the report concludes: “Firms must take a strategic approach to technology adoption and ensure alignment with their overarching business goals.”

Looking at how firms should manage the skills disconnect, ICAEW Head of Data Analytics and Tech Ian Pay says: “The technology landscape is evolving rapidly, so it has never been more important to keep up to date with the latest developments and ensure that digital skills play a vital role in the training of staff.”