The Big Four Horsemen of alternative legal services, or the law firm apocalypse
There is a prophecy in the last book of the New Testament, the Book of Revelation, that Four Horsemen of the Apocalypse will arrive to announce the Last Judgement and thereby mark the end of mankind's earthly existence. The apocalyptic riders will appear on a white, a red, a black and a pale horse and respectively bring conquest, war, famine and death.
Fortunately, we are yet to see such a terrifying cowboy quartet emerge from the heavens above to end our days (at least from what I know?). But for the traditional law firms, this prophecy might turn out to be somehow true. At least if one ought to believe the rhetoric surrounding the Big Four — Deloitte, EY, KPMG and PwC - and their doom-bringing conquest of the legal market. They circle the legal profession like hungry sharks surrounding their prey, they are sleeping giants “coming for you”, Trojan Horses preparing an invasion. or the put it more simple; an existential threat.
Alternative legal service providers, which includes everything from the Big Four accountants to platforms like Atrium, are growing quickly in most parts of the world these days. A large Thomson Reuters study found that revenues for alternative legal service providers had an annual growth rate of 12.9% from 2015 to 2018. Furthermore, 23 % of the large law firms interviewed for the report said that they had lost a client to the Big Four. And it is not stopping there, as the report also predicts a 24 % growth per year in the coming years due to 25 % of corporations say they plan to increase their spending on alternative legal service providers in the future.
Often mentioned as a prerequisite for the Big Four's success is the global deregulation of the legal market that followed UK's liberalising Legal Services Act from 2007. But according to the Thompson Reuters report, the alternative legal service providers attracts their clients by offering a “more sophisticated service” while Financial Times writes that the succesful accountancy firms “are using technology to muscle in on traditional law firm territory.” But what are the Big Fours own perspectives on their triumphs in the legal industry? Legal Tech Weekly has asked them.
A reimagined legal future
EY recently published a well-researched article in which they called for a re-imagination of the legal function to maximise value from the digital transformation. Most businesses are under pressure to reduce costs on legal spending, but at the same time, the demand is increasing. Therefore, they must either embrace technological innovation or optimise talent which has shown to be a challenge for the legal function. “As a result, many are now considering outsourcing and external procurement as a solution,” EY concludes.
The article is a substantial support the statement that Global Law Leader in EY, Cornelius Grossmann, made when they acquired Riverview Law in 2018: “Legal managed services is one of the fastest growing segments of the legal market. This acquisition underlines the position of EY as a leading disruptor of legal service.” With the acquisition, EY Law comprised more than 2,200 law practitioners across 82 jurisdictions.
According to the Head of Law in EY Denmark, Susanne Scott Levinsen, EYs biggest strength is their ability to integrate the legal services with the other offerings that their 270.000 employees deliver in finance, accounting or IT: “Our strength is that we collaborate with all our colleagues in EY - both nationally and globally. It means that we can manage and coordinate with all the advisors we have involved. We can develop and offer counselling which is deeply specialised and at the same time builds on a broad economic, technical and commercial insight,” she says.
Levinsen calls it a “one-stop-shop” and mentions their GDPR Dawn Raids as a suiting example. With the raids, they appear at their clients acting as Data Authority to test their GPDR-setup. When they show up, they bring both legal professionals and IT-security to give a more realistic and holistic evaluation of whether the client complies with GDPR.
Another strength she mentions is their global reach: “We know that in-house legal general counsels are under pressure. They are up against more and more complex rules while also being subject to tighter budget constraints,” she says and explains that a solution could be to let external legal service providers take care of certain legal aspects of the business. With a global advisory firm such a process can be handled globally: “The service is centrally managed, from London for example. We work with IT-solutions that enables the customer to pull an updated global concern diagram at any time. The process is streamlined in all countries for a reasonable price because you do not have to find new local lawyers for each country and each change related to corporate law,” Levinsen says.
Alternative legal service providers and legal tech
Lene Sakariassen from PwC Norway has similar views. She also mentions PwC's ability to give clients an end-to-end service without the friction points that occur in handovers between different providers as an important feature that separates them from the traditional law firms: “PwC Legal can obviously provide advice in terms of the legal aspects of the deal. However, we can also help the client in other aspects of the transaction, bringing along different experts from other service lines within PwC. For instance corporate M&A advisors to find the right buyer, financial experts to break down the target’s numbers, HR-experts to evaluate the competencies of the target, strategic advisors to consider the potential synergies of the deal, tax specialists etc. PwC has, in other words, a holistic and integrated approach to legal services, offering clients the right mix of lawyers, consultants and financial advisers to help the client develop an efficient and commercially viable solution.”
Furthermore, she mentions PwC's technological expertise and their focused efforts on legal tech as one of their key strengths: “Technology is crucial for PwC Legal like for any global law firm I assume. Technology enables lawyers to focus on non-standardized work providing cost-effective advice to the clients and more meaningful work for our fantastic lawyers. However, being part of a multi-disciplinary network with tech-advisors under the same roof, we obviously have aggressive goals in terms of technology. We are therefore not only adapting the legal-tech suppliers' solutions, but we also using the power of our network to develop our own solutions tailor-made for the legal services we provide to our clients,” she says.
In general, Sakariassen believes that non-law firms will drive massive changes in the legal services by offering market places, AI-based tools and new kinds of legal related services: “However, I believe that PwC is well positioned to combine the advantages of technology with first class legal services. PwC is a multidisciplinary firm with thousands of tech-skilled employees who enable the lawyers to understand the market changes and adapt correspondingly,” she elaborates.
Are the Big Four causing an apocalypse?
There is also plenty of success in the other half of the Big Four. KPMG's legal services devision revenue grew by a record-setting 30 % last year and they expanded with more than 2,300 legal professionals last year so we can expect that number to grow. Last but not least, Deloitte is also using their financial firepower to invest in legal technology and expand their legal services offerings. So should law firms really fear the big four - regardless of whether they are Trojan Horses or apocalyptic horsemen?
Levinsen from EY plays down the drama: “We are not a law firm, and we have no ambitions to become one. In general, there is fierce competition in all our business areas which is good for us and our clients. We must continuously develop and strengthen our services and be open to new opportunities - especially within IT. We are not running a law firm, but we are happy to compete when it comes to certain legal services,” she says.
Sakariassen from PwC agrees that the competition from traditional law firms is tough: “However, by developing and recruiting amazingly talented lawyers over years, we experience that our clients trust that we deliver at least the same quality as our traditional competitors and that they appreciate our holistic approach and the fact that the lawyers are not just providing a legal advice. The client’s understanding of the advantages of the one-stop shop concept is constantly increasing amongst new sectors and groups;” she concludes.
For now, The Big Four are only competing for certain types of clients, and a global reach wont be relevant for all matters, and many countries still protect law firms by law - so winter is not coming just yet. The question is if some of the traditional law firms can find a way to expand the scope of their services and deliver the global and holistic one-stop shop concept that some clients demand. What is holding traditional law firms back from offering the same broad consultancy services as the big four?