Big Four’s Next Big Bite
Blood in the water as professional services firms eat into global legal markets
By Heather Suttie
While traditional law firms may believe that technology and non-traditional legal companies are the biggest competitive threats, none – not even all of the world’s legal technology companies and alternative legal service providers (ALSPs) combined – come close to the continuing advancements being made into the global legal services market by the Big Four professional services firms.
For more than 20 years, the Big Four have been steadily moving into the legal services market and stealth has been their modus operandi. But no more. Like sharks, they smell blood in the water and are acting accordingly.
They are not an idle threat. However, traditional law firms tend to refer to the Big Four’s presence in the legal services market as “encroachment” – a rather benign reference to aggressive actions that speak louder than words especially when each offers a suite of professional services that can include finance, legal and consulting, which is music to many client’s ears, including those attached to the heads of some CFOs. Moreover, CFOs, who have the ear of the CEO, usually have long-standing relationships with one or some of the Big Four. This means that when decisions are made about hiring outside legal counsel, the CFO often has major influence because money talks.
In June 2018, Deloitte, which now has 2,400 “legal people” located in more than 80 countries worldwide, bought the non-U.S. offices of immigration law firm Berry Appleman & Leiden, while that firm’s U.S. offices entered into an alliance with Deloitte.
2018年6月，在超過80個國家已經擁有2400位“法律人士”的德勤會計事務所，收購了專注于移民問題的Berry Appleman & Leiden非美國地區的辦事處；同時，其位于美國的辦事處也與德勤達成戰略合作。
As of September, EY bought NewLaw entity, Riverview, which meant that as of last year, EY Riverview Law comprised 2,200 law practitioners in EY member firms across 81 jurisdictions worldwide.
9月份，安永收購了新的法律機構Riverview Law。這意味著截至去年，安永的Riverview Law在全球81個地區的成員公司中擁有2200名法律從業者。
Also in September, PricewaterhouseCoopers LLP (PwC UK), the UK member firm of the PwC network joined forces with U.S.-based immigration law firm, Fragomen, Del Rey, Bernsen & Loewy LLP to provide global mobility tax and immigration services. This move enabled one of PwC’s core business lines to align with Fragomen, a global immigration powerhouse with more than 50 offices worldwide and over 3,800 immigration professionals, including more than 550 lawyers and equivalent professionals. Currently, PwC’s lawyer headcount stands at over 3,500 working in 90 countries and providing immigration legal services in 116 countries.
同樣是在9月，普華永道的英國分公司聯合美國的移民律師事務所，Fragomen, Del Rey, Bernsen & Loewy LLP，提供全球流動稅收和移民服務。此舉使普華永道的核心業務之一得以與弗拉格曼(Fragomen)結盟。弗拉格曼是一家全球移民服務的巨頭，在全球擁有50多個辦事處和3800多名移民專業人士，其中包括550多名律師和同等專業人士。目前，普華永道的律師人數超過3500人，在90個國家工作，在116個國家提供移民法律服務。
As for KPMG, it has ambitions to have 3,000 lawyers working in its global legal services unit within the next few years.
As of NowHalfway through 2019, a Big Four bit again. In June, EY acquired Pangea3, a legal managed services (LMS) business that previously was part of Thomson Reuters. Pangea3 was one of the first alternative legal service providers and had operated worldwide for 15 years.
Now, EY can offer legal operations consulting, managed services, and technology in addition to legal advisory services where permitted within the 80-plus jurisdictions where this global professional services behemoth is active. Combining Pangea3’s legal personnel into the mix means there are some 3,500 EY Law professionals worldwide.
Add to this a go-to-market revelation from Chris Price, CEO EY Riverview Law that, “We’re spending $2-billion on client-based technology in the next 18 months. That’s kind of difficult to compete against.”
此外，安永Riverview Law首席執行官Chris Price還透露：“未來18個月，我們將在以客戶爲中心的技術上投入20億美元，從而與其他四大的法律部門競爭。”
Is it ever! Competing is difficult because EY and others of the Big Four have amassed competitive advantages that include enormous war chests along with cultivating highly sophisticated financial acumen to enable efficient and effective scaling of their businesses.
Also in the Big Four’s favour is the advantage of internationally recognized brands, sophisticated infrastructure that has been quietly building for the last 25 years that includes development of a strong sales culture and teams, legions of professionals of numerous descriptions, access to every significant business tool and system, and attractiveness as a global employer offering opportunities for international careers. All this is in addition to their ability to offer clients an array of professional services in numerous jurisdictions as applicable worldwide.
Currently, the legal units of the Big Four are aligned with core business lines of tax, audit, assurance, and advisory. Legal services are also positioned within target markets and key industries, and are operating globally where regulated to do so using a one-stop-shop platform. Because the Big Four tend to prefer a sure thing with no surprises, they’re unlikely to provide legal services that don’t make business or financial sense, at least at this time.
Feeding FrenzyThe frenzy of BigLaw firms creating ALSPs is on big time with three global entities hatching theirs within days of each other last month. Greenberg Traurig debuted Recurve, Eversheds Sutherland announced Konexo, and Bryan Cave Leighton Paisner produced BCLP Cubed.
大律師事務所創建ALSP的熱潮正如火如荼，上月，三家全球實體相繼成立了自己的ALSP。格林伯格·特魯裏格(Greenberg Traurig)推出了Recurve，安永勝山地産(Eversheds Sutherland)宣布科內克(Konexo)加盟，布萊恩·凱夫·萊頓·派斯納(Bryan Cave Leighton Paisner)創建了BCLP立方(BCLP Cubed)。
These new ALPSs are described as innovation-focused and tech-led. They are also a subsidiary of their parent firm. While each is designed to deliver legal services in a streamlined fashion, they have similar offerings that include managed services, advisory, project management, legal operations, and resourcing. Their other sameness is that they act as a defensive manoeuver to keep work within the family—parent or subsidiary—rather than risk losing it to a Big Four firm or other competitor.
What none of them does is expand into a vast breadth of other professional services. If a client is seeking assistance primarily in the legal realm, they may have an advantage. But if a client is attracted to a platform of expansive and varied professional services, such as those offered by the Big Four, they still can’t compete effectively.
What Next?It’s highly likely that traditionally-structured North American law firms will continue to plod along content in the knowledge that 2018 was a solid year financially and, at its halfway point, 2019 seems to be on good financial footing. Also, Alternative Business Structures (ABS) have not taken hold as they have elsewhere in the world, which is what has enabled the Big Four to expand into various legal markets as fast as they have.
For now, the Big Four will continue to develop in jurisdictions where legislation and regulation permit them to operate. And they’re comfortable doing so while perfecting their strategies, planning future tactics, and bulking up their legal service teams knowing full well that, in time, escalating global market pressures and client demands will breach the traditional legal services culture, which in turn will open more markets to ABS models.
Of increasing concern is that instead of aggressively countering the Big Four’s developments, the complacency and inaction of traditional law firms that leads them to do nothing rather than something, will eventually cause them to struggle for solvency or be completely pulled under.
What to do?For most traditionally structured law firms, a fast fix is foolhardy and next to impossible to even attempt. What is possible, however, is taking select tactics that form part of the core procedures in the Big Four’s playbook. Three such tactics include:
1. Industry Alignment
Identify current clients by industry codes to provide hard data. Findings will sharply define industry strengths, which will enable a firm to organize and face the market by sector. It will also make marketing opportunities, decisions and spends easier to target and justify as well as provide direction for developing more business by way of prospective client targeting.
2. Industry-Practice Client Teams
Combine industry and practice group members to provide a suite of services in the form of client teams. A key client that is serviced by four or more practice-specific lawyers who have proven experience in the industry in which a client operates is more likely to be loyal and less apt to bolt.
3. Client Service Interviews
Establish a formal and permanent client service interview program. By doing so, you’ll set yourself apart from the competition immediately especially since the most recent Canadian Lawyer annual corporate counsel survey found that 87.8 per cent of large companies asked were not surveyed by their law firms.
Of course, how it’s done is all-important. Quick-and-dirty, check-the-box surveys cheapen a client’s experience, reflect poorly on you, and can be easily ignored by pressing the delete key. Alternatively, in-person conversations demonstrate care, enable mutual learning and deepen trust. Active listening and acting on a client’s request for change—which, in my experience happens rarely, and if it does is usually minimal and easy to accommodate—wins more loyalty, work, referrals, and goodwill than you can ever possibly begin to imagine.
Rather than being firm-focused, each of these initiatives is client-centric, which is fundamental to the Big Four’s success. Also, each is scalable to fit law firms of various sizes, jurisdictions, and practice orientations.
How Not to Bleed
It’s common knowledge that client relationships are at the heart of every law firm’s success and the key to solvency. Winning more work from current clients while attracting prospective new ones whose work, legal needs, culture, and values align with your own will become critically important as ALSPs gain more ground, up-and-coming service providers enter the legal market, and the Big Four continue to steamroll through it.
This is because while relationships matter, business is global and has a trickle-down effect that has already begun and will continue to impact law firms of all sizes, jurisdictions and expertise. Upcoming international events, such as Brexit along with forecasts for a financially soft 2020 worldwide, may be among the inflection points that incite discontented clients who have long been agitating for change in the global legal services market to be the ones who will take the next big bite.
[Disclosure: EY became a client of mine in 2011.]
Heather Suttie is an internationally recognized legal market strategist and management consultant. She works with lawyers, law firms and legal service providers — Global to Solo — BigLaw to NewLaw — helping them thrive in the evolving legal industry by claiming a distinctive position and sustained competitive advantage resulting in greater market share, revenue and profits. Reach her at heathersuttie.ca, http://ca.linkedin.com/in/heathersuttie or @HeatherSuttie1