About that Crack in the Wall Protecting U.S. Law Firms from Big Four — What Are the Big Four’s Competitive Advantages?

In my most recent blog I considered the respective entries by PwC (the former Pricewaterhousecoopers) and by Deloitte into the U.S. market for legal services as an initial and expanding “crack” in the “wall” that protects U.S. law firms from Big Four competition.

And because this blog and my law practice focus on securing and maintaining the legal health of client companies — I wrote that I hoped for more and deepening cracks in this pernicious wall.

It turns out that Heather Suttie — a leading Canadian consultant to legal practices both in law firms and in the Big Four outside of the U.S. legal market — had made some timely observations a week before Deloitte’s recent announcement. As an advisor since the early 1990s both to law firms and to Big Five / Big Four accounting firms that have contained law practices she has a depth of perspective about Big Five / Big Four offerings of legal services that few in the U.S. share.

Her thesis: The Big Four enjoy substantial competitive advantages over law firms in delivering legal services to business:

” … Each of the Big Four professional services firms is armed with internationally recognized brands, legions of professionals of numerous descriptions, infrastructure that has been built up for the last 30 years or more, access to significant and sophisticated business tools and systems, and capital resources and financial acumen to run efficiently and effectively.

“The Big Four are also equipped with four big advantages that, in many cases, remain elusive to law firms ….

Big Advantage One: Pricing

“Due to their historical accounting acumen, the Big Four are bound to have strong relationships with senior decision-makers on the financial team of a current or prospective client. And when a company’s CFO is calling the shots, pricing of legal services becomes prevalent.

“This is precisely when Big Four accountants who know their margins cold and can make numbers talk, have supreme advantage over law firms in providing fast, creative and agile pricing structures for legal service offerings.

Big Advantage Two: Referral Clout

“There’s an advantage of referral clout when each of the Big Four continues to absorb legal practices into their international service lines along with securing alternative business structure (ABS) licenses that enable them to service multinational clients ….

Big Advantage Three: Process Drivers

“Professional services firms are masters of process and efficiency. This comes from their accounting foundations where an intimate understanding of and facility for math and money comes to the fore ….

Big Advantage Four: Project Management

” … Project management within these professional services firms—regardless of what the project is—has been an ingrained practice for many years ….”

My take-away:

Over the last three decades the large accounting / consulting firms have integrated management systems, complementary skills sets, technology, and pricing disciplines into the delivery of legal services — doing so outside the U.S.

And they’ve done so to an extent and in a manner most U.S. law firms have barely begun to think about.

If the wall protecting U.S. law firms from Big Four competition continues to crack — America’s businesses will gain access to a huge source of legal services whose delivery capabilities may be better in kind as well as competitive in price — as compared with most U.S. law firms.