Articles Posted in Big 4 Firms

In a recent blog post Ron Friedmann responded to a question posed in a legal technology publication:

“‘How do you envision the legal team of the future changing?’ The thesis of my answer: multidisciplinary teams ….

” … The complexity of the modern world makes many problems multifaceted. How many ‘legal problems’ are really business problems with a legal element?  Clients need lawyers to team with other professionals – and treat them as peers – for the best solution.

“A story from early in my legal market career illustrates the point. I had just arrived at a large firm to run practice support. A partner who knew I had a quant background asked me to help on a competition matter. A regional office of a regulator questioned our client’s action. It worried that many consumers would be adversely affected by a mistake it had made. I ran a simple time-series regression on the number of claimants to date. It showed a quickly diminishing curve. That is, a reasonable projection showed few new complaints would be filed. That one graph got the regulator to back off. That was a simple stats answer, not a legal’ answer.”

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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 ….

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After offering legal services for two or three decades elsewhere in the world — the Big Four accounting firms (PwC — the former Pricewaterhousecoopers, Deloitte, EY — the former Ernst & Young, and KPMG) are now taking tangible steps to move into the U.S. legal industry.

Last Wednesday (June 6) Deloitte UK and the San Francisco-headquartered immigration law firm of Berry Appleman & Leiden LLP (BAL) announced an agreement that gives U.S. businesses market access to Deloitte Global’s immigration legal services worldwide — including the U.S. — while adhering to the traditional rules that have insulated U.S. law firms from Big Four competition.

This comes on the heels of PwC’s formation nine months ago of a new law firm called ILC Legal in Washington, D.C. — the first entry into the U.S. legal market by a Big Four firm (see here).

These initial moves by two of the Big Four could signal a tectonic shift in the competitive landscape for legal services in the U.S.

As prominent legal consultant Bruce MacEwan put it after PwC’s announcement last year:

“[The Big Four] have incredible resources in terms of capital, thousands of high-powered professionals, brand equity, and entrée into every Fortune 1000 board room ….

“If the Big Four want to come at Big Law, they can. And they will be pretty successful.”

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The legal industry has been slow to embrace artificial intelligence (AI)*. But other industries and professions are not waiting to deliver AI’s enhanced precision and cost efficiencies.

How high do the stakes have to be before law begins to catch up with medicine?

On April 11, 2018 the U.S. Food and Drug Administration announced that it would, “permit marketing of the first medical device to use artificial intelligence to detect greater than mild level of eye disease retinopathy in adults who have diabetes”.

According to the U.S. FDA, the device: “Provides a screening decision without the need for a physician to also interpret the image or results, which makes it usable by health care providers who may not normally be involved in eye care.”

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Part III

For routine, repetitive, or high-volume legal or regulatory compliance tasks, ask yourself which service provider brings the the right business processes — and perhaps the right technology — to the need presented.

Some of your company’s legal and regulatory needs call for a team and a process.

Not for a particular attorney.

And certainly not for an attorney who happens to be under-utilized or to have only partial aptitude for the task.

Unlike general management, the legal industry doesn’t usually break down routine, repetitive, or high-volume tasks according to Six Sigma, the Toyota Production System, etc.

As a friend put it when we were both first year associates in a prestigious Wall Street law firm: “We’re in a cottage industry!”

He didn’t mean that our work was small beer. After all — each lawsuit and transaction had lots of zeros after the dollar sign.

Instead my friend meant that lawyers at our firm were essentially individual artisans, sitting at work benches making shoes by hand, etc. sitting at our desks, proof-reading trust indentures, researching case law, etc.

Most tasks handled by large law firms, by small law firms, and by in-house legal departments are made-to-order. Lawyers’ work is usually marked by intellectual rigor in the thinking behind it — but not by management rigor in its execution.

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tech picture 12.15.2017When the IRS changes a lease regulation, compliance protocol calls for review of every lease to which a company is a party. Until recently this always meant lots of professionals reading lots of pages for a long time – slow, costly, and error-prone.

Now – employing a tiny percentage of the professionals required for traditional manual review – EY, the Big 4 firm automates this review with an artificial intelligence-based system “three times more consistent and twice as efficient as previous humans-only teams” — and they do it for only a fraction of the cost.

Each of the other Big 4 firms has implemented its own artificial intelligence-based systems to complete faster, cheaper, and more accurately various labor-intensive tasks that have historically been staples of accounting practices: KPMG, Deloitte, and PwC.

But business lawyers are staying away in droves from this sort of labor-saving technology.

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