August 06, 2020

 Liam Brown

legal technology law company big 4 liam brown

This post is a distillation of my recent talk at Bucerius Law School’s 2020 Legal Technology Essentials 2020 program.

The Power of a Name

Over the past decade or so, a large and growing segment of businesses serving the legal industry has emerged. These companies have often been referred to as “alternative legal services providers,” but that’s a misnomer. After all, no one ever called digital cameras “alternative cameras,” and what was originally “alternative energy” is increasingly, and more accurately described as renewable energy. I believe the term “alternative” in law signals something vaguely pejorative, not quite acceptable, or not quite good enough – as in, “Well of course if you select us [insert name of Big 4], you get all of the expertise of our firm, but if you need a lower cost, well you could use an alternative legal service provider – they are good for lower-value, lower-complexity, lower-cost work.” It’s subtle, but it’s sometimes enough to scare a customer away from thinking about working differently. It certainly makes those legal professionals who are not lawyers feel like they don’t belong.

I believe that the ecosystem of consulting, technology, and services businesses, that are not the Big 4, is mature enough to shrug off the label “alternative.”

How Did We Get Here?

The hyper-connected digital world has enabled new business and operating models across many industries. The patterns are familiar:

• A need for efficiency or desire for a better experience
• Advances in technology enable new models
• New models work where old models fall short
• A new generation of tech-savvy buyers is prepared to try out new ways of working
• Outside capital fuels the change

The legal sector is not immune.

We used to gather in person in conference rooms to do deals. Now we videoconference and revise documents online – and we only get on a plane for the most sensitive negotiations that require us to meet face to face. We use AI software to review mountains of documents during M&A due diligence or litigations. We sign documents electronically with one click – in the back of a cab. We manage contracting using software that integrates with our company ERP or CRM systems.

While the legal sector has historically been company law departments, law firm partnerships, and (more recently) the Big 4, a new kind of provider, with a new business model, has emerged. I believe the right name for these technology, consulting, and services businesses is right before our eyes: they are simply “Law Companies.”

The Evolution of the Law Company

Law companies bring together the disciplines of technology, services, and expertise (e.g., legal operations, legal tech, and legal practice). Some law companies evolved from being technology providers that offered single point-solution tools to law firms and law departments, who were left to figure out who would use them, and how. Others began as legal outsourcing providers that integrated people, processes, and technology to offer services to address a single problem, with the work overseen by the law department or law firm. Now, companies like Elevate offer one-stop enterprise legal services to law departments and law firms – with a focus on Jobs to Be Done, and the law company responsible for outcomes.

The Law Company and the Business of Law

Law departments exist to help a corporation achieve its business goals lawfully. They design, manage, buy, or perform all legal work, whether channeled into the law department itself or woven into the day-to-day operations of the business. We call this “Law in the Core.”

Law firms provide “Advice of Law” services to companies to navigate high stakes or bet the company issues.

Law companies provide “Business of Law” capabilities to support business as usual or run the company activities, focusing on achieving business outcomes.

Follow the Money

Law companies now make up more than $12 billion of sales, and the market opportunity to grow into is huge. More than half of Global 200 law firms use or partner with law companies, and in 2018, 25% of Global 1000 CLOs said they planned to increase spending on law companies, almost double the response from two years before.

Meanwhile, outside capital – more than $1 billion in 2019 – is flowing into law companies, and M&A activity is heating up. The second quarter of 2020 saw $178 million in investment in legal tech companies, beating 2019’s Q2 total of $122 million, despite the COVID-related economic crisis.

The Huge Ambitions of the Big 4

And then there is the arrival of the Big 4.

The Big 4 have enthusiastically entered this space and started to take a share, providing legal services to many of their clients as part of their end-to-end, broader, multi-disciplinary engagements. They have deep relationships with the C-suite, well beyond just the General Counsel.

They have made acquisitions, such as EY’s acquisition of Pangea3 from Thomson Reuters and Riverview. They have hired teams from law firms and law companies. They have already grown quickly – at 17% growth in 2019, Deloitte had its sixth year of double-digit growth. They have almost 1,700 lawyers, and PWC has more than 2,500 lawyers. In Germany, up to 20 percent of the legal market is in the hands of the Big 4, according to a report by The Economist. A recent whitepaper by Thomson Reuters predicts: “If only one of the Big 4 can capture even 1% [of market share] they would become the single largest global legal services provider.”

Digital Law

I am convinced that CEOs will emerge from the current COVID work-from-home environment with a greater than ever commitment to doing business digitally. This will create pressure for digital work in law departments and law firms to keep up. Today’s typical legal technology stack is a Rube Goldberg machine of kludged-together point solutions. Every time a legal technology provider releases an upgrade, the law department or firm must integrate that upgrade into the patchwork of other legal technology systems they operate – different databases, assorted dashboards, matter management tools, etc.

There is a real opportunity for one common platform – sort of a Workday for law. Elevate recently released our Ecosystem Legal Management (ELM) legal operations software, enabling seamless collaboration among law departments, law firms, and law companies. Elevate ELM enables self-service, eliminates the inefficiency of manual work and email, and provides real-time insight into project status, resourcing, and cost.

More Than the Big 4 for Law

Law companies are here to stay – and will only grow as credible ecosystem alternatives to the Big 4 – to help law departments and law firms solve their “Business of Law” challenges.

Expertise-led. Digital-forward. Without competing with law firms for “Advice of Law.” And without a web of potential conflicts with audit, tax, consulting, or legal advice.