Earlier this month, EY, the mega accounting firm and one of the Big 4 accounting firms, announced plans to spin off into two separate businesses. One business would be devoted exclusively to providing audits to EY clients. The other business would be devoted to providing a variety of consulting services to EY’s business clients. The consulting business will likely be a public company which suggests where EY is putting its future priorities.
The split must be approved by some 10,000 EY global partners, which will take some time. The thought is that this split will eliminate conflicts created by EY’s auditing function. The split will remove obstacles to the consulting and business services EY can provide.
Why is this relevant to a legal?
Why is this relevant to a legal? By spinning off the auditing function and the conflicts it creates, EY will be able to provide sophisticated legally related consulting services to a broader group of business clients. These services include many services that law firms have traditionally provided. Services for which a lawyer is not really needed or needed less and less as the potential of AI and automation increases.
I predicted some time ago that a Big 4 firm might take this step. . And it will place the accounting firms in indirect competition with law firms worldwide and, more particularly, in the US.
I say indirectly because it’s unlikely that an accounting firm will actually “practice law,” at least in the traditional US sense. Trials and pure legal advice are probably not something EY wants to do. But, like other accounting firms, EY views legal problems quite differently than law firms. Accounting firm leaders would tell you there are no legal problems. There are only business problems with legal implications. This diferant conceptual attituded enables accounting firms to make inroads into what law firms and, for that matter, other ALSPs now provide.
EY wants to provide business consulting services that may include everything but pure practice. And the concept of the actual practice of law is increasingly blurred with the advent of AI and machine learning. EY wants to take over functions that can be done by AI and machine learning and for which a lawyer is not needed. It wants to be the trusted advisor that many lawyers aspire to be in all business areas, even if and when those areas touch upon law. It wants to be a one-stop for its clients for the handling of business matters.
And when those matters may require a lawyer, I am sure EY wants to help manage that arrangement and perhaps even select the lawyers. It certainly wants to provide legal management services and process management for legal matters. We may even see EY and the big 4 move toward forming alliances with law firms to provide pure legal services when needed. We already have seen this in some specialty areas like immigration. We are also seeing similar alliances with big 4 firms and legal tech vendors: Deloitte and Litigiy recently announced just such a move.
When the lawyers no longer are diving the bus, someone else—the business enterprise and their Big 4 advisors- will decide who will do what. The lawyer’s role may be relegated to doing what they are told to and only what they do best.
The Deloitte-Litify Alliance
I see similar motives in a recently announced alliance between Litify, an end-to-end legal operating platform and Deloitte, another big 4 firm. According to the joint press release, the alliance will “help legal teams across industries modernize and digitally transform their legal operations via Litify’s enterprise legal management (ELM) technology, automation, and data-driven insights alongside Deloitte’s Legal Business Services.”
The purpose of the alliance, as stated by Brian Karney, a Deloitte Legal Business Services Managing Director, is telling. Says Karney, “Litify’s modern approach to enterprise legal management and Deloitte’s experience advising legal teams on operational transformation offer our shared clients an integrated platform built on Salesforce—which many of our clients’ organizations already leverage—to help enhance the way they manage and deliver work.” Enhance the way they manage legal that is.
And according to the press release, what the two firms will offer includes “enhanced management, visibility, and predictability in how legal services are managed and delivered via a single platform, including matter management, e-billing, customer relationship management (CRM), case management, document management, legal service request, document generation, and other initiatives.” Whew.
Deloitte says a lot of pressure is being placed on law firms to be more agile and have better data driven insights. With Litify, Deolotte no doubt believes it can help businesses and in-house legal do what the law forms have not. Says Karney, “legal is getting closer to the rest of the enterprise, meaning that it is the business that now drives legal rather than vice versa. And it is the business side where the Big 4 can best compete.
The Big 4 don’t consider themselves accounting firms but professional service firms. They provide enterprise solutions as opposed to accounting or legal solutions
And make no mistake, EY and Deloitte, like its big 4 brethern, has all the tools to do just this. The Big 4 don’t consider themselves accounting firms but professional service firms. They provide enterprise solutions as opposed to accounting or legal solutions. They offer HR, IT, R&D, and financing services in a holistic sense. Unlike law firms, the Big 4 see the enterprise—the business—as the client, as opposed to seeing the GC as the client, as most lawyers do. The Big 4 offer substantially more to the overall business than lawyers can or do.
The Big 4 have the ear of the business parts of the enterprise. Their reach in the business is broader and more vast than people the GC works with. Lawyers and law firms? To the Big 4, this is just a tiny part of what the Big 4 and the business deal with.
They also have the ear and inroad into almost every corporation of any size. EY, like other Big 4 firms, are global service providers to some of the biggest companies in the world. They have or can get the ear of their well-heeled clients, who routinely hire U. S. lawyers. And as I have said before, it is these clients that will ultimately drive change in the legal industry.
One of my former partners told me years ago that if you want to become indispensable to a client, learn its documents. Today’s mantra is a little different: if you want to be an indispensable service provider to a client, learn that client’s business. In-house counsel consistently express a desire for outside counsel to better learn their businesses. But who is in a better to understand a client’s business than an accounting firm that provides business advice across a broad range of functions, including legal? It’s hard to see how law firms could hope to match this breadth of understanding.
So who else would an in-house counsel turn to for a thorny legal problem than a single firm? A single firm that knows the business (perhaps even better than the client)?
And free of limitations that auditing functions impose (such as those under Sarbanes Oxley, for example), EY will be better able to provide such a range of services. So who else would an in-house counsel turn to for a thorny legal problem than a single firm? A single firm that knows the business (perhaps even better than the client), can marshal the required legal services, and manage the work consistently with the overall business goals. And the Big 4 don’t even need to bother trying to change the legal, ethical rules barring nonlawyer ownership of law firms to get what they want.
Less restraint on what the Big 4 can do. Alliances that give the Big 4 even more of a foothold with legal. If lawyers weren’t already concerned with where the Big 4 is headed, perhaps they better be.