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Our recent report explores three key competitive threats facing City law firms, one of which is posed by the Big Four: , , , and . 

The Big Four are targeting the legal service sector. This isn’t a new story, they’ve long targeted the sector, never quite achieving the predicted success. But, according to our report, this time is different.

In this article, we explore the initial promise of the Big Four, track their early forays in the market and their consequent shortcomings, explore the key difference between the Big Four and other legal service offerings, examine why City firms need to take their new challenge seriously and suggest strategies they can implement to respond. 

The early promise of the Big Four

The Big Four entered the legal services market in the late 1990s. It began with optimism and a flurry of hope as they almost immediately gained high-profile clients. The initial success was such that many quickly predicted a huge disruption to the legal market. And this was perhaps no surprise, as their offer seemed persuasive: emphasis on project management, huge brand recognition, economies of scale and competitive advantage, and a global reach. 

Their offering differed from the standard law firm. Law firms stuck strictly to legal matters, but the Big Four promised professional services such as auditing and assurance, tax compliance and reporting. Law firms focussed on purely legal solutions, but the Big Four looked to integrated solutions. Law firms seemed localised, at best national, usually operating in a single jurisdiction, but the Big Four traversed geography and outlined global solutions. But, despite so much promise and the apparent benefits they could pass on to clients, the Big Four never made the impact predicted. City law firms continued to dominate. The Big Four’s failure to seriously penetrate the market stemmed from high-profile accounting scandals, , myriad regulatory challenges, reputational damage and ensuing client scepticism, and litigation risks. 

The realisation of their early promise

“The last time they tried to enter the legal profession in the 1990s, their strategy was we’re just like law firms only bigger. But that’s not their strategy anymore. Now, it's we provide a different kind of offering, moving from a fee-for-service model to an integrated solutions model,” says David Wilkins, Lester Kissel Professor of Law at Harvard Law School, in our recent report, Are the Big Four reshaping the future of legal services?

The Big Four have evolved and now focus on day-to-day work, not the highly competitive legal work. They focus on managing services, ensuring legal teams are not demoralised by mundane and repetitive work. They boast scalable information technology, alternative billing, and advanced auditing, consulting, risk, financial, tax, and other advisory options. In short, they sell an end-to-end service to clients.

It's perhaps no surprise they now pose a serious challenge to City law firms. However, the Big Four still possess many drawbacks. Their large-scale operations can lead to various regulatory barriers, and they tend to stay clear of litigation due to conflicts of interest. Furthermore, with many alternative legal service providers, the business model tends to focus on high-volume work, which isn’t as attractive to clients who are seeking bespoke solutions. 

But the Big Four are gaining a greater share of the market. Attitudes towards them are shifting as clients focus on solutions. According to our research, PwC doubled its revenue in the past five years, winning international work with BP, British Airways, and RBS. KPMG tripled revenue streams in the past five years, working with Sainsbury’s on an international reorganisation project. Deloitte worked with BT, EE, and Ikea. EY has partnerships with Nokia, Tesco, and pharmaceutical company Merck Sharp and Dohme.

The Big Four are making serious strides in the legal market and it’s clear their offering is increasingly appealing to clients. They are a looming threat to City firms. So, the pressing question, for City firms at least, is how to rise to that challenge?

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Competing with the Big Four

City law firms need to adapt to meet the challenge of the Big Four. There are various methods, many of which City law firms have already taken. Below we explore two essential strategies, starting with the need to shift their business models. 

Switching to an ABS

Firms should move away from the partnership model and explore alternative business structures (ABS). Firms pursuing ABS have found that they better serve client needs. Shifting from hierarchical to disaggregated business structures can lead to quick solutions, with less bottlenecking and managerial oversight, alongside greater agility. ABS encourage the move away from billable hours and ensures that specialisms match client expectations. 

Many firms have already changed business models. The pandemic served as a catalyst. Ways of working shifted by necessity, boosting agility and flexibility in the process. Greater utilisation of tech happened almost overnight, allowing firms to traverse geographical limitations, reduce costs, and streamline operations. were shattered by the blurring of front- and back-office roles. Client-facing lawyers and back-office lawyers integrated, with service personnel becoming essential to client interactions. Old silos evaporated, which brought large improvements to overall efficiency and client delivery.

Embracing legal tech

The Big Four pride themselves on integrated tech. and boosts efficiency, allowing lawyers to spend more time solving client challenges, finding solutions, improving processes, and so on. Lesser-known benefits include greater recruitment, greater staff retention, improved overall productivity. Tech, in short, saves time and money and supports quicker legal solutions, a point that the Big Four have long recognised.

City firms typically approach tech with an entrenched conservativism. But that, too, changed with the pandemic, with the necessity of tech becoming clear. And the appeal of tech has lingered post-pandemic, despite a slip in appetite. This embracement will help City firms stay ahead and see off the looming threat of the Big Four. If they haven’t already, City firms should start with the basics, embracing legal automation and looking at AI, scoping out the best tech to meet their commercial needs and the expectations of clients. 

Read our report, The three competitive threats facing City law firms, in full now.

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