Law's Emerging Elite: Enterprise Legal Service Providers, Part 3
Updated: Aug 15
Mies van der Rohe, the noted architect, remarked: “Architecture depends on its time.” The same can be said about business structures. The last decade has seen a profound change in business architecture. Facebook, Amazon, Apple, and other tech-enabled, consumer-centric companies have built new business models that have transformed the customer experience and, in the process, recast industry landscapes. There are also a handful of iconic brands that have faced challenge before reinventing themselves. IBM-business mainframes to software and solutions- and Ford-cars to mobility/technology- are examples. No matter the path, each of these paradigm-busting companies reimagined the customer experience, replacing existing monolithic paradigms with new, more accessible, flexible, and cost-effective ones. Data, capital, scale, execution, constant improvement, and understanding the consumer are core elements of their architecture.
A handful of providers have emerged as legal delivery’s new architects. Their foundations differ, yet they share a similar vision: to provide a new delivery paradigm, capability, and impact responding to unmet consumer needs and delivering unimagined possibilities. Here is the first wave of enterprise legal service providers.
Allen & Overy: Modernized Legal Practice
Allen & Overy (A&O), the blue-blood UK-based global law firm, calls its enterprise legal service capability “Advanced Delivery.” The firm’s journey leveraging and integrating its differentiated practice expertise with a suite of related technology and resourcing capabilities began more than ten years ago. It has been broadened and deepened during the past decade. Advanced Delivery operates at the intersection of technology and resourcing, tapping into A&O’s legal and market expertise to deliver the most efficient, effective way to solve client challenges. This involves a balance of cost, quality, and risk.
Allen & Overy recently named Andrew Trahair, former co-Head of its global banking practice, to serve as Head of Advanced Delivery. Trahair’s new role involves leading nine A&O-backed technological and resource capabilities and their integration with the firm’s practice. Trahair’s appointment affirms the importance, commitment, and traction that Advanced Delivery has gained within the firm and in the marketplace. It has a year-on-year growth exceeding 25% and according to Trahair is A&O’s foremost growth area. The breadth and depth of Advanced Delivery, owned and funded by the A&O partnership, speaks to the firm’s resolve to a long-term, customer-centric approach and its willingness to invest heavily to achieve it. This contrasts with the “future is now” strategy adopted by most firms, even elite ones.
A & O’s version of enterprise legal services can be broken down into three main categories: solutions, technology, and resourcing. Most prominent within solutions is the Markets Innovation Group, comprised of a dedicated team of A&O partners that develop proprietary technology solutions for clients’ large-scale legal and regulatory challenges. Aosphere, the firm’s first practice augmentation, is an online subscription service that helps clients understand their cross-border risks. A&O Consulting, a recent addition, provides business-focused advice on governance, corporate culture and purpose, operational risk, and regulatory issues.
The technology team also has three components. Fuse is a tech innovation space where A&O lawyers and technology companies collaborate. The tech companies are hand-picked for their focus on relevant tech solutions for A&O internal and client challenges. They are provided free state-of-the-art space at A&O’s London digs and afforded access to the firm’s substantial resources. The Legal Technology Group is an innovation engine that supports lawyers who are transforming mainstream legal work by technology (services to products and/or lower-cost services). The E-discovery group uses advanced technology solutions to collaborate with lawyers and clients to mine data. It has morphed from a litigation/dispute resolution product to a broader-based document review processes incorporating advanced AI technology.
Resourcing is the third bucket of Advanced Delivery and it too has three components. Peerpoint offers clients access to a panel of top-tier, experienced lawyers to meet the interim needs of their legal and compliance teams with full support from the A&O mothership. The Legal Services Center handles a wide range of tasks, including due diligence, litigation reviews, drafting, negotiation and research functions with greater cost efficiency and taking advantage of digital solutions wherever possible. The Project Management Office is a dedicated team of project management (PM) professionals with the dual role of training firm lawyers on PM fundamentals as well as working with clients on large, complex projects.
Each of the Advanced Delivery offerings is designed to “plug and play” with the firm’s global practice teams, clients, and other service units. They can operate as single-point solutions but drive greater impact when they are aligned with A&O’s broader legal, technological, and resourcing capability. It is this integrated, broad, deep, multidisciplinary domain expertise that qualifies Allen & Overy as the first global law firm that has achieved a truly modernized practice from the client perspective. The firm operates with the inherent challenges of the traditional partnership structure, the internal and competitive pressure to maximize profit-per-partner (PPP), competing for top talent, and limitations on capital. The differentiation Advanced Delivery provides—not to mention the capital—mitigates these structural limitations and provides A&O with far more flexibility and capability than other firms.
The market is giving two-thumbs up to A & O and its enterprise legal service (Advanced Delivery) approach. This is not a futurist blueprint; A&O is deploying enterprise legal services now and it is impactful for clients and the firm. “Advanced Delivery has greatly enhanced the firm’s ability to compete successfully for the most complex, high-value legal work across the globe,” Andrew Trahair told me. “It has also opened up collaboration opportunities with leading industry players like UnitedLex and Deloitte. We have similar but by no means identical expertise, so it’s what’s best for the client that drives the right mix of providers, especially on very large, complex matters.”
UnitedLex: The Art of The Possible
UnitedLex was, in the words of CEO and Founder Dan Reed, “created to address a glaring gap in the legal profession—a gap in access by law department leadership to resources critical to drive transformation and to align more deeply with business.” Unlike the C-Suite that had access to a range of expertise from sources like McKinsey, Capgemini, and Atos, Reed recognized that leaders in law departments were generally on their own. They relied solely on law firms and a handful of other single solution providers that tended to have a narrow, transactional focus, not a holistic view with end-to-end and business centric solutions capability. Reed launched United Lex in 2006 to address that void. If that sounds brash, it does to me too.
Reed and UnitedLex have pulled it off. Fast forward thirteen years to the present. UnitedLex employs more than 3,000 lawyers, engineers, programmers, forensic accountants, data analysts, and other highly-skilled professionals and paraprofessionals. The company operates seamlessly across 18 countries and has a client roster that includes more than 25% of the Global Fortune 500. What’s especially remarkable about this staggering growth is that it was achieved organically. This has enabled UnitedLex to retain a singular cultural focus on delivering significant client value and affording its professionals a unique, dynamic, and cutting-edge home from which to extend the current boundaries of client solutions. Spend an hour with Reed and you will walk away convinced that UnitedLex’s best days are ahead—or as old blue eyes crooned, “The Best Is Yet To Come.”
Client-Centricity, Capital, And Marquee Clients From The Get-Go
UnitedLex landed IBM as its first client soon after its 2006 launch. Hewlett Packard and Microsoft were its next two clients. Not a bad start. Reed, a CPA, BigLaw alum, and executive with two successful corporate liquidity events, understood the importance of capital and the structural limitations on law firms to secure it. He secured the backing of two financial powerhouses, Sequoia Capital and JP Morgan, early on. They were betting on the company’s early success but, even more so, on Reed’s commitment to use the capital to build out UnitedLex’s fledgling enterprise legal services platform. They were also impressed by the company’s business plan that described consulting, technology, and solution delivery teams deployed around the globe. UnitedLex had a consumer-centric vision from the get-go.
UnitedLex recently made headlines when it took on a $500m investment from CVC Capital Partners, Europe’s largest private equity company. The deal, described by several sources as the largest-ever investment in the legal market, was closed after an exhaustive, multi-year analysis by CVC of the entire legal landscape. Siddharth Patel, Senior Managing Director of CVC Capital Partners, and his team concluded that “UnitedLex has pioneered the enterprise legal services platform. We are convinced no other company has mastered the regulatory, technology, and solution designs essential to addressing the needs of the leading law departments of the world.“
Law Department leaders are no longer faced with the binary choice of in-sourcing legal work or using traditional law firms for the delivery of high quality, cost effective legal services. UnitedLex has created a unique enterprise legal services platform for transforming large in-house legal departments. It is comprised of a consulting, technology, and resource solutions company and an international law firm constellation. Each of these component parts is focused on the areas of contracts and commercial transactions, litigation, intellectual property, consulting, and compliance. Clients can engage on a single solution basis or, as is increasingly the case, turn to UnitedLex for its end-to-end solutions capability. UnitedLex quite literally bets on its ability to deliver. It guarantees clients that the quality, efficiency, and cost-savings of its enterprise legal service—typically 30% or more—live up to expectations. If they don’t, UnitedLex—not the client—bears the risk. This is unique, even among UnitedLex’s handful of enterprise legal service provider peers.
UnitedLex recognizes that the legal industry is confronting a skills gap, especially in the delivery area. Many in the industry bash law schools for this. UnitedLex has taken an entirely different approach, partnering with law schools to help train students for a rapidly changing marketplace. The Legal Residency Program, as this initiative is called, now involves UnitedLex partnerships with ten law schools including Emory, Vanderbilt, USC and Miami. Not only has this resulted in after-graduation jobs for students (including at UnitedLex), but it also demonstrates the company’s commitment to promote the health of the profession and the industry. United Lex is also pursuing plans to help fund The Digital Lawyer Institute, a one-of-a-kind training program designed initially for General Counsel and their senior business counterparts to solve pressing, real-time challenges and to apply digital transformation to the legal function.
Big Deals and Huge Pipeline
UnitedLex surprised many in the legal industry when it announced its mega-deals with GE and DXC, both in 2018. That was apparently just a warm-up. UnitedLex now has a $3B pipeline balanced across four principal domain areas: intellectual property, contracts, litigation, and compliance. To put that number in perspective, it is equivalent to the annual revenue of Kirkland & Ellis and Latham & Watkins, the world’s highest-grossing law firms. Even more startling is the size, complexity, value, and term of the deals UnitedLex is handling. This is in marked contrast to the transactional nature of most law firm/client engagements. It is also why UnitedLex and the handful of other enterprise legal service providers will undoubtedly continue to grow rapidly in a marketplace keen for their differentiated resources, delivery capability, and enterprise impact.
The Big Four: Law as Professional Service
The long-running debate about the Big four’s legal services intentions and strategy is over. Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG have each publicly declared their objective to dominate the legal space with an enterprise legal services strategy. Piet Hein Meeter, Deloitte Global Leader, Legal Services, said, “We are building capabilities to deliver seamlessly across borders as a truly global legal service provider. The innovative, technology-enabled and integrated nature of our services will disrupt the legal market as a whole.” His counterparts at EY, PwC, and KPMG have made similar statements. The Big Four are all-in and have made no secret of their strategy.
The Big Four have not taken on Big Law head-to-head by replicating its traditional practice-centric partnership model. Instead, they have focused on a suite of practice offerings that include tax, immigration, business transactions, litigation support, cybersecurity, risk management, and regulatory. Their market differentiation is not the number or pedigree of lawyers they employ but their ability to integrate niche legal domain expertise with a global technology platform, robust process and project management capability, a global footprint, trusted brand, massive professional and paraprofessional support, deep C-Suite ties, and advanced digital transformation knowledge and experience. The Big Four is not rooted in law nor does it lead with its legal expertise; it’s the delivery capability that makes it elite. This would not have been a winning formula even a decade ago, but it is now. That’s because the practice of law is shrinking and the delivery of legal services is expanding. In today’s marketplace, legal services are whatever buyers need to solve business challenges, and that does not necessarily require lawyers or law firms.
The Big Four have invested heavily in technology, resource management, perpetual learning, thought leadership, succession planning, data mining, and client relationships. They have a deep understanding of their clients’ business, the touchstone of client-centricity so notably absent among most law firms. Their global footprint, local knowledge and presence, integrated operations, and vast talent pool coupled with their delivery expertise enable them to take on massive, multi-jurisdictional matters and to operate with the speed of business. No wonder KPMG Legal Services reported a 30% growth (Deloitte, PwC, and EY have also reported robust annual legal growth) that includes revenue from mergers and acquisitions, tax, global equity management, compliance matters, and legal tech solutons. Jurg Birri, Global Head of Legal at KPMG, echoed the approach articulated by his Deloitte, EY, and PwC counterparts: “Increasingly, our clients are being asked to implement business transformation programs (sic) that need an integrated approach that combines business and legal methodologies, not just pure legal advice. We understand this and are able to deliver.”
The Big Four Confront Structural, Cultural, and Regulatory Challenges
The Big Four’s double-down on legal services is not without internal and external obstacles. EY, PwC, Deloitte, and KPMG are single-branded global professional services networks. Each of their networks has hundreds of “members” with their own balance sheets. This can result in internecine disputes and an inability to make quick decisions—an “on steroids” version of the law firm partnership model. Another issue is culture: the Big Four long ago morphed from being accounting firms to something considerably broader. Still, the “accountant mindset” and management dominance remains. Just as “non-lawyers” remain second-class citizens in most law firms and in-house departments, so too have lawyers yet to achieve equal standing with accountants among the Big Four. There is also an integration issue among Big Four lawyers exacerbated by member segmentation along geographic and service lines as well as divergent statutory and professional regulations. Big Four law firms (in jurisdictions where they can engage in legal practice) often function more like insurance company “captives” than integrated global firms.
The Big Four also confront two major obstacles in the U.S., the world’s largest legal market. The first is statutory; Sarbanes-Oxley limits auditing firms from providing legal services to audit clients. The other major restriction comes from the legal profession. The ABA Model Rules of Professional Conduct, which serve as the basis for ethics rules of most states, ban non-lawyer ownership of law firms and a fee-sharing prohibition for legal services businesses. While these impediments provide an uneven U.S. playing field for the Big Four to compete in the U.S. legal market, they by no means shut them out. Nor do these obstacles apply in other major legal markets around the globe—notably the UK and Australia—where the Big Four actively engage in full-on law practice. No matter the market, the competitive advantage the Big Four enjoy emanates from the ability to deliver enterprise legal services.
The architecture that a handful of enterprise legal service providers are pioneering is, to borrow from van der Rohe, right for its time. It is at once utilitarian and imaginative, responding to immediate challenges and offering a flexible paradigm for addressing new ones. It provides a structure that is built for the legal consumer and designed to align provider with consumer. This is very different from law’s existing insource or outsource and practice or delivery paradigms. Enterprise legal service providers alleviate and harmonize those choices, delivering consumers holistic, flexible solutions for their most complex business challenges. That’s an architecture that consumers are increasingly buying into.
About Mark A. Cohen