Last year, Big Four firm EY bought Pangea3 from Thomson Reuters as part of a major strategic play to rapidly build up its Legal Managed Services (LMS) arm. Artificial Lawyer spoke to John Knox, the new head of the LMS group about its business model and where it is headed now.
Knox, who joined EY at the end of 2019, is based in Singapore, but will soon move over to New York to lead the LMS group from what is a key centre for EY’s work with global corporates.
He is the co-founder of Lawyers on Demand, the flexible resourcing group. Knox joined EY after more than a decade at the company. He’s also previously worked in senior business development roles at Allen & Overy and Norton Rose Fulbright. In short, he knows a thing or two about how the legal sector works and also how to grow a legal services business.
So, the first question is a multi-part one: what is EY’s vision for the LMS group, where is it now, and where is it going?
Knox starts off by defining what the LMS is: ‘We have a combination of onshore subject matter experts, with contract experts and regulatory experts. Then we also have solutions designers who help solve problems for clients.’ They also have service delivery teams around the world.
Their approach is to start with a client’s challenges and work backwards: what tech will they need to help improve a certain process, e.g. around contracting; what external resources in terms of staff that the LMS can provide will the client need for that matter; how will the whole thing unfold and be priced?
This is the polar opposite of ‘the traditional law firm model’ where neither the client, nor the legal advisor, is able to scope from day one what needs to be done or exactly how it will be done, where instead both parties ‘feel their way through’.
EY’s approach is all about ‘solutions design’, i.e. where they work closely with the client to develop a clear plan, and then assemble what is needed to solve that challenge, right down to how the use of particular types of tech will increase efficiency and therefore provide better value….and a better price.
‘For example, we did a repapering project for a financial services client, which took around 10 to 12 weeks – a timescale for that kind of project that would not have been possible normally. There was also a Magic Circle law firm involved, but they had a very specific role in the matter. The work we did, if it had been done by a traditional law firm, would have cost five times what we charged,’ Knox explained.
However, he pointed out that just working toward lower prices is not the main goal here. The focus is on efficiency, and better pricing in turn is a result of that increased efficiency.
They also have talent cost advantages, with delivery teams in the North of England, India, Poland and the US Mid-West.
And on the tech side, Knox stresses that they are totally vendor agnostic. They have a team that spends most of their time testing out new and established tech offerings, then seeing where they can best be used for different client matters.
They’ve even created something of a legal tech encyclopaedia that they share with clients that shows the pros and cons of a wide variety of tech vendors for different use cases.
Knox adds that this tech strategy will remain in place. They just don’t want to be tied to one particular vendor for one particular challenge. This is a little different to some law firms that often have an openly expressed preference for just one type of solution for a certain problem set. The difference is perhaps the scale of EY, which allows them to take such a broad approach.
And finally, there is the wider legal offering. In total they have around 3,500 lawyers, with the LMS just a part of this. That allows them to provide the solutions design approach with plenty of resources, along with the legal advisory work.
All well and good, but what next? What is the plan?
Knox notes that a lot of the work the LMS does comes from existing clients of EY – which as one would guess from an organisation that serves the world’s largest corporations on a global scale, is quite a client group.
‘We could grow this business ten-fold without even getting new clients [outside of EY],’ Knox noted. And this is not an exaggeration. EY has a global staff of 300,000 people and brings in revenues of around $37 billion. An advisory business at this scale could generate a lot of LMS work, given the growing needs of inhouse legal teams for better work processes and more efficiency.
But is the market demand there now? Is the inhouse world changing enough to generate the level of demand EY and other Big Four firms want?
‘What I have seen in the last two or three years is that clients are now dictating how things will be done. Ten years ago, law firms just chose how they did the work. But, clients now are focused on unbundling work, they ask law firms to pair up with ALSPs,’ Knox explained.
In short, it’s a different world now, and one that seems custom-made for their approach. That said, several large law firms are doing exactly the same thing with an LMS approach, with a big focus on process and tech, as well as legal ops consulting. Other process-focused groups such as Elevate are not standing still either. Rather, it seems like a significant chunk of the legal services market is all moving in the same direction. And this movement is driven by the ineluctable gravity of client demand.
And now for some of the trickier questions. What about the departure of key people from Pangea3 after the EY deal, e.g. Eric Laughlin, Ed Sohn and Joe Borstein? Knox simply said they wanted to move on, and life at the LMS continues as well. And, of course, Knox is now running the show. So, a new chapter begins, that’s the way they see it.
‘The firm spent some time consolidating the acquisitions and we are now aiming to scale the client base and the business,’ he added. And note the plural there, that’s a reference to Riverview Law, the UK-based ALSP that EY also bought.
And what about Deloitte’s bagging of mid-size UK law firm, Kemp Little? Is this the start of something big? Knox doesn’t comment directly on this, but he said: ‘The legal sector is changing, clients want end-to-end solutions. No doubt others, including EY, will keep making acquisitions.’
That seems to be a tacit statement that there will be more Big Four M&A. But, we will have to wait to see if it really takes off like it did in the late 1990s.
In conclusion, what this all seems to say to Artificial Lawyer is something along the lines of ‘cometh the hour, cometh the right type of legal services provider’. One could argue that the Big Four are moving the market, and that is partly true – but as mentioned, the bigger force here is the clients who are getting wise to what can be done and are now demanding change.
Last point. One thing that really stood out about Knox’s view of legal services was this comment: ‘At EY we keep asking: can we save 5% on the time it takes us to do this task?‘
And that goes to the heart of the legal services model in ways that have only just started to be felt. The next few years are going to be very interesting indeed.
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