KPMG sees an opportunity to grow its legal business by outspending major law firms on artificial intelligence tools.
The Big Four consultancy plans to invest “tens of millions of dollars” to help corporate legal departments streamline operations, including implementing generative AI, said Stuart Fuller, KPMG’s head of legal services, in an interview. The technology will eventually “take away part of the core business model” for law firms by handling tasks usually assigned to junior lawyers, he said.
“The most critical difference between a Big Law firm and the Big Four is the ability to have capital provided by the organization to invest in your own business,” Fuller said in an interview. “Creating technology-enabled solutions and investing in AI requires capital.”
KPMG reported more than $36 billion in gross revenue last year, more than five times that of the world’s largest law firms.
The Big Four have intermittently been seen as a rival to Big Law firms since they began amassing lawyers and selling adjacent legal services more than a decade ago. Still, they have not proven to be a strategic rival for elite law firms, and they remain restricted from practicing law in the vast majority of the US
Fuller leads KPMG Law’s 3,850 legal professionals across 84 jurisdictions. He was previously the global managing partner of King & Wood Mallesons, a large firm in the Asia Pacific region.
Generative AI tools will soon be able to handle certain legal work faster, more accurately, and cheaper, he said. The company in November announced it is partnering with Microsoft to implement the software giant’s AI expertise for corporate legal departments.
“We’ve seen the very powerful business model of the law firms survive a whole range of things,” Fuller said in an interview. “The difference we see with generative AI is that it goes to the core of what lawyers do, which is language and words. The transformational effect of it is significant.”
Spending Money on AI
Australia-based Fuller joined KPMG Law in 2018 and became global head of legal services a year later.
KPMG Law revenue rose between 10% and 15% last year, he said, declining to provide a specific figure. The company’s legal services arm expanded in the Asia-Pacific region in late 2022 with the addition of 275 lawyers from Zico Law.
Legal services are among 11 sectors targeted for growth in a recent companywide strategy review, he said. That decision led to the “tens of millions” Fuller said KPMG will invest in its business.
To justify the internal investment, Fuller said KPMG Law is targeting three internal metrics: revenue growth, the share of KPMG large clients who purchase legal services, and client feedback.
Legal tech companies have invested heavily in generative AI, and law firm leaders have discussed it as a potential game-changer. But the new tools have yet to make a dramatic impact.
Any kind of generative AI “transformation” is in its early stages, Fuller said. He is focusing on educating his workforce on the technology, rolling out a global training program in collaboration with Microsoft.
Most clients are at the earliest stages of deploying generative AI solutions, Fuller said. When they discuss possible use cases, they focus on legal research, document summaries, document creation, information extraction and document drafting, he said.
He anticipates the market will quickly consolidate around a handful of AI technology providers. The difference will be in who can best wrangle their own internal data, such as advice a company has historically received from law firms, to be used by those tools, he said.
“We now need people who are just mentally curious about how the practice of law will change and who are agile in changing their thinking,” he said.
Billable Model
Big Law’s business model has survived previous predictions of its demise. “Underestimate the strength of the law firm business model at your peril,” Fuller said.
He expects clients will force law firms to use generative AI for tasks that can be done more cheaply and efficiently than work traditionally done by junior lawyers. That will cause stress on the traditional billable hour model, he said, and create tension between law firms and their clients.
Law firms will be seeking a return on their investment in technology, he said, but clients will be expecting to recoup some of the cost savings created.
“That’s where the opportunity lies, but also the challenge,” he said.
Bloomberg Law competes in this market and sells AI-based tools that provide contract solutions.
