This news followed a similar move from fellow big four firm EY, which cut 148 staff, mainly from the firm’s consulting and financial services arms, in April this year. In March, PwC cut 329 jobs in a major restructuring following its 2023 tax scandal. Deloitte Australia also announced a major restructure earlier this year – although its tax and legal business remains unaffected.

But amid a continuously turbulent market, will the big four firms continue to push into legal services – or will traditional top-tier firms and alternative legal services providers (ALSPs) continue to dominate the Australian legal market?

In a statement following the KPMG legal restructure, tax and legal managing partner Ben Travers said that rather than continuing to invest in a commercial law practice, KPMG would instead look to use “alliance relationships” with law firms that offered complementary services.

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“Our strategy is focused on playing to our strengths and prioritising investment into areas which align to KPMG’s broader growth strategy and markets,” he said.

The sheer size of big four firms makes it hard to add a “relatively small legal function” to its ranks, and there are key structural challenges to a law firm adapting to the working practices of a consulting firm.

One former KPMG legal partner told Lawyers Weekly that within this environment, “it has always been challenging to attract the right talent and enough of the right talent to make the law function within the big four feasible”.

“Even though lawyers know how to run a profitable business, the expectations within the big four are different, and there have also been tensions between how much the lawyers are paid and what revenue they are bringing in. How long were the partners outside of law going to be willing to subsidise the law function?” they said.

Many clients may also be hesitant to “accept the legal function” within the big four firms, with many GCs within organisations often deferring to BigLaw firms and having their own legal panel in place.

“I query if the big four need to develop strategic alliances or will they just go back to what they do well and let the client decide who they want to use for the legal side,” the former senior partner said.

The Australian legal market is especially hard for new players to break into, big four or otherwise, Lawyers on Demand managing director Australia Paul Cowling told Lawyers Weekly.

“There will always be some room for high-quality, top-tier players to break into the Australian market, however this will be rare. We may see further disruption via groups of partners spinning off from established existing top-tier practices, or top-tier overseas firms investing more heavily in the local Australian market. However, the Australian market is finite, so the opportunity is limited, especially when compared to the US or UK market,” he said.

“Moving forward, smart accounting firms will likely develop alliances with specific law firms (many outside BigLaw) and established ALSPs (like LOD) that offer complimentary services to meet specific client needs, rather than investing solely in their own proprietary legal service offerings.”

Growth of ALSPs and ongoing disruption to BigLaw

As previously revealed by Lawyers Weekly, the ALSP sector of the legal market has continued to grow exponentially, particularly around consulting for legal tech.

ALSPs can be housed within law firms in addition to being standalone service providers – with more firms likely to invest in alternative services as client demands grow and change.

A recent LexisNexis report titled, Are the big four reshaping the future of legal services?, revealed that following this growth, the big four firms have since benefitted from the growth in ALSPs and the changing delivery of legal services.

“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. Their strategy is ‘we provide a different kind of offering, moving from a fee-for-service model to an integrated solutions model‘,” David Wilkins, Lester Kissel Professor of Law at Harvard Law School, said in the report.

“The big four can offer a far higher integration of technology, project management and process management; they employ a huge number of people across a huge range of specialties, and they are way more global than even the most global law firm. This is why, for many kinds of issues that companies face, it’s a very attractive offering.”

This comes as more lawyers – particularly those in-house – are forced to do more with less, leading to the increased adoption of legal tech. In fact, according to Thomson Reuters’ Future of Professionals Report 2024, 77 per cent of Australian legal professionals believe AI is a force for good, and using AI to tackle large volumes of administrative tasks, they "expect to free up to two hours a week in the next year”, Thomson Reuters VP for Asia and emerging markets Carl Olson said.

“As the global economy becomes ever more complex, there is a growing need – and demand – for legal professionals to offer specialised expertise, innovative legal technology, and strategic counsel to their clients,” he said.

Despite BigLaw being “well entrenched” in the Australian landscape, disruption is already evident in the market for legal talent, as opportunities outside of BigLaw and within big corporates and ASLPs are “increasingly varied and attractive”, added Cowling.

“If we look more closely at the underlying services being offered, it is possible, and it has clearly been happening for some time. There will always be a place for BigLaw but, increasingly, corporates are now buying legal services in a far more strategic manner than five-plus years ago. They are increasingly likely to utilise a variety of legal service providers (both law firm and non-law firms) to deliver on specific needs. The ‘one-size-fits-all’ approach is becoming a thing of the past. This is where real disruption will continue to occur,” he explained.

“The market has matured significantly in the past five years where traditional firms and alternative providers coexist, servicing different client requirements alongside one another. There are numerous examples of traditional firms partnering with alternative providers and that ecosystem will only continue to evolve.

“While professional services firms may now lay low and reassess their legal strategies, they have succeeded to an extent and are unlikely to all now bow out completely. Their business model faces unique challenges in delivering legal services, but they are impressive organisations who I have no doubt will continue to do all they can to succeed.”

The influence of consultants, new entrants, ALSPs, and the increasing use of technology are all factors that have disrupted the legal sector, pushing BigLaw top-tier firms to find areas where they excel, and drop off in other areas.

For “depth or real expertise and experience”, according to the former-KPMG partner, clients generally want BigLaw in their corner.

“What has really shifted is the understanding that a law firm panel can be a mix of BigLaw, mid-tier, boutique, MLS and alternative legal providers. It doesn’t make sense to go to BigLaw for everything. There is no one-size-fits-all model, and you will see niche firms compete with BigLaw and alternative providers take market share. I see the future being bright for those who are willing to adapt,” they said.

“It is hard to see any of the big four sticking with providing legal services other than tax controversy/litigation which has been an area of success, or some of the adjacent areas such as consulting to legal teams on their tech and process improvement options. It looks like law within the big four is dying slowly and has been for some time. KPMG was just brave enough to call it.”

Lawyers Weekly reached out to KPMG for a statement on the BigLaw landscape in Australia, but the firm declined to comment further.