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KPMG’s Strategic Bet on AI to Outpace Big Law Firms

KPMG, a powerhouse in the consultancy realm, is setting its sights on the legal industry, leveraging its considerable resources to outmatch major law firms in the artificial intelligence (AI) arena. Stuart Fuller, the head of KPMG’s legal services, revealed plans to invest “tens of millions of dollars” into AI tools aimed at enhancing the efficiency of corporate legal departments, a move poised to redefine the traditional business model of law firms.

Capital Investment: The Big Four’s Edge

According to Fuller, the critical advantage the Big Four consultancy holds over Big Law firms is the substantial capital available for reinvestment into their own business operations. This financial muscle allows KPMG to venture into technology-enabled solutions, including generative AI, which promises to revolutionize tasks typically reserved for junior lawyers. With a reported gross revenue surpassing $36 billion last year, KPMG’s investment in AI significantly dwarfs the capabilities of even the largest law firms.

The Evolution of Legal Services

KPMG’s ambitious strategy is not without precedent. The Big Four have long been seen as potential competitors to traditional law firms, especially since they began expanding their legal services over a decade ago. However, limitations remain, particularly in the U.S., where they are generally restricted from practicing law. Despite these constraints, KPMG Law, under Fuller’s leadership, boasts a formidable team of 3,850 legal professionals across 84 jurisdictions.

The Transformative Potential of Generative AI

Fuller, who joined KPMG Law from King & Wood Mallesons, is optimistic about the transformative impact of generative AI on the legal sector. By partnering with Microsoft, KPMG aims to harness AI’s capabilities to execute legal work with greater speed, accuracy, and cost-effectiveness. Fuller emphasizes that generative AI’s ability to manipulate language and words could significantly alter the core functions of lawyering.

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Investing in the Future

Under Fuller’s guidance, KPMG Law has seen revenue growth of 10% to 15% in the past year, with strategic expansions in the Asia-Pacific region. The legal services sector is identified as a key area for growth, justifying the substantial investment KPMG plans to make in developing AI capabilities. To measure the success of this investment, KPMG Law will focus on revenue growth, the penetration of legal services among KPMG’s large clients, and client feedback.

Navigating the Early Stages of AI Adoption

Despite the buzz around generative AI, the legal industry is still in the nascent stages of integrating these technologies. KPMG is spearheading efforts to educate its workforce on AI, rolling out a global training program in collaboration with Microsoft. The focus areas for AI application include legal research, document summaries, and drafting, with Fuller predicting a market consolidation around a few AI technology providers.

Challenges and Opportunities Ahead

Fuller acknowledges that the traditional law firm business model has proven resilient but anticipates that client demand for AI-driven efficiencies will challenge the billable hour model. This tension between law firms’ technological investments and clients’ expectations for cost savings highlights both the potential and the hurdles in the path toward AI adoption in legal services.

As KPMG embarks on this bold initiative to integrate AI into legal services, the industry watches closely to see how this investment will impact the traditional dynamics between law firms and their clients, potentially setting a new standard for the utilization of AI in legal practice.

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