The challenge for providers of legal and audit services lies in their business model having to change.
By Johan Steyn, 7 December 2022
The revenue model of professional services providers, based on the hourly billing of human workers, is under threat due to automation.
Professional services providers — whether audit, legal, consulting or others — rely on their human workforce to perform the duties they were trained for, using the intellectual property, methods and frameworks that their employers place at their disposal. Human minds and hands perform the work.
In an era when most business tasks and processes can be automated by cognitive automation platforms, the need for large teams of workers is diminishing. However, many things humans do cannot be automated. In a previous article, (“Experience cannot be automated”, October 18), I asked: “Can we automate experience? Are we able to find a way to simulate the things that human workers have grasped over many years of learning, growing and exposure?”
I often ask clients why they want to use automation. They say rightly that it is to achieve efficiencies, deliver services faster, increase accuracy and improve customer experience. But what is the end goal of automation? Because of the inevitable impact on people, we have to view this through a philosophical lens. My view is that the goal of automation is to alleviate human workers from performing low-value, repetitive work, and to focus more on the meaningful work that only humans can perform.
I was recently providing consultation and automation strategy work with the procurement team at a large financial services organisation. I explained to them how they could use automation technology to work smarter and achieve their key performance indicator targets quicker. Someone in the meeting raised an interesting point. She asked: “If we can automate and thus do things quicker at a lower cost, why can our legal and audit providers not do the same?”
She made an interesting point, and we discussed it at length. The future challenge for providers of legal and audit services lies in the fact that their business model will have to change. Many of their clients are experiencing the benefits of cognitive automation platforms and are asking rightly why these providers are not doing the same.
The revenue model of these providers is essentially based on placing as many human workers as possible on projects, relying on the vast amounts of hourly billing for the work performed. If legal, audit or other services firms achieve efficiency through automation, can their clients not rightly expect that the services fees should decrease over time?
The team I was consulting with told me that they are thinking of placing a section in future requests for proposals in which they will demand their potential vendors explain in detail how they aim to achieve cost reductions through technological means. In theory, the vendors should be able to perform the same amount of work at a lower cost base.
Humans will always be needed to perform the work — especially knowledge work — but teams will increasingly be made up of digital assistants, software robots and other platforms working alongside the people.
The way organisations procure services from specialist providers will change. I foresee a time when the engagements will move away from rate cards, and full-time equivalent or consultant numbers to outcome-based delivery underscored with efficiency gains and radical cost reductions.
• Steyn is on the faculty at Woxsen University, a research fellow at Stellenbosch University and founder of AIforBusiness.net