Posted , in Business model
What tax tells us about the future of professional services
Large trees grow from small acorns. If I’m honest, tax consulting isn’t the first place I’d have turned to if I wanted to understand the future of professional services. That’s not the fault of tax consultants, but of the rule-bound world they operate in. Like lawyers, there’s a huge amount of intellectual horsepower directed at finding and aggregating often small opportunities. And, with tax authorities increasingly bearing down on what they regard as loop-holes, those opportunities are getting ever smaller and more specialised. What changes all of this, of course, is technology, and that’s where some important innovation is taking place.
Like legal services, tax consulting is ripe for automation. Many services involve trawling through huge quantities of data, something that could be better done by robotic process automation. Sprinkle in a bit of artificial intelligence fairy dust, and offer the package at a discount compared to traditional time and materials work, and you’ve got something that’s attractive to both clients and tax consulting firms. The interesting thing—the potential spark of innovative life—is what happens next.
I was talking recently to the tax director of a major US educational institution. She completely gets all of that, and sees no reason to suppose that the tax function of the future will be very small, most of the work being done by software. What was more interesting was who she thought would provide that software. “It’s a really tricky decision, who to use,” she said. “If I go to a Big Four firm I’ll be completely confident that the tax knowledge embedded in the programme will be correct and up-to-date, but I’m not convinced that Big Four firms know how to build and support software. That’s not their core competence. On the other hand, if I go to a software company, can I trust the tax information?” Couldn’t that be solved by two companies, a software company and an accounting/ tax firm, working together, I asked. She was sceptical—her past experience of such collaboration wasn’t great, and she was also concerned that a Big Four firm would go to a small, specialist software firm, when she was thinking more of an Oracle or an SAP. “I don’t think the solution here is for the Big Four to sub-contract: I need to know we’re working with a real software company!” Most interesting, though, were this client’s views on how her perceptions of the Big Four might change: “I’m a Certified Public Accountant: I’m used to comparing the Big Four with each other, and with specialist tax practices in—say—law firms. But in the future, I could be putting the Big Four next to ERP vendors, and weighing up the differences between them. Changing the competitive set will inevitably change how I view the Big Four: It will give me a completely new perspective.”
Could a Big Four firm become just another IT vendor in the future? That would certainly have a dramatic impact on the competitive landscape. And where tax consulting leads, we may see other professional services follow.