You can’t charge for that anymore

There’s a process revolution underway in the legal marketplace, and yesterday brought two more reports of cannon fire. The ABA Journal published a primer (HT to Legal Blog Watch) by Boston lawyer Jay Shepherd on how to establish a flat-fee billing system. It’s not an airy, wouldn’t-it-be-nice piece; it’s a practical guide borne of his firm’s successful experience with abandoning hourly rates. The key step: reviewing eight years’ worth of bills to figure out exactly how much it costs the firm to complete various client tasks.

Meanwhile, Larry Bodine linked to a Forbes magazine story about FastCase, a Washington, D.C.-based company that provides access to an online, digital, searchable collection of U.S. case law at much lower costs than those charged by traditional publishing powerhouses West and Lexis. The article describes similar ventures launched by other organizations, without even getting into the Legal Information Institute collection and its offspring around the world.

So for those of you keeping score at home, here are two more things you won’t be able to build into your legal bill the way you used to:

–> the standard lawyer fuzziness around just how much it’s going to cost to do something the firm has done before; and

–> most commercial online legal research services, because the cheap or free alternatives are proliferating.

These two entries join a growing list of items law firms can no longer charge out at pricey associate rates, if they can charge them out at all:

–> contact drafting (thanks to legal companies in India working for dimes on the dollar)

–> cost uncertainty (thanks to innovations like Eversheds’ Global Account Management System)

–> document review (thanks to the advanced systems of suppliers like Novus LLC

–> due diligence (thanks to the example of systems like Allen & Overy’s diligence)

–> legal research (thanks to in-house KM and suppliers like The Practical Law Company)

–> precedent development (thanks to collaborative resources like JD Supra)

Law firms’ traditional stock in trade — voluminous hours billed by lawyers doing necessary but straightforward or repetitious tasks — is being hollowed out. The commodity nature of many of these tasks is being exploited by innovative suppliers, who can design systems to streamline or automate these processes and complete them much more cheaply than can a top law school graduate in a large law firm. There’s no going back now.

There are two inevitable end results for law firms. Those that understand and accept what’s happening will recognize that these new processes are their friend, not their enemy: they free up high-talent and high-cost lawyers from low-value, low-cost work, enabling these lawyers to take on more challenging, higher-value tasks. The process revolution in legal services means that firms now have more high-end lawyer hours to sell.

But those law firms that don’t get it will continue to try peddling the Pony Express in an age of airmail, and will find too late that the cost expectations landscape has changed irrevocably. The disconnect between the purchasers and vendors of legal services regarding the cost of those services, a longtime sore point for clients, is going to be fixed a lot sooner than many law firms think.


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