Alternative fees vs. electronic billing

By contributing author Brad Blickstein, Blickstein Group, on legal service providers:

There was an interesting article in the Wall Street Journal some weeks ago about law firms doing more contingency-fee work for corporations (“Knives Out? Law Firms in New Era, Mar. 7, 2007 at B1). Like many, I’m regularly surprised at the resiliency of the hourly bill, and assumed that someday it will go away for most work. As put forth in this article, efficient law firms can make more money with other billing mechanisms, and clients are always frustrated with hourly bills (at least they say they are).

But I’ve been rethinking this lately. If a law department really optimized their electronic billing system, couldn’t this take the place of alternative fees? With detailed input and sophisticated reporting, a “legal spend management” system can help the law department understand in advance what a matter should cost. With this information (dare I say “budget?”) the client can simply manage the number of hours put forth on the project. The client gets the predictability it craves without changing the way their firm wants to do business.

Getting this type of information into and out of an electronic billing system can be difficult—in fact an MBA-type analyst may be necessary—but so would be the value of getting “alternative fees” without straining their relationship with their law firms.