LDO Buzz

Law Firms Looking Closer at Pricing Analysis
Gina Passarella, Corporate Counsel
After a few years of collecting financial data and applying project management techniques to the legal process, law firms are beginning to dedicate resources to pricing analysis.

Firms are analyzing and strategizing on pricing in order to properly staff matters handled on alternative fee arrangements, provide a client with more cost certainty and, perhaps just as important, ensure the firm is not losing money on a fee arrangement.

“The data tells the story better than people can sometimes,” said Reed Smith Chief Knowledge Officer Thomas Baldwin. (read the article)

Why the Billable Hour Endures
Steven J. Harper, The Am Law Daily
Last month, I wrote a New York Times op-ed that discussed the billable hour regime and its unfortunate consequences for the legal profession. The piece generated a lot of response, most of which supported my theme. Readers generally agreed that the system rewards unproductive behavior, invites abuse, and pits attorneys’ financial self-interest against their clients’ goals.

DEFENDING THE BILLABLE HOUR

Even so, the Times published a letter to the editor in which Alan B. Moldawer, executive vice president and general counsel of Veolia Transportation—“the largest private sector operator of multiple modes of transit in North America,” according to its website, with transit and rail management contracts in such cities as San Francisco, Boston, and Miami—responded to the article by defending hourly billing. (read the article)

Will Unbundling Undo Biglaw?
Ron Freidman, Strategic Legal Technology
“[T]he concept of the bundle has been foundational. Ads go with editorial content in print, commercials go with programming on television and the channels you desire are paired with ones you did not in your cable package. People were free to shop for what they wanted, as long as they were willing to buy a bunch of other stuff they did not [sic]…. though bundles may be a handy way of protecting things, they also tend to obscure the weaknesses within. Those flaws are becoming more apparent as the practice of bundling comes under attack…. once the consumer decides, it doesn’t matter what stakeholders want. They can’t stop what’s coming…. The advent of the Internet presented an existential challenge to bundles. Once consumers got their hands on the mouse and a programmable remote, they began to attack the inefficiencies of the system…. Change often comes very slowly, but then happens all at once.”
Substitute a few words and this could describe the market for corporate legal services. BigLaw still dominates but the unbundlers have arrived:

Alternatives to law firm such as legal process outsourcing (LPO) providers, document review companies, and Axiom Law and its competitors. (For an excellent discussion on Axiom, see Richard Granat’s April 8th post, Is Axiom Law a Law Firm?)
New types types of law firms such as boutiques (BigLaw expertise without its overhead) and new model law firms such as Clearspire (US) and Riverview Law (UK), which offer fixed fees and lower overhead.
Law firms that offer unbundled services: Several US firms offer document review service from low-cost service centers. Multiple UK firms run their own alternates, with document review and paralegal support from low cost centers in Belfast, Scotland, or the north of England.
The Big 4. At The Georgetown Law “Shrinking Pyramid” conference on April 12th, I tweeted ”@PaulLippe reports each Big 4 does $2-4B of ‘legal systems’ work adjacent to what law firms do. BigLaw lost out. #LawShrink”. (Note: that revenue likely dwarfs all the the alternatives combined.) (read the post)

How to fix a ‘churn that bill’ mentality? Hourly billing is only part of problem, Axiom CEO says
Debra Cassens Weiss, ABA Journal
Hourly billing is only part of the problem contributing to a “churn that bill, baby!” mentality at law firms, according to the co-founder of a company claiming to offer cheaper and more efficient legal services.

Mark Harris, chief executive of Axiom, says in a Forbes column that the problems run deeper. Law firms are run by partners who have worked for decades to reap the rewards that come from being atop the pyramid. Change could be self-destructive, Harris notes.

At the bottom of the pyramid are the associates, who are deployed “in a haphazard manner against ill-defined tasks within an incentive structure that motivates waste and anti-client behavior,” Harris writes. These associates “tend to operate in a professional environment that has simply ignored all of the investment in technology, tool creation, and efficient workflow that have made the rest of the economy more productive.” (read the post)

Hourly Rates in a Time of Moderation
Mary Smith Judd, Corporate Counsel
Click to search seven years’ of legal billing rates in the 2013 Going Rate database.

We live in a time of moderation, where client pushback has eliminated automatic 6 percent to 8 percent annual rate hikes and now holds lawyers to modest rate increases.

As our cover story by contributing writer Mary Helen Martin makes clear, law firms are turning toward technology to manage billing, increase profitability and improve collection rates and turnarounds.

Drat. (read the article)

Wells Fargo GC to Cut Outside Counsel Spending
Brian Glaser, Corporate Counsel
Wells Fargo & Co. general counsel Jim Strother told attendees at a University of North Carolina School of Law conference that the bank is planning a “meaningful reduction” in its outside counsel spending.

According to a report from Retuers, Wells Fargo is undergoing a “companywide cost-cutting initiative” and “began reviewing these expenses about nine months ago and plans to start implementing changes in the next quarter or so.”
(read the article)