Should Lawyers Be Scared Of Abandoning The Hourly Billing Rate?

Law firms today are facing increased pressures from corporate counsels to reduce their external legal spend

. They have been caught in a pincer grip of a slackened economy on one hand and reduction in work from clients on the other, resulting in a demand to lower both the quantum of billing and the billing rates. They need to adapt to this changing market scenario and the unimaginative ones will see their earnings do down. But, this market also offers growth opportunities for those firms who are ready to change, and are ready to look at the value they offer to the clients in a different way.

Reduced billing rates need not mean reduced profits per partner. You can increase the leverage smartly; reduce cost of delivery, increase efficiency of resources deployed, increase the billing amount the lawyer retains and at the same time reduce the amount you would bill your customers.

Traditionally, the alternative billing methods pioneered by DuPont include:

Flat fees for repetitive, predictable services

Discounted fees in exchange for performance bonuses (based on cost savings)

Blended rates for any resources used - from Senior Partner to paralegal - that should push the firm to use lower level employees when possible

Volume discounts that discount hourly rates as the volume increases

Capped fees, which may be a gamble, but can provide predictability

Striking upon the right billing model is a challenge for most law firms, and it has been seen that alternative billing models will be more in vogue going forward. Manthan seeks to add a new dimension to enable alternative billing models to work for firms, by dramatically reduce the cost of delivery if they leverage a team of lawyers in India to deliver a substantive portion of select processes. Law firms will find it easy to retain their profits per partners in a comfortable zone only if they can seek an increased leverage, offered by offshore outsourcing. Offshore outsourcing works best if you offer flat fees, capped fees or blended rates.

Lets take a case in point:

1.Cost of drafting a typical contract in US: $3000

2.Cost of drafting the same contract in India + Cost of review by attorney in US: $750

The labor arbitrage between US and India is 8:1 (Billing rates of $300 an hour for an associate in the US versus $40 an hour in India) and hence deploying offshore support to do most of the repetitive, predictable and well defined legal tasks shall deliver dramatic increases in profits per partner for a law firm.

By Gururaj Potnis

CLO Manthan Legal Services

http://www.manthanlegal.com

http://www.manthanlegal.com

by: Gururaj Potnis

POST COMMENT

Civil Litigation Lawyers Choosing A Licensed Attorney Or Lawyer Is The Most Crucial Thing A Perfect Guide on Mutual Fund Investing Cerebral Palsy Case: Hire A Lawyer-cum-doctor For Better Results Technical Trading - Learning The Laws Of Successful Investing Stock Strategy - Making A Plan For Successful Investing Great Times Begin With Investing in Timeshares EXPERIENCED CRIMINAL DEFENSE LAWYERS WIN MORE CASES How To Make Big Bucks With Little Risks Using Value Investing 10 ways to identify if your lawyer is right for you US Federal Courts - Lawyer Admission Requirements Your Invention - Commercially Exploit It with the Right Intellectual Property Lawyers Investing In Penny Stock