The Under-Reported Story

Law.com recently ran a piece by Frank D'Amore, founder of legal recruiting and consulting firm Attorney Career Catalysts, discussing one of the questions he is asked most:

"Alternative fee arrangements, the decline of hourly billing and rates are being written about frequently. Is a lot of this more hype than substance, and how do you think things may shake out when the market stabilizes?"

According to D'Amore, alternative pricing is here to stay but, at the same time, the billable hour is not going to vanish, either.

"...there are matters that are just too important or otherwise defy being easily wedged into alternative fee arrangements. That's why I think that hourly billing is here to stay, even if its use declines somewhat over time."

But what is more interesting is D'Amore's opinion that the under-reported story here is the reductions law firms have made to their hourly rates in the face of more stringent client demands.

"As the balance of power swung to in-house counsel, they have been able to drive harder bargains on non-alternative fee work.

"Getting those discounts from large firms may prove to a be a watershed development, as it underscored that a new world order may be unfolding that will reward firms with business models that support greater pricing elasticity. These firms may be better positioned to get a broader range of work because they will be more suitable partners for their clients; their challenge will be to maintain a cost structure that keeps this lower end work within profit parameters. Firms that are inflexible or hyper-focused on rates may get hurt as a result."

As D'Amore concludes, it makes sense that firms that are set up to support pricing elasticity may be the long-term winners.