Re-Thinking The Service Delivery Model

Professional services and firm management consultants Hildebrandt Baker Robbins released their 2011 Client Advisory for the legal market.

Their comprehensive surveys highlight perceived legal trends in 2010, as well as the trends they believe will impact the market this year. Their discussion of Management Challenges opens with two telling paragraphs:

"Much has been written over the past two years about the changing delivery model for legal services and the need for firms to re-think their underlying assumptions about work processes, pricing, infrastructure, and administrative support. While some of the bold predictions of revolutionary changes in the structure and work of firms have no doubt been overblown, there is no denying that the market is changing and that some firms are beginning to use the redesign of their service delivery models to good competitive advantage."

"As Mike Dillon, the General Counsel of Sun Microsystems has observed, “The reality is that we are in the early stages of a seismic shift in the traditional cost and delivery model for legal services. I see it every day in my interactions with the law firms that support us and in my discussions with peers at other companies.”

The report notes that while the billable hour is still considered the "normal" model, "there has clearly been a noticeable increase in the use of AFAs (alternative fee arrangements) and the evidence suggests that this trend will continue in coming years."

The Hildebrandt survey encompassed more than 200 companies, and looked at 2009 actual number along with expected 2010 numbers and found:

• 41 percent indicated they had used contractually fixed fees in 2009 for up to 10 percent of their outside legal work.

• 20 percent also reported they had used contingency fees for up to 10 percent of their outside legal work.

• 19 percent indicated they had used value or incentive billing.

• 8 percent stated they had used portfolio pricing (i.e. the use of fixed fees for a series of projects or cases or for projects occurring).

• 61 percent projected an increase in the use of contractually fixed fees in 2010.

• 55 percent projected increased use of value or incentive billing.

• 45 percent projected increased use of contingency fees.

• 36 percent projected increased use of portfolio pricing.

The Hildebrandt survey certainly seems to indicate that alternative models have moved beyond simply gaining traction; they seem now to be part of the permanent landscape.