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Perspectives
Embracing modern legal service delivery models
How alternative legal pricing strategies up value and productivity
The sea change in the legal industry that has been foreshadowed for well over a decade may finally be underway, showing that leading legal departments are seeking better, faster, and value driven service delivery. While most legal work is still done in traditional models and under traditional hourly business agreements, a recent survey indicates real momentum for modern legal service delivery models.
It’s more than just talk
According to the 15th Annual Blickstein Group Law Department Operations Survey, done in collaboration with Deloitte, more than 30% of law departments expect their spending with alternative legal service providers (ALSPs) to increase in the next 12 months, and none expect their spending to decrease.
Additionally, leading practices among legal departments recognize that not all legal services are homogenous in terms of business value created, contribution to strategic goals, complexity and risk profile. One perspective on legal work is categorizing it into three general buckets: cream, core and commodity:
- A “bet the company” piece of litigation might be classified as cream, meaning it is worthwhile and necessary to engage bespoke services from top attorneys at leading law firms to mitigate unacceptable risk or take full advantage of a complex opportunity.
- Other legal work may be seen as a “commodity” because it can be done in largely the same way every time with less expensive resources with reduced risk.
- We define core legal work as the bread-and-butter matters that in-house counsel and their law firms do that keeps the company running on an ongoing basis. It may occasionally vary or escalate but is mostly predictable and repeatable.
It is not sensible business practice to charge for—or pay for—all legal work as if it is bet-the-company litigation. Organizations are finding new ways to get core legal work done. These alternative legal service delivery models include automation and self-service, flexible staffing, and offerings from ALSPs.
The difference between delivery models and billing models
Alternative legal service models are not the same as alternative billing models, also known as alternative fee arrangements or AFAs. While most alternative delivery models typically make sense with an AFA in place, “time-based” AFAs are sometimes applied to work done under traditional models.
These time-based AFAs are predicated on the number of hours it takes a firm to do the work at a specified unit price. And while those hours are repackaged for the client into a different commercial model, the providers are still selling time. (For more on time-based and value-based AFAs, please see our recent publication, Value-based pricing: Aligning the cost and value of legal services.)
Modern legal service delivery models, however, may require services to be delivered using some novel combination of people, processes and technology, which can reduce the time spent on a matter. A value-based AFA, based not on inputs such as time but on outputs and results, may make more sense. When legal processes are delivered in new ways, it is often logical to bill them in new ways, too.
Alternatives for core legal work
Most attorneys, of course, look at work through a legal lens. Different areas of work may not seem to have much in common from that perspective. Negotiating contracts and drafting pleadings, for example, may require completely different legal expertise. They may not even be in the same type of practice, as contracts are a commercial enterprise and pleadings are part of litigation. When looking at legal work through an engineering lens, however, the processes behind a lot of core legal work may actually be quite similar, and, therefore, ripe for disruption.
Here are three alternatives to the traditional or hourly billing model for delivering legal services. When implemented strategically, they can drive much more than just cost savings.
Making modern legal service delivery models work for you
Of course, one size does not fit all. An efficient way for law firms and legal departments to implement a strategy for managing legal work may be to create a sourcing framework which enables them to identify and design a hybrid approach to delivering legal services. While this may seem obvious, implementing such a strategy is not always simple. It typically requires the resources, openness, and desire across the legal department and its firms to not only design but also adopt new practices. With the right focus on change management, however, the application of new service delivery models can provide enormous value to a legal department and the larger enterprise.
As used in this document, “Deloitte” means Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/ us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. The Deloitte US firms do not provide legal advice. This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this article.
Learn more about Deloltte's Legal Business services
The rapidly changing business landscape has intensified pressure on legal departments to increase efficiencies and deliver greater value to the business. Deloitte's Legal Business Services helps clients modernize their legal departments, freeing the core legal team to focus on strategic priorities, enhance the speed and quality of issue identification, and use data to drive faster, more informed decision-making.
*The Deloitte US firms do not practice law or provide legal advice
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