publication of the International Legal Technology Association
Issue link: https://epubs.iltanet.org/i/535467
ILTA WHITE PAPER: JUNE 2015 WWW.ILTANET.ORG 12 What if steady customer demand suddenly changed? That's exactly what happened after the 2008 financial crisis. Although demand has rebounded somewhat in the past few years, the balance of power has shifted to the client side. While lawyers retain the critical knowledge base that commands high fees, clients no longer accept being excluded from the process. According to The American Lawyer's 2014 survey of the Am Law 200, "Firms on average last year showed the lowest revenue per lawyer since The American Lawyer began tracking the 200 firms in 1998." The legal services economy has improved, but the recovery has been modest. From 2010 to 2013, the growth rate for legal services revenue was 4.6 percent — less than half of what law firms enjoyed during the boom. Things continue to change, with technology heavily entrenched in the future of the client-attorney relationship. RESISTANCE TO BUSINESS IMPROVEMENTS The turmoil rocking the legal profession in recent years highlights what a unique place it held historically among successful global enterprises. Few other industries could defy best practices, marketing investments, management training and technology for so long without suffering debilitating consequences. Change never comes easy, as evidenced by Altman Weil's 2014 Law Firms in Transition survey. Many firms remain tied to the status quo: • Less than half the firms surveyed intended to make significant changes to their business models • Only 30 percent reported intentions to change their strategic approach to pricing in 2014 • 39 percent would overhaul the efficiency of their legal service delivery • 46 percent were working on lawyer staffing strategies However, when firm leaders were asked about the biggest driver of their decision-making, 44 percent chose short-term profitability to hold on to key partners and 56 percent cited long-term, client- focused investments. THE CHANGING FIRM-CLIENT DYNAMIC Some firms are embracing proven business methodologies and technology designed to increase transparency. Clients now can measure a firm's performance based on detailed analytics. Firms, in turn, can interact with their clients as partners in a process rather than collection sources at the end. The shift toward client power is clear in the changing terms of the billing arrangement. The billable hour continues to endure despite numerous reports of its impending death. Lawyers would prefer to continue using the billable hour since it is more profitable than alternative fee arrangements and favors traditional firm-client dynamics. However, The American Lawyer's recent annual survey noted that 60 percent of Am Law 200 firms reported discounting rates for some or all of their top 50 clients. Virtually all firm leaders said they used some sort of alternative fee arrangement. Integrated software applications provide clients with real-time data about their cases, and firms can continuously monitor the profitability of a matter. TECHNOLOGY: CHANGING THE ATTORNEY-CLIENT RELATIONSHIP FOR THE BETTER!