PANGEA3 LLC

Not surprisingly when the recession hit the legal industry, arguments against the billable hour model resurfaced in numerous articles and blogs. The recession has forced many law firms to not only downsize but, in a bid to show an understanding of the pressures corporate counsel face as well as keep their clients happy, firms are also discounting billable hour rates and providing alternative fee arrangements such as flat-fee pricing. But discounting billable hours doesn’t necessarily equate to cost savings.

In an article by the Boston Business Journal, Christopher Mirabile the president of the Northeast Chapter of the Association of Corporate Counsel and other industry experts, discuss the value of discounting billable hour rates. Interestingly one of the arguments against discounting billable hour rates revolves around value and efficiency. Alternative fees and fixed-fee arrangements place the burden of ensuring efficiency on the law firm or legal services provider whereas the billable hour can potentially promote inefficiency. Essentially, no matter how low the billable rate plummets inefficiencies will cost you in the long run.

According to a recent survey from PricewaterhouseCoopers and the Duke University Offshore Research Network, legal outsourcing is doing well in this recession. Not only is outsourcing (BPO, ITO, HRP, LPO, etc.) growing in 2010, with 62% of all service providers expanding their offerings, but legal outsourcing is the current darling of the outsourcing industry. With over 100 providers in the LPO industry, legal outsourcing is expected to grow at an annual rate of 40% in India. What is the reason for this growth? The changing perception of the legal industry as a result of the economic recession.