Historically, attorneys and other timekeepers bill clients hourly for legal services. Overhead costs — primarily real estate and support staff — were recovered as a small component of the hourly rate. However, the need to incorporate both advanced technology — and more importantly, the people who can best utilize that technology — has introduced new costs that cannot be directly billed. As a result, firms must rethink how they price their services — or if they can continue to offer the same services.
The approach of incorporating overhead into the billable hour is becoming increasingly untenable, especially when clients do not directly perceive the value of these additional costs. Moreover, technological advancements and evolving client expectations are driving greater efficiency. This efficiency reduces billable hours and consequently, revenue generated under the traditional model. The rapid expansion of e-billing has given clients immense data sets to evaluate firms against each other. Clients are able to determine their own benchmarks for cost, time of delivery, rates and leverage — and are holding firms to those benchmarks.
