Fitting the bill

As clients turn against hourly rate billing, LPO providers are stepping in with an innovative range of alternative fee structures. Lesley Sutherland reports

Writing on his blog, Legal Process Outsourcing, industry observer Rahul Jindal doesn’t mince his words: “Charging by the hour is a sure way of driving your clients away from even the periphery of your office,” he says. “Payment of services should be based on the value addition done by the service provider rather than the number of hours the person has spent in courtship with the project.”

His words resonate. Driven by client demand for efficiency and transparency, traditional hourly-rate billing for legal services is in decline. In its place, new alternative billing models are becoming increasingly prevalent.

Perhaps unsurprisingly, it is legal process outsourcing (LPO) providers that are at the vanguard of the alternative billing movement. But the introduction and use of new billing models only makes sense if clients truly understand how they can best utilize and quantify the powerful resources offered by their legal service providers.

LPO providers lead the way

None of this is new to LPO providers or their clients. The quest to break down, commoditize and accurately account for the basic elements of legal work is fundamental to their industry. Yet LPO may lag behind other sectors of the outsourcing profession when it comes to the sophistication of its billing practices.

“The billing arrangements in the LPO industry are not as varied or developed as in other outsourcing areas,” explains Kunoor Chopra, president and CEO of LawScribe. “You are mainly seeing project-based billing. Full-time equivalent arrangements do exist, but they are not as prevalent, yet, as in BPO [business process outsourcing] and ITO [information technology outsourcing].”

One reason for this disparity may be that LPO is still regarded by some clients as a low-cost option for handling low-skilled work. As JR Maddox, director of intellectual property services at Lexadigm, explains, many clients remain attached to the simplistic concept “that outsourcing legal services involves sending low-level legal chores to cheaper overseas attorneys to be performed in a vacuum”.