A Financial Model for Law Firms to Embrace Alternative Fees & LPO

June 13, 2010

In a recent post (LPO is a Distinct Legal Services Industry – Porter’s Five Forces), I outlined how LPO firms have emerged as a new class of competitors, or partial substitutes, for some services offered by law firms.  I agreed with Hildebrandt’s Kristin Stark that many law firms could be providing clients with superior value and service by incorporating lower cost discovery review into their services. 

Law firms should consider structuring LPO vendor services into fixed-priced, litigation offerings.  Firms should be able to offer lower prices while maintaining profits in return for vetting and managing LPO vendors and providing integrated litigation management.  Clients would receive lower, predictable prices and a single point of accountability for litigation matters.  LPO vendors would get more business and have the opportunity to work with clients and law firms to continuously improve processes and lower costs for all parties.  The two biggest obstacles to law firms incorporating lower cost discovery services are financial and ethical.  In this post I will outline a viable financial model, and a subsequent post (The Ethical Challenges for Law Firms to Embrace Alternative Fees & LPO) will highlight some of the significant ethical challenges.

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LPO is a Distinct Legal Services Industry – Porter’s Five Forces

May 9, 2010

The blog at Hildebrandt Baker Robbins includes an interesting series of posts analyzing the structure of the legal industry using Michael Porter’s Five Competitive Forces that Shape Strategy.  In particular, Lisa Rohrer has written Porter’s Threat of Substitutes: Do LPOs Present a Competitive Threat to Law Firms? in which she suggests that because of lawyer licensing restrictions, the threat of substitutes has traditionally been very low in the legal industry.  She then asks, “How much of what happens in law firms really falls within the boundaries of the legal ‘profession’?”  I think this is a key question, because it highlights the ongoing shifts in the legal industry. Read the rest of this entry »