From Akin Gump: Policymakers Focusing in on Artificial Intelligence. “Following a series of recent events involving policymakers from Trump’s Administration and Capitol Hill, artificial intelligence (AI) was the second hottest topic in D.C.”
From Haynes and Boone:’s Stephanie Sivinski in Law 360: 4 Ways Advances in AI Could Challenge Patent Law
Speaking of blockchain, in this post, Kevin Gidney, co-founder of Seal Software asks, “What do blockchain, artificial
Check out this interesting post by Gerry Riskin about LTaaS (Legal Technology as a Service). It seems Allen & Overy is using Neota Logic technology to offer some fresh packaging/delivery of services. It’s branded “aosphere.”
In my series on using intel to optimally price legal matters (Part 1, Part 2, Part 3) I mentioned that the calculation of profitability requires that a firm have the discipline to promptly close matters. I have since been asked how to accomplish this feat, seemingly impossible in certain firm cultures.
This is the third and final installment in my series on using Business Intelligence and Competitive Intelligence to optimally price legal services.
Pricing fundamentals and the considerations unique to law firms are discussed here.
The three types of pricing and their dependence on Competitive Intelligence and Business Intelligence are covered here.
This calculation is based entirely on data from the firm’s financial systems [Business Intelligence] and therefore very accurate–at least once the politics around various allocation assumptions have been resolved. (This is represented by “Profitable Work” in the following graph.)
Historically, firms have often told their clients that they cannot offer fixed prices because they can’t anticipate how much work will eventually be entailed. This excuse is increasingly falling on deaf ears as clients respond that they are being held to budgets, and a 
firm claiming to have deep experience should be in a much better position than they are to anticipate costs, at least for each phase of a matter. So you’d better be able to forecast profit.
Sources of such data are readily available [Competitive Intelligence], and at the date they are published, generally accurate. Assumptions may be required to get to the specificity needed by market and practice, but the results should still be pretty accurate. (This is represented by “Competitor Rates” in the following graph.)
This is the second installment of my three-part Pricing series. The first is here.
This installment covers the three essential elements of pricing legal services.
Tomorrow, in the final installment, I will show how to use Competitive Intelligence and Business Intelligence to develop the optimal price.
The MIT Sloan Management Review7 identifies three factors to be considered in pricing (all apply to legal services):
Let’s consider each in some detail.
This is directly relevant to the profit discussion in Part One of this series. Cost-based pricing means calculating the total cost of the work, including all allocated direct and indirect expenses. If ALL firm expenses are allocated to matters, any work priced above its cost will be profitable. Firms should be very reluctant to approve any 
new work projected to be unprofitable. Some firms have pricing committees established for the purpose of acting as gatekeepers in this regard.
Remember, the total amount of any discount fully hits your bottom line profit. Many partners are quick to give in to clients’ requests for discounts, but these should be given only as a last resort after exhausting other methods of increasing the value of your services to this client. (See “Customer Value-Based Pricing” below.)
This may be hard to believe, but I have seen it happen several times. Some in-house counsel receive bonuses based, in part, on the discounts they manage to negotiate from outside counsel. (This seems to have been more common a few years ago than today.) So, law firms would increase the entries on their rate sheet a bit only so they could then give the client the desired discount.
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The next part of my series on “Better Decisions with Business Intelligence and Competitive Intelligence” will be about using BI and CI when pricing legal services. (Part One is here.) As I draft that post it occurs to me that we need some more common vocabulary, specifically around Alternative Fee Arrangements (AFAs). We’ve been kicking this term around for several years now, but I rarely meet two people who have exactly the same things in mind when they talk about AFAs.
To each their own, but here are the forms of AFA with which I have worked and how I think of each:
Blended Rate
Billing all attorneys and every attorney class (partner, associate, of counsel) at the same hourly rate
Contingency Fees
Traditional straight contingency for plaintiff cases
“Reverse” contingency for defense cases
Often gradated based on phase of the matter
Percentages increase as case nears trial
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I’m a big fan of all things “Access to Justice” (A2J), so I was pleased to see