Legal Departments and the Rising Use of AFAs - Mitratech

Legal Departments and the Rising Use of AFAs

I came across this blog post and infographic from Debbie Stephenson at Firmex, concerning the rising use of Alternative Fee Arrangements (AFAs).

For those not familiar, Firmex runs virtual data rooms for law firms, and I thought that the law firm point of view on AFAs would be of interest to our own corporate clients.

  • The majority of both law firms recognize that AFAs are attractive to clients, and 95% of them offer some form of AFA (mainly fixed fee or partial fixed fee arrangements).
  • AFAs only make up 19% of total law firm revenue, but this represents a 18% increase in the past two years, and both law firms and legal departments see this trend continuing to rise.
  • Only 12% of legal departments use AFAs for the majority of the work assigned to outside counsel, but this is not just because law firms are more comfortable with billable hours. In fact, 40% of legal departments are more comfortable with billable hours, even if they know AFAs potentially would save the department money.

We know from our own internal research that some of the reasons that legal departments do not use AFAs with more frequency is the lack of historical data to tell them when an AFA represents a true reduction in legal spend and the lack of a technology structure to support the AFA once negotiated. Legal departments do not want to use an AFA if it is going to  increase the ongoing legal staff demands in terms of tracking the AFA and savings, budgeting and the invoice approval process.

Mitratech has been delivering the structure for AFA support to clients individually for years, and we were able to take that experience and release our first AFA module made generally available to all e-billing clients earlier this year.  We recognize that this is a first step, and as AFA use grows and becomes more sophisticated, there will be more work to do. The final statistic in the Firmex blog explains that 84% of legal departments are somewhat to very satisfied with using them, and that alone encourages our product management team to pay attention to this trend in the marketplace.

[Via: Firmex: Virtual Data Rooms]

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