Global professional information and software company, Thomson Reuters, has declared that the billable hour – that revered emblem of the legal world – is now dead, at least as far as clients are concerned. It has also joined the battle to gain market share for legal matter cost prediction tech, following a wave of startups offering similar products in this area, by launching its own new service as part of its 3E platform.
Eric Ruud, managing director, at Thomson Reuters Elite, the group behind the new cost prediction system, said in a company statement: ‘The true billable hour is a thing of the past.’
Although, how dead and forgotten remains to be seen, given that even if clients don’t want to pay specifically by the hour, that internally even Elite’s new pricing system will be tuned to cope with both fixed fees and hourly rates for a firm’s own accounting needs. I.e. even if clients want a fixed fee, lawyers are still stuck with the reality that time remains how they calculate their work production costs.
However, to see a major legal tech software producer such as Thomson Reuters coming out and saying the billable hour is history is an important milestone. It matters a lot to the new wave of legal tech especially, because much of this technology is around the automation of legal tasks, which clearly are not time-based services.
But, what does Thomson Reuters’ new billing tech do?
The new 3E Matter Pricing system is a ‘suite of tools to help firms accurately budget, confidently plan, and closely monitor matter financials. [That gives] valuable insights to enable matter pricing and budgeting while increasing profitability and revenue’.
Matter Pricing also ‘accelerates the budget-planning process by providing more than 50 Matter Maps from a variety of common matter types. These Matter Maps were created by Thomson Reuters Practical Law lawyer editors and experienced experts in their respective fields’. Or in other words, the company has basically calculated in advance for you what needs to go into each piece of legal work. That is another great step forward and a move toward greater standardisation in the legal market.
Another aspect here is that if Thomson Reuters can easily figure out what needs to go into each matter, then surely General Counsel will be better armed when it comes to asking for fixed fees. How can a law firm produce the old yarn about ‘it’s very hard to know how much this will cost’, when a software supplier has already mapped it all out for everyone? Interesting times.
And, it’s worth adding, these are moves that make the deployment of AI and automated systems more likely. I.e. in a fixed fee, more standardised world, then to protect margins you need better automated means of making all those legal products you sell to the consumers.
It’s a virtuous cycle of automation and supports the industrialisation of the legal world. It’s also a sign of the times, where the religious-like mystery around what a piece of legal work should cost is coming to an end (hallelujah…!).
Elite’s Ruud added: ‘Clients want predictability and that requires law firms to understand like never before how much it will cost to take on a new matter for them to win the business and still remain profitable. It is essential for firms to bridge this information gap with rich firm data and metrics so they can apply accurate models. 3E Matter Pricing is an easily adoptable and sophisticated technology solution for law firms, and the first step in supporting front-to-back, practice and business of law demands.’
Overall, excellent news and a fillip for the legal AI and automation world as it fundamentally supports this new approach to legal work production.