7/1/09

Alternative Fees - "How To" Tech

All this talk about alternative billing and alternative fee arrangements (AFAs) might lead one to believe there are numerous tools on the market for managing these. I've previously posted on 3 Geeks about how budgets sit at the core of AFAs and on methods for building reasonable budgets. With that concept in mind, a firm needs a tool set for creating, modeling and then monitoring AFA budgets. Creating is something previously discussed. Modeling is playing with the budget; shifting tasks, adjusting leverage and generally driving numbers that will benefit clients and lead to profitable engagements for firms. Budget monitoring is the long-haul, oar-in-the-water effort of making sure efforts stay on budget and firms remain profitable. As well, these monitoring efforts will create a knowledge base that will enable more effective budget creation and modeling going forward. So what tools are out there? The short answer: not much. The Lexis owned Redwood Analytics is the the most evolved tool I found. And it's on a reasonable development path. Redwood has been around a while and with a focus on law firm financial analysis, was well-poised to meet the emerging AFA needs. So it's good to see a viable tool on the horizon. Beyond Redwood, I found vendors willing to build something. This is not encouraging. For all the push for AFAs, a lack of tools will serve as a serious impediment to adoption. A vendor building a one-off custom application is not a good option in my opinion. These leave firms in a dead-end position. The power of a commerically developed tool with ongoing development will go a long way towards driving AFA adoption and success. On a side / related note, the in-house law department vendors seem to be heading in the same direction as Redwood. I suppose with their more immediate demands for AFAs, legal departments should be driving this development. I must say I am disappointed at the lack of tools for managing AFAs. In the short-run firms will be doing a lot of AFA management manually. Not the best situation, but one we'll live with for the time being.

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1 comments:

Ron Baker said...

Hi Toby,

The lack of technology tools for Value Pricing is because this is a theoretical change, not a technology issue. Vendors simply don't understand the theory behind value pricing.

Project and Knowledge Management is the best solution, and even there, the technology is not that great. We've seen many firms develop their own technology, but it's driven by the theory, including measuring the right Key Predictive Indicators, capturing learning through After Action Reviews, etc.

When the airlines switched to Yield Management, there weren't any technology solutions either. But they still did it, and then the technology followed.

If firms are waiting for technology, that's an excuse, IMHO, not to change.

Regards,
Ron Baker, Founder
VeraSage Institute
www.verasage.com
Twitter @ronaldbaker

 

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