This post at sheds light on a hot topic right now: the legal billing system and the rise of alternative fee arrangements:

Law firms are under increasing pressure from clients to reduce costs and justify expenditures, and alternative fee arrangements (AFAs) are rising to the challenge. While AFAs aren’t exactly a new concept to the legal industry (personal legal services have been offering them for years), they are now becoming more prevalent in new practice areas, such as corporate law and litigation work.

It’s a major shift for a profession that has historically been married to the billable hour. If we go all the way back to 1958, it was the American Bar Association’s Special Committee on Economics of Law Practice that first recommended the billable hour approach, which was widely adopted and deeply entrenched in the legal industry for decades.

But the Global Financial Crisis brought with it significant changes for everyone, including law firms, which have responded in a resounding way. Budget conscious clients now have an endless array of options; fixed fee, phased fee, collared fee, value fee, holdback, blended rate, contingent fee, for just about any legal service.

According to a 2010 survey by Altman Weil, 95% of law firms now have some kind of alternative fee arrangement in place. Yet according to a whitepaper from Jaffe PR that same year, clients – not law firms – are spearheading the use of AFAs. So is the legal industry really ready to embrace the AFA model?

As a virtual data room provider used by law firms to reduce costs and increase efficiencies, Firmex takes a great interest in the AFA conversation. They’ve brought together a series of research findings to help paint a clearer picture of what impact AFAs are having on the legal industry:

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