Is the Billable Hour Feasible?

Nicole Black’s new endeavor Legal Tweets is keeping track of a conversation about whether the billable hour is still feasible for law firms.

It’s an interesting discussion, and I think it wouldn’t hurt for you to go check it out and follow the links to the different ideas.

Now, I definitely think there are places where law firms should think about something other than the billable hour as a revenue model, but then again there are other areas that simply don’t translate well. Let me give you an example from the e-discovery/lit support world.

Let’s say you have two cases, one involves maybe 500MB worth of data that needs to be processed, stored and loaded into a Summation database to be reviewed, the other has 20GB of data. Since we only bill by the hour, and don’t bill machine time, or network storage, your processing costs as a client are going to be basically the same for both of these cases. You’ll pay for the time it takes me to setup the project in the processing software, to setup the export, and to setup the load into Summation. Obviously, all of the machine processes will take much longer in the second case, but you won’t see any difference in my time, therefore you’ll pay exactly the same for the processing.

That hardly seems fair, does it? Of course, the larger case is going to see many more hours billed by the attorneys for reviewing the documents, as well they should. It takes longer to review 20GB of data than it takes to review 500MB of data! That’s a good example where the billable hour makes sense.

Certainly, we’ve seen vendors and some firms switch to a per-GB cost for processing and hosting, and that makes perfect sense, even if most firms have not recognized it yet. Does it make sense for document review to move to that model? I would say no, because all gig’s of data are not equal when it comes to review. I think we can all agree 1GB of video files is not going to take near as long to review as 1GB of Word documents, can’t we? Whereas a GB of data that needs to be extracted from emails, transferred and stored is a GB of data regardless of the type of information in that GB, that doesn’t hold true in other areas of e-discovery.

If you’re not going to use the “hour” as the measurement for review, what are you going to use that makes sense?

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