Law firms need to innovate and revisit their fee structures as clients become more cost-conscious, a panel comprising several senior law firm partners said at the Inter-Pacific Bar Association’s annual conference in Hong Kong.

The panellists, who spoke during the second plenary session of the day, included Elaine Lo, Asia chair at Mayer Brown JSM, Jonathan Watmough, managing partner of RPC, Patrick Sherrington, Hogan Lovells’ Asia and Middle East regional managing partner, Simon Powell, managing partner of Latham & Watkins’ Hong Kong office, and Jeremy Lam, co-head of Deacons’ financial services practice.

As clients become more cost conscious in the wake of the global financial crisis, and savvier with cost management tools and software, law firms are facing a downward pressure on fees, the panel said. And the growing view among clients of certain legal work as a commoditised good is putting further pressure on law firm’s to adjust their fee structures.

While law firms have traditionally charged hourly rates, clients are increasingly seeking out more predictability and certainty over costs. The fact that many clients now view certain legal work as a commoditised good is compounding the issue. This has led many law firms to start using fixed fees for almost every type of legal work, barring regulatory investigations, litigation and other contentious matters.

Some law firms are also looking for ways to increase the transparency of their billings, while reducing the overall costs charged to clients. “To try and reduce our costs, we use technology to the extent that we can, and roll out project management courses to make our lawyers more efficient,” said Lo from Mayer Brown.

“For example, Thomson Reuters developed a software for us to help us sort assignments, and with planning and budgeting. The software monitors the work in progress against the budget, and the balance can be checked every day in a report. This is really useful when you have a team working in multiple offices, and the partner in charge of the matter can pull up the report and see where the variance in the budget is,” she said.

“A lot of the advances in terms of cost efficiencies, disaggregated services, and project management have been done by some of the larger firms so that the clients feel that the law firms really are trying to help them. The sophisticated client will assess a firm as one that provides value,” added Hogan Lovells’ Sherrington.

Providing value for a client could also include finding innovative ways to reduce the client’s legal spending in the long run, said Lo. She cited one example where, in response to a client’s needs, Mayer Brown seconded its knowledge management director to work with the client and create a knowledge management platform. The new platform would help reduce the client’s legal spending in the long run.

While one could claim that by helping clients reduce their legal spend, law firms would have to find alternate ways to boost their revenue, others might argue that the relationships formed between clients and the firms that embrace innovation and offer cost transparency could prove to be invaluable.

The IPBA’s 25th Annual Meeting and Conference, held in Hong Kong, runs from May 6 to May 9.