I don't think you'll see he billable hour model go away. I've worked on internal investigations that were like onions. Client did something wrong and the deeper you go the more you find problems with their process, etc. That's going to stay billed by the hour because there is no predictable way to value the service. However, I think there will be a lot of movement towards more predictable billing of say transactional matters. Some high end firms now structure fees as a percentage of deal value. Right now they use it to get a premium for big deals, but the percentages could be adjusted to bring the average fee in line with what similar transactions cost under billable hour models.

What new fee models won't change of course is the average cost. That's just a mater of supply and demand. If a service like this one say highlights bills for summer associates, and firms stop charging for them, then they'll just raise rates elsewhere. If you were willing to pay $X today for the overall service, you can only change X by increasing supply (say considering a wider range of firms instead of just big well known ones), or decreasing demand. Playing with the itemization won't do it.

There are two traditional ways you can incentivise someone outside your company to do custom work for you.

If you pay them a fixed price for the job, their incentive is to do as few hours as possible, to ignore your phone calls and e-mails, to test/mitigate risk as little as possible, to push work back to you, to produce no documentation, to refuse any change of scope without a big cost increase, and to deliver the least they can within your contract. IT example: Elance

If you pay them by the hour, their incentive is to increase complexity, to investigate every possible risk in painstaking detail, to re-do work you've already done, to call and e-mail and hold meetings with as many people as possible for as long as possible, to produce more (and more carefully produced) documentation than you want, to interpret every cough and sneeze as an instruction to widen the scope, and to deliver late and over any estimated budget. IT example: Government IT and defense projects.

Theoretically it's possible to come up with an agreement that doesn't have either set of flaws - but in my experience if you've got the expertise and to do that, you've got the expertise and time not to need to hire outsiders.

One way out is to have lots of small agreements, one after the other. Then it doesn't matter what the small agreements say in detail, just that the relationship will only go on, if both parties are satisfied.

Post author here. That quote was just his shorthand for saying that if he's advising clients or investors, he's billing for that time. He talks to his clients to tell them how to set boundaries for investors and how to best communicate with them.

Check out what Spark Capital is doing to help alleviate this problem: http://bijansabet.com/post/48787521538/picking-up-our-own-ta...

But yes, time-based billing sets up an inherent conflict of interest. Flat fee is great when it makes sense. Our company advisor setup a flat fee matter at his prior company to cover any phone calls or emails. No more watching the clock.

In some states there is a mandate by the bar that you must charge hourly. In California, for instance, you cannot do a flat rate for a pre-nup agreement. I believe the logic is that if it becomes more complicated, the incentive to do a good job disappears. With an hourly rate, an hour on a complicated prenup == an hour in court, with the same expectation of quality and effort.

you should see bills for divorces. Talking might be the least of your expenses.

Proving the point about hourly billing... http://www.wevorce.com/

Flat fee billing is the better business model. It's not always possible, but it takes the stress out of watching the clock.