(Credit: Mmaxer/Shutterstock.com)

Many predicted that technology would bring the downfall of the billable hour, yet the payment model has showed continued strength throughout 2016. But while the billable hour has kept a pretty tight hold on the legal industry, alternative fee agreements (AFAs) have grown substantially in the last few years.

Now, startups are finding ways to help clients cut time spent on delivering legal services and move closer toward flat fee structures. Here are three types of legal technology startups pushing traditional law firms to think twice about their commitment to the billable hour.

Online Legal Services

LegalZoom, Rocket Lawyer Inc. and Avvo Inc. have all become the proverbial boogeymen for legal service providers—the idea that individual consumers and businesses could prepare and file their own legal documents seems to threaten general practitioner lawyers at smaller firms who have traditionally handled low-complexity services.

Online services typically provide forms and templates for consumers to create and file business formations, patents and trademarks, wills and estate plans and other documents themselves, typically with an option to connect to service-contracted attorneys if needed. These services have attracted strong financing from investors—those three services alone have raked in nearly a quarter of a billion dollars in venture funding, with similar services springing up across the internet every day.

Micah Buchdahl previously told The Legal Intelligencer that especially for middle and working class families living outside of major metropolitan areas, online services may continue into local market attorneys’ client base.

“The question is if you live in Blue Bell, are you going to go out there and look for an attorney in Blue Bell … or are you just looking for the lowest cost option?” Buchdahl said.

Automation Startups

Automation has already woven itself into the components of traditional law firm work, especially in areas like e-discovery and contract review . Startups like Beagle , ComplyAdvantage and HotDocs Ltd. have all stepped into the legal automation arena in different applications, with many more sure to enter the field.

Putting additional pressure on firms is corporate law’s increasing adoption of automation technology. Still, many in corporate law still find the technology fairly rudimentary. Olga Mack, general counsel at ClearSlide Inc., previously told Legaltech News that “it’s only very recently that machine learning and various software-related solutions have become compelling.”

Finding ways to automate away small, rote tasks could improve law firm workflow, but the approach seems to be at odds with the billable hour pay structure—when tasks take less time, law firms have less hours they are licensed to bill back to clients. Vanderbilt University professor Larry Bridgesmith, however, previously told Legaltech News that automation’s potential to lower costs may force firms to reconsider their reliance on these billable models.

“Lowering the price, that’s ultimately the driver that’s going to be changing delivery. Those are ultimately economic forces that cannot be resisted,” Bridgesmith said.

Fee-For-Service Products

Startups honing in on some of the more formulaic areas of law have looked to capitalize on technology to provide specific legal services for a flat fee. A number of startups have taken on divorce, for example, looking to leverage the form-based nature of divorce filings to put divorce negotiations into the hands of consumers, largely bypassing attorney involvement, typically for a depressed flat fee.

Other form-based areas of law have also started to move in this direction—immigration filings, startup formation and wills all now have startups looking to help consumers file paperwork for a fixed price. Venture capitalists seem to have taken notice—Silicon Valley tech incubator Y Combinator has sponsored at least six startups that provide flat fee services directly to individual consumers and small businesses.

A heated debate over the ABA’s Resolution 105 early this year to acknowledge that some states may want to adopt nonlawyer-based legal services reflected both attorney apprehension about these services’ potential to detract from legal work and potential growth in this area. While some of these practice areas, immigration in particular, already offer flat fee billing structures to potential clients, small firms are beginning to look to alternatives to hourly pay in order to compete with these services.

Many predicted that technology would bring the downfall of the billable hour, yet the payment model has showed continued strength throughout 2016. But while the billable hour has kept a pretty tight hold on the legal industry, alternative fee agreements (AFAs) have grown substantially in the last few years.

Now, startups are finding ways to help clients cut time spent on delivering legal services and move closer toward flat fee structures. Here are three types of legal technology startups pushing traditional law firms to think twice about their commitment to the billable hour.

Online Legal Services

LegalZoom, Rocket Lawyer Inc. and Avvo Inc. have all become the proverbial boogeymen for legal service providers—the idea that individual consumers and businesses could prepare and file their own legal documents seems to threaten general practitioner lawyers at smaller firms who have traditionally handled low-complexity services.

Online services typically provide forms and templates for consumers to create and file business formations, patents and trademarks, wills and estate plans and other documents themselves, typically with an option to connect to service-contracted attorneys if needed. These services have attracted strong financing from investors—those three services alone have raked in nearly a quarter of a billion dollars in venture funding, with similar services springing up across the internet every day.

Micah Buchdahl previously told The Legal Intelligencer that especially for middle and working class families living outside of major metropolitan areas, online services may continue into local market attorneys’ client base.

“The question is if you live in Blue Bell, are you going to go out there and look for an attorney in Blue Bell … or are you just looking for the lowest cost option?” Buchdahl said.

Automation Startups

Automation has already woven itself into the components of traditional law firm work, especially in areas like e-discovery and contract review . Startups like Beagle , ComplyAdvantage and HotDocs Ltd. have all stepped into the legal automation arena in different applications, with many more sure to enter the field.

Putting additional pressure on firms is corporate law’s increasing adoption of automation technology. Still, many in corporate law still find the technology fairly rudimentary. Olga Mack, general counsel at ClearSlide Inc., previously told Legaltech News that “it’s only very recently that machine learning and various software-related solutions have become compelling.”

Finding ways to automate away small, rote tasks could improve law firm workflow, but the approach seems to be at odds with the billable hour pay structure—when tasks take less time, law firms have less hours they are licensed to bill back to clients. Vanderbilt University professor Larry Bridgesmith, however, previously told Legaltech News that automation’s potential to lower costs may force firms to reconsider their reliance on these billable models.

“Lowering the price, that’s ultimately the driver that’s going to be changing delivery. Those are ultimately economic forces that cannot be resisted,” Bridgesmith said.

Fee-For-Service Products

Startups honing in on some of the more formulaic areas of law have looked to capitalize on technology to provide specific legal services for a flat fee. A number of startups have taken on divorce, for example, looking to leverage the form-based nature of divorce filings to put divorce negotiations into the hands of consumers, largely bypassing attorney involvement, typically for a depressed flat fee.

Other form-based areas of law have also started to move in this direction—immigration filings, startup formation and wills all now have startups looking to help consumers file paperwork for a fixed price. Venture capitalists seem to have taken notice—Silicon Valley tech incubator Y Combinator has sponsored at least six startups that provide flat fee services directly to individual consumers and small businesses.

A heated debate over the ABA’s Resolution 105 early this year to acknowledge that some states may want to adopt nonlawyer-based legal services reflected both attorney apprehension about these services’ potential to detract from legal work and potential growth in this area. While some of these practice areas, immigration in particular, already offer flat fee billing structures to potential clients, small firms are beginning to look to alternatives to hourly pay in order to compete with these services.