e-discovery 2.0

The Chinese philosopher, Lao-tzu, once said “a journey of a thousand miles begins with a single step.”  This truism has been applied in a myriad of ways over the years, but it applies with equal measure to the process of taming the multifaceted challenge that is electronic discovery.  Simply put, conquering e-discovery is always a journey.  And for enterprises like The Home Depot, they know first hand that you can’t simply look at the end result and wish for the journey to be complete.  Instead, it’s paramount to embrace all the steps along the path and develop good habits that work both for the first and the last mile.

Many enterprises clearly understand the benefits of in-house discovery that include lower processing and review costs, earlier access to case facts, better control over the processes, etc.  But some struggle with how to begin their journey, for any number of reasons (lack of knowledgeable staff, failure to get executive buy-in, inability to build a compelling business case, etc.).  Fortunately, the folks at Home Depot have recently completed their journey and have offered to share secrets they leveraged throughout the process.

In a similar fashion to best selling author’s Stephen R. Covey’s “The 7 Habits of Highly Effective People” David Steel, Sr. Counsel and Barbara Squires, Paralegal at The Home Depot will host a web seminar to walk us through the some of the e-discovery habits that helped them successfully navigate their way through the process.  The web seminar is titled “5 Habits to Create a Highly Effective In-House E-Discovery Process” and it’s free to attend. Since we don’t want to steal their thunder, we won’t divulge their habits now, but suffice it to say that every company can learn from their experiences.  And, after the web seminar I’ll devote more blog time to further expansion of each habit.

Since it’s our raison d’être to help companies complete their e-discovery journey, we’re excited to have The Home Depot on to share stories from their journey, all in the hope that others, just embarking on their own expedition, can be just as successful.

Part IV of this series on reducing e-discovery costs described how bringing e-discovery in-house can reduce costs.  One of the major decision points when in-sourcing e-discovery is to decide which parts of the e-discovery process should be in-sourced.  In making this decision, each company should look at the nature of their e-discovery process today, which parts of the e-discovery workflow they currently perform in-house, if any at all, and which are currently outsourced.  They should then look at which outsourced parts would produce the best return on investment (ROI) if in-sourced.

When most companies look at their current litigation software process, they often find that they are already in-sourcing the first stages of e-discovery: identification, preservation and collection.  While there are some companies that will occasionally outsource these steps, especially when there is a need to perform forensic collections, most sizable companies are already doing most of these steps themselves, though often advised by outside counsel.  For example, most companies will identify the custodians and sources of electronically stored information (ESI) in conjunction with outside counsel.  Litigation hold notices will be sent internally and data will be collected by the company’s IT, legal IT and/or internal forensic/investigations team.  It is typically at this point that e-discovery moves outside the company as the data is transferred to a litigation support service provider and/or law firm who perform processing, analysis, review, and production.

When a company takes a look at how they can reduce their e-discovery costs, they are most often looking at two high-level options:

1. Whether they can streamline their existing internal identification, preservation and collection processes
2. Whether they should bring processing, analysis, review and/or production in-house

There are of course exceptions to this.  Some companies do outsource their collection for example, especially when collection might need to be done in remote offices.  But the majority of companies seem to fall in the above categories.  Distinguishing these two options is important because the ROI analysis and decision-making process related to streamlining an existing process is very different than the analysis and decision-making related to bringing a process in-house.

When performing an ROI analysis of these different options, one typically comes to two conclusions.  The first is that both are often ROI positive projects.  The second is that in-sourcing some aspects of processing, analysis and review is far and away the biggest “bang for the buck” project that most companies can undertake when it comes to reducing e-discovery costs.  The biggest reason for the second conclusion is that the majority of the costs incurred during e-discovery are processing and review costs.  In a previous post where we analyzed e-discovery costs, we found that processing and review typically represent over 90% of these costs.  As a result, in-sourcing some or all aspects of processing, analysis and review can save very significant amounts of external processing fees and attorney review costs.  In contrast, while there can be real savings to improving and automating identification, preservation and collection, the size of savings pales in comparison because these steps represent less than 10% of the total cost of e-discovery.

The best approach to reducing e-discovery costs, of course, would be to do both of these projects: improve identification, preservation and collection as well as in-source processing, analysis and review.  However, if you have to sequence these projects or pick only one (a popular requirement in this economy) then in-sourcing processing, analysis and review is the one to pick.

Part I of this series on reducing e-discovery costs discussed a number of approaches for managing e-discovery costs.  The third approach suggested in the original article is to bring e-discovery in-house.  This means taking some e-discovery tasks that were previously conducted by external organizations, such as e-discovery service providers or outside law firms, and performing them using in-house enterprise e-discovery software, and/or people.

How does bringing e-discovery in-house reduce costs?  The way in-sourcing e-discovery reduces costs is fairly straightforward.  It simply is a way to take variable costs and convert them into fixed costs.  If the variable costs are incurred frequently enough, then the sum of the variable costs will at some point become higher than the fixed costs.  In this case, a company bringing e-discovery in-house reduces costs by investing in fixed cost in-house software and/or people and using these to reduce the amount of variable e-discovery legal and service provider fees.  Over time, the savings from these reduced fees outstrip the cost of the original investment.

Cost is, of course, not the only factor that must be considered when a corporation, or law firm, decides to bring e-discovery in-house.  There are additional benefits as well as additional challenges.  Some of the additional benefits include:

• Increased visibility into costs and schedule: you’ll have a better idea about the specific costs and duration of e-discovery and how they relate to the overall management of the matter.
• Increased control of process and data: better visibility and in-house tools and/or people give you greater control over the conduct of e-discovery, so there’s less finger-pointing.  In-sourcing also allows you to keep control of your data avoiding the risk of entrusting it to third parties.
• Greater efficiencies: over time, in-sourcing allows you to build up data, processes and experience that will reduce costs further over time.  Instead of potentially training new people or adapting new software to your company’s business and processes every case, you’ll build an expertise that will lead to greater efficiency.  It also be easier to retain your work product and reduce the times when, for example, a document is inadvertently re-collected, processed, analyzed, reviewed and produce when it already from produced for a different matter.

Some of the challenges of bringing e-discovery in-house include:

• Risk: Risk is often the biggest concern when a company considers in-sourcing.  Many corporations feel that in-sourcing could increase their liability and risk of sanctions because if something goes wrong, they are more responsible.  The reality, of course, is that if something goes wrong the corporation often bears much of the liability even if e-discovery is out-sourced.  There are also ways to mitigate risks, which is typically more related to people in-sourcing not software.
• Expertise: how do you find the right people and software to perform e-discovery in-house?  This can be challenge but there are now many good options.  The first is to hire expertise from service providers or law firms.  The second is in-source only the software and continue to use outside people.  This is an approach worth discussing in more detail.
• Overhead: many corporations are concerned that bringing in software will require a large investment in people and an increase in operational costs, potentially out-weighing the variable cost savings.  Fortunately, e-discovery software has improved such that the best software does not result in a significant increase in overhead, and the savings from reduced service costs more than offset any additional overhead.

In recent months, a large number of organizations have analyzed all of the benefits and challenges of bringing e-discovery in-house.  The results have been both unsurprising and somewhat surprising.  Unsurprisingly, what most of these companies have found is that bringing parts of the e-discovery process in-house makes a lot of sense if the company has a fairly consistent case load from litigation and/or internal investigations.  More surprisingly, many companies have also determined that bringing e-discovery software in-house can often pay for itself with just one large case.  The first finding suggests that, as one might suspect, most Fortune 500 companies and large government organizations, should be taking a look at bringing e-discovery in-house.  The second finding though suggests that it’s not just the Fortune 500 that should be taking a hard look at in-sourcing.  If bringing parts of e-discovery in-house can pay for itself on one large case, then many organizations, not just the Fortune 500 should be taking a hard look at e-discovery in-sourcing.  When they do, one of the big questions that each organization needs to answer is what part of the e-discovery process do I want to in-source?  That will be the subject of my next post.

On of August 14, 2009, the California Judicial Counsel amended their Rules of Court to augment discussion of electronic discovery issues during the meet and confer process.

Rule of Court 3.724 was amended to require discussion of “Any issues relating to the discovery of electronically stored information” no later than 30 calendar days before the date set for the initial case management conference.  The broad language (i.e., “any”) was augmented by eight specific categories that must be expressly discussed:

(A) Issues relating to the preservation of discoverable electronically stored information;

(B) The form or forms in which information will be produced;

(C) The time within which the information will be produced;

(D) The scope of discovery of the information;

(E) The method for asserting or preserving claims of privilege or attorney work product, including whether such claims may be asserted after production;

(F) The method for asserting or preserving the confidentiality, privacy, trade secrets, or proprietary status of information relating to a party or person not a party to the civil proceedings;

(G) How the cost of production of electronically stored information is to be allocated among the parties;

(H) Any other issues relating to the discovery of electronically stored information, including developing a proposed plan relating to the discovery of the information;

Many of these issues track FRCP language (including forms of production, preservation, privilege issues, etc.).  However, section G seems somewhat novel given the historical “American Rule” where the producing party is required to bear all necessary costs of production.

Curiously missing, in comparison with FRCP 26 B(2)(b), is the need to discuss the handling of “inaccessible” ESI, although this could easily be subsumed in the “any other issues” language of section H.  Also missing is a discussion about proposed searching and/culling protocols (aka “keyword negotiations”) which are often part of the core meet and confer topics in Federal court.

Nevertheless, the scope is broad enough to require *a* discussion of all likely relevant electronic discovery issues, which was often lacking historically.  Once that discussion starts, reasonably savvy counsel should be able to flesh out most of the significant issues.  And, given this broad language a judge would presumably give them a hard time for any material omissions.

We’ve devoted a number of posts to the topic of ECA, ranging from a quest to define the acronym, all the way to the cost savings benefits of the ECA approach.  And, while there seems to be relative unanimity around the beneficial aspects of ECA, there still seem to be a number of myths and misconceptions.  So, ala the Mythbusters, we’ll run these myths through the gauntlet to see which survive scrutiny.

Myth #1: ECA Is Only Valuable if Performed “Early”

Certainly, ECA is best leveraged and will be most valuable when performed at the outset of litigation.  As has been stated before, it has value on two primary fronts, the first being the ability to scope electronic discovery (both in terms of cost and timelines).  The next is the more traditional value proposition where ECA is used to get an understanding of the case facts to enable the strategic decision making process.

As such, there are scenarios where an ECA methodology would still generate value even if performed “later” in the mater.  For instance, with bifurcated, class action litigation initial discovery about the class may occur months before discovery on the merits.  In this instance using a later ECA approach would still make sense since discovery about the case facts may not have been possible earlier on.  Similarly, “late” ECA may still hold value when new parties or claims are added to an existing lawsuit, or when there’s a substantial change in case direction, data, or custodians.

Myth #2: ECA Is Only Performed With Technology

Sure, enterprise grade ECA products  are an important part of the mix, but the products won’t perform an ECA by themselves.  There’s just too much subjective decision making involved in the assessment process.   Therefore, the right people are critically important — not only in terms of experience performing this analytical work, but also in their ability to capably testify about the underlying decision making process.  It’s also important to be able to follow a repeatable and defensible processes to show that the “recipe” used was aligned with industry best practices and wasn’t ginned up for a particular engagement.

Myth #3: ECA Only Works With Large ESI Volumes

Yes, ECA methodologies makes a lot of sense for large, bet-the-company matters because even modest savings when processing, analyzing and reviewing terabytes will easily approach six to seven figures.  However, smaller matters will still benefit from better budgetary insights that facilitate informed matter management.  And, in a way there’s almost more benefit from being able to quickly evaluate (fight/settle) smaller suits since the transactional costs are so high relative to the amount in controversy.  In both scenarios it’s important to view objective case data to prepare for meet & confer conferences.

Myth #4: Clients Don’t Want To Pay for ECAs

Many end clients (corporate counsel typically) have a similar litigation mindset:  i.e., the desire to avoid costs for as long as possible.  While avoiding early costs makes some sense on its face, the fact is that spending a small amount of money early on (for budgetary and case assessment purposes) will in most instances reduce the overall litigation budget.  It’s the classic, “you can pay me now, or pay me later” situation.

Counsel must understand that while some costs are incurred early in the process the benefits are crystal clear: i.e., determining customized case strategies early in the matter to decide whether to fight or settle.  Similarly, corporate clients must recognize that the benefits outweigh the costs and require their litigation counsel to include this process in every significant matter.

This illustration highlights how an initial ECA investment actually pays for itself over the life of the litigation.

Myth #5: ECAs Begin when the Complaint is Filed

Many newbie ECA practitioners may think that the timing for an ECA approach would start when the complaint is filed.  And, while this isn’t patently ridiculous, I think the better approach is to begin the clock at the time litigation becomes “reasonably likely” — versus later dates such as when the complaint is filed or when discovery is propounded.  This trigger is also the same for trigger preservation obligations and a host of interrelated activities such as ESI “identification,” which makes the matter kick-off more synchronized.

For more information about ECA, watch a recording of our recent webinar — E-Discovery MythBusters: Debunking Common Myths About Early Case Assessment.

Earlier today, Clearwell announced Version 5.0 of its e-discovery platform. Unlike prior versions which focused on processing, early case analysis, and first-pass review, this release extends Clearwell’s capabilities in two directions: upstream, by adding pre-processing; and downstream, by adding document-by-document review and production. I wanted to say a few words about what motivated these changes, and why the new release greatly increases Clearwell’s value to enterprises, government agencies, law firms, and litigation support service providers.

Over the past year, the benefits of early case analysis and first pass review have driven hundreds of companies to adopt Clearwell. They have saved huge amounts of money and time, and often become evangelists for the product. But despite that, we continually hear that the overall e-discovery process remains expensive, unpredictable, and risky. When we investigated why, we found the problem lies less in the features of the products being used than in the number of products used.

Once data is collected, a typical e-discovery process today may involve as many 4 different tools: one for filtering by custodians or date range, another for de-duplication and keyword search, another for load file creation, and yet another for review and production. Each time data moves between these tools, and there’s a handoff from one to another, there’s the risk that document counts do not tie out, data does not convert correctly, or any of a hundred other things go wrong. This risk is magnified by the fact that e-discovery is highly iterative: custodians are often added or keywords changed as new information comes to light, forcing people to redo many steps of the process. As a result, timelines are unpredictable and it’s hard to stick to a budget, even with extensive project management which itself is not cheap.

Since the problem lies in the handoffs between different products, it’s impossible to solve this problem by making any one part of the process better. The only solution is to have a single product that can manage collected data from soup (filtering / pre-processing) to nuts (production). Prior to today’s announcement, that product did not exist: there was no single, integrated product that could do everything from process data to review and produce it. And that, in summary, is why Clearwell is releasing Version 5.0.

With Clearwell’s new product, there are no handoffs, no uncertainty about how long it will take to export out of one tool and into another. There’s no need to cobble together a string of different products or train lawyers on multiple different interfaces and workflows. As a result, the risks of cost overruns or missed deadlines are greatly reduced.

To our mind, this is just part of a natural evolutionary process that affects many markets, not just e-discovery. Who wants to carry a Palm Pilot, iPod, and a mobile phone when you can carry a single device like the iPhone? Who wants a cable receiver and a TiVo when you can get both in a single set-top box?  As markets mature, there develops a logical package of functionality that customers prefer to buy from a single, integrated provider.

You can sign up for a product demonstration at our website, or come see the product at ILTA next week (Booth 606). Take a look – and let us know what you think.

Part I of this series on managing e-discovery costs discussed a number of approaches for reducing e-discovery costs.  One of the approaches is to perform early case assessments.  Pioneered by Dupont and others, the objective of this approach is to learn a substantial percentage of the key case facts within a short period of time so that the litigation team can make better decisions quicker.  There are a number of good sources for information on what is early case assessment (ECA) and how to conduct ECAs including John DeGroote’s articles on the Settlement Perspectives blog, Eric L. Barnum’s “An Introduction to Early Case Assessment” and Dean Gonsowski’s Early Case Assessment article on this blog.  The point that these articles make is that early case assessment is a different approach to litigation that can significantly reduce the overall cost of litigation and electronic discovery.

As Mr. DeGroote highlights, the two main benefits of ECA are: better settlements and better case management.  First, ECA enables the litigation team to make a better decision as to whether to settle or not by giving the team an enhanced understanding of the costs and benefits of settling.  Early case assessment also provides the team with valuable information for negotiating the best possible settlement with the other side.  Second, even if the case is not settled, ECA can reduce costs through improved case management.  For example, e-discovery costs can be better managed by targeting discovery efforts to reduce the data reviewed and by improved planning and budgeting.  Overall, Dupont estimates that, by performing early case assessment on 18 of their cases, they reduced their costs by over a third.

Given the clear benefits of early case assessments, one would expect that early case assessments would be the norm.  However, as Mr. Gonsowski points out, this doesn’t appear to be the case.  Mr. Gonsowski points out that one of the reasons for this “may lie in a common litigation mindset:  i.e., the desire to avoid costs for as long as possible.”  This makes sense and I would venture to suggest some additional reasons.  First, ECA can be hard to do, especially when it comes to the e-discovery piece of ECA.  Traditional lead-times for performing collection, processing and loading electronic documents into a review platform are measured in weeks or months.  And because ECA works best when analysis is performed iteratively (e.g. start with a small, targeted set of documents, analyze them, use that analysis to target additional information, and repeat) and often ideally on-site, this long cycle time can shackle the efficient execution of an early case assessment strategy.  Second, ECA can be too expensive, again using traditional approaches.  If a company spends too much money on an early case assessment, they might be less inclined to settle because of how much they have spent already.

Recent advances in electronic discovery software, however, are addressing these issues and making it easier to perform early case assessments.  This newer software, which can often be installed on-site as well as in a hosted fashion, can be used to review data within hours of it being collected and often provides content analysis technology that speeds up analysis to help attorneys find the critical information faster.  The lower cycle time allows for prioritized and iterative analysis largely removing technology constraints from the adoption of early case assessment methodology.  This newer ECA software is also less expensive because it is more automated and easy-to-use than traditional technology.

An early case assessment case study of Holme, Roberts & Owen’s (HRO) experience performing an early case assessment, is a good example of what is now possible with new software solutions.  HRO was representing a client who was facing a time-critical false advertising lawsuit. With expedited discovery ordered and a motion for a preliminary injunction pending, the attorneys at HRO had less than two weeks to gather and analyze the underlying documentation and determine case strategy. Leveraging new e-discovery software, HRO was able to perform the early case assessment in days and at cost much lower than traditional means.  The ECA ultimately enabled HRO to conclude the matter on a favorable basis for their client saving significant costs that would have been incurred if they had been required to continue the litigation.

As the HRO case study shows, early case assessments have become a powerful method for reducing not only e-discovery costs but also overall litigation costs.  Any corporation looking to lower their e-discovery and litigation costs would do well to consider adopting early case assessment methodology where practical.  How do you expect the frequency of practicing ECA to change over the next year?  Please take a moment to fill out our poll.

Unfortunately, though, early case assessments are also not a silver bullet solution to the e-discovery cost problem because some cases are going to require full discovery and will go to trial no matter what.  To address these costs, other methods are required.

Part I of this series discussed a number of approaches for reducing electronic discovery costs.  One of the approaches is to implement a document retention policy.  The popularity of document retention policies increased in the early part of the decade with the passage of new financial regulation, such as Sarbanes-Oaxley.  Data retention policy popularity has now increased again with the passage of the FRCP and the recognition of the challenge of electronic discovery costs.  How effective, though, are document retention policies in reducing electronic discovery costs?  Do they solve the electronic discovery cost problem?

It is certainly true that any policy that enforces the deletion of documents that might otherwise be discoverable should reduce electronic discovery costs.  Thus, document retention policies, just like enforced mailbox size limits, can absolutely help reduce e-discovery costs.  However, implementing a retention policy is not easy.  A recent article in the New York Law Journal by Adam Rosman is very insightful in this regard when he says, “the rub is implementation.”   Mr. Rosman outlines a conversation between a hypothetical company’s Associate General Counsel and the CTO that demonstrates that the major challenge with retention policies is not designing one.  Rather, the challenge is implementing a policy that effectively balances the needs for litigation readiness and e-discovery, regulatory compliance and knowledge management and can be cost-effectively enforced throughout a company’s IT organization and user community.  Given this, it’s not surprising that a 2006 study by Nextpage and CXO research found that “while two-thirds of the companies surveyed have a document retention policy in effect, almost half of them don’t actively enforce it” and why 39% of respondents cited implementing a standard policy and 34% percent said user compliance were major weaknesses in implementing retention policies.

Because of these implementation challenges, retention policies are not a quick way to reduce your e-discovery costs.  They are also not going to reduce enough data to solve an organization’s e-discovery cost “problem.”  First, due to the implementation challenges, retention policies are not going to delete all the electronically stored information (ESI) they should.  Second, HIPAA, Sarbanes-Oaxley (SOX) and FINRA regulations require that many documents must be retained for several years.  Finally, business users will demand many exceptions: emails, loose files, collaboration content, financial records, contracts, etc. that they want to save beyond the retention period for important business reasons.  As a result, even companies with retention policies are going to have a substantial and growing amount of discoverable ESI and the electronic discovery costs that go with that.

Document retention policies thus are a bit like taking vitamins.  They are likely going to help reduce the amount of time you are sick – although you’ll probably find some “studies” that say they do help and some that don’t.  But when you get sick, they aren’t going to make you better.  For that, you need a remedy that directly targets the specific problem.  Similarly, document retention policies, and you can say the same thing about all information management solutions to e-discovery, will help reduce e-discovery costs, but they won’t solve the e-discovery cost problem.  Specific e-discovery solutions are necessary to do that.  We’ll discuss many of these specific e-discovery solutions in the next set of posts in this series.

In the post, E-Discovery 911: Reducing E-Discovery Costs in a Recession, we analyzed the question: which electronic discovery activities are the most costly today and thus have the greatest room for cost reductions? An analysis of a typical, hypothetical case demonstrated that the bulk of e-discovery costs reside in the processing and review stages. In this post, we want to look at the different ways of reducing e-discovery costs and which are likely to be the most effective, especially given processing and review costs are the largest sources of expense.

Corporations have the following options for reducing e-discovery costs. Some of these approaches are aimed at changing the overall way e-discovery is performed. And some of these are aimed at improving the results of a particular step within a typical e-discovery process. None of the options are mutually exclusive.

• Retain less data through information management: one of the methods that corporations can undertake to reduce e-discovery costs even before e-discovery has begun is to adopt a data or document retention policy. Such a policy can, for example, stipulate that the corporation deletes all documents not required for specific business, legal or compliance reasons after a fixed period of time, such as 90 days. As a result, a properly implemented document retention policy has the potential to significantly reduce the amount of data that is identified and collected during electronic discovery.

• Better assess your case and your discovery issues: another approach to reducing the overall costs of litigation including discovery is to perform an early case assessment. Pioneered by Dupont and others, the objective of this approach is to understand all the key case facts within a short period of time so that the litigation team can make better decisions quicker. Because costs always rise over time, quicker resolution of litigation reduces costs. While early case assessment was originally an overall approach to litigation, there is now an equivalent in electronic discovery. The goal is to identify all the potentially discoverable data, but only collect, process, and analyze a prioritized portion of this data in order to inform an understanding of the case AND calculate an estimate of the ultimate potential e-discovery costs.

• Bring e-discovery in-house: another holistic method for reducing electronic discovery costs is to manage all or a portion of the e-discovery process in some or all matters inside the Enterprise as opposed to outsourcing it to law firms or litigation service providers. While bringing e-discovery in-house has other benefits, such as improved security and control, the principal benefit is to convert variable service costs, typically priced on a per Gigabyte basis, into fixed software costs thus producing a return on the investment to manage e-discovery in-house.

• Preserve and collect less data: in addition to holistic approaches, e-discovery costs can be reduced at each step in the e-discovery process. One way to reduce e-discovery costs would be to preserve and collect less data. Reducing the amount of preserved and collected data not only reduces the cost of each of these steps but also reduces the cost of each downstream step. There are pros and cons to this approach which I will discuss in a later post.

• Process less data: more data is frequently preserved and collected than needs to be processed for analysis and review. This excess data can be filtered out prior to processing thus reducing processing and all other downstream costs. The techniques used to do this are often referred to as pre-filtering, pre-processing or early data analysis.

• Process differently and review native: historically, most electronic data was converted to an image format, such as TIFF, prior to review. This process is computationally intensive and expensive. In recent years, e-discovery practitioners have been processing and reviewing more documents in a native or near-native format and avoiding the cost of converting documents to an image format until later in the process.

• Review less data: data can also be reduced after processing and prior to review and production. Much has been written in the e-discovery community about this process, often called “cull-down,” and the different search and analysis techniques that can be used as part of this process, such as keyword search, concept search, de-duplication, and others. The fewer documents requiring processing and review, which as we have seen is a substantial portion of the overall costs, the lower the overall costs.

• Review data faster: in addition to reducing less data, the electronic discovery community has pioneered new methods of reviewing data faster including data clustering, near de-duplication, and other more automated review techniques. The faster documents are reviewed, the lower the attorney review costs.

While all of these approaches have the potential to reduce the costs of electronic discovery, some are going to be more effective than others. Each approach can be implemented using a multitude of techniques or practices and each of these techniques has their pros and cons. For example, some techniques may have a greater risk of raising defensibility issues from the court or opposing side than others. Other practices may be less expensive initially, but, over the course of a changing and iterative e-discovery, may prove to be more costly overall. In a series of future posts, we’ll review the different practices used as part of these approaches and analyze the pros and cons of each to understand which may be the most effective for your organization.

Maybe this will show my age, but I’ve been around the electronic discovery business since the days when pricing was both simple and very expensive. Terabytes were at the mythical high-end of the spectrum and gigabytes of “e-docs” (not “ESI”) cost $3,000 – $4,000 to process. Understandably (and fortunately for most), pricing models have evolved, thanks in part to more educated consumers and initiatives such as Sedona’s RFP + Vendor Panel.

Leaving the WABAC machine and moving into present times, we’ve starting to see some variance from traditional pricing models that primarily focus on data “into” the processing machine. More and more companies (such as Kroll Ontrack) are moving to models that price on data “out” of the process. Since that’s a bit nebulous, an example might illustrate:

Traditionally, in a somewhat simplified fashion, an electronic discovery project would be priced by the amount of data in the initial corpus (say 100 gigabytes) and processing would be priced at $500 a gigabyte (for round numbers purposes). Leaving out the sometimes significant caveat that the 100 gigabytes would likely increase due to expansion of compressed files, this would mean that the bulk of the project expenses would be $50,000 ($500 x 100), plus relatively nominal costs for monthly hosting and user access rights.

At the end of the day, after elimination of system files, deduplication and application of search terms (reducing the initial corpus by say 70% collectively) there would be 30 gigabytes remaining for hosting and possible production, both of which are most often priced separately.

Given rampant commoditization there’s an arms race underway among certain service providers where they’re now changing the above model to give away initial processing as a loss leader – pricing only on the data that comes out the end of the processing/search step. In this approach the above workflow would largely stay the same, but the vendor would charge a higher rate for what ultimately is hosted on the back-end. If this back-end fee was $2,000 per resulting gigabyte and the same 30 gigabytes was seen out the back end, then the customer would pay $60,000 for the project. But, if the deduplication, searching, culling, etc. was more effective (at say 80%) then the resulting 20 gigabytes would only cost $40,000.

The question then, as Clint Eastwood would put it, is: “Do you feel lucky?” This pricing model forces attorneys and litigation support managers to guesstimate what culling, search, and de-duplication rates they’ll likely get on the data corpus. Guess right and they save the end client money, guess wrong and they’re way over budget.

The dynamics of this purchasing decision are a bit atypical because the buyer (usually counsel) doesn’t pay the bills, so the decision can often be more vexing than most. When a direct consumer gambles on pricing things will ideally balance out over time, with money being saved in some instances and some being overspent in others. But, when the buyer doesn’t pay the bills the motivation is less clear.

Thoughts run to Maslow’s hierarchy of needs to determine which pricing model is ultimately more compelling: (a) price certainty/adherence to budget, or (b) cost variability and the opportunity to save money. While it’s never good to understate the upside of saving money (Esteem), I think ultimately there’s a more fundamental need (Safety) to stay within budget and avoid the painful (sometimes client imperiling) call to discuss how a given e-discovery project has gone way over budget.

This calculation is made further vexing because it not only pits the purchasing party against unknown data culling/searching rates, but it also puts the vendor in an ethical bind where they make less money if they’re supremely effective at data reduction, whereas if they’re either intentionally or accidentally beneficiaries of relatively little data reduction then they stand to make a ton of upside.

It’s like you went to Vegas to gamble your kid’s college fund and on top of the already questionable house odds you knew that the dealer stood to profit by your losses. So, as for myself, no, I don’t feel lucky.