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.

After more than ten years of IT experience and over a year of experience as an attorney working exclusively with e-discovery, I am delighted to join the E-Discovery 2.0 team.  I am a member of the South Carolina Bar Association and the American Bar Association.  In this and future posts, I will try to bring a practical perspective or view from the trenches to this blog – a look at how to deal with some of the day-to-day problems facing e-discovery practitioners today.  I will begin with a discussion about how to approach the decision to move e-discovery in-house, and although the desire to build a solution “in a day” is tempting (and sometimes precipitated by necessity), a solution that will stand the test of time and provide the greatest ROI requires a bit more planning and care.

E-Discovery can sometimes be thought of as an ailment that requires a quick remedy in the form of software or services.  We continue to be reminded, however, that e-discovery is much more than a fleeting malady; it is an ongoing business problem that must be treated with the same diligence and meticulous execution as regulatory compliance or data security.

So where should the prudent practitioner begin?

Every good IT project manager I have ever worked with always had the same mantra when it came to solving a problem with technology – make sure the business problem has been well defined and establish detailed requirements before venturing into the marketplace.  So, why are so many companies sending out form RFPs containing canned text expecting to find a miracle “end-to-end” e-discovery solution in a relatively short period of time?  The answer, I believe, lies both in the abundance and availability of generic information about e-discovery and the fact that most companies looking to bring e-discovery in-house are already feeling the pain of rising costs and demands on existing staff.  They are, in short, trying to conquer their e-discovery problem in a day.  To truly conquer the problem, it should be attacked from the areas causing the greatest pain and expense first, and those areas should be thoroughly examined using proven project management techniques.

If e-discovery is indeed a significant business process, then companies must address that problem using the same proven methods that they have been using for years to solve other business problems.  For example, every company today, believe it or not, has an e-discovery solution in place.  If the company was sued tomorrow, and there was a significant e-discovery component to the matter, the company would likely react in a certain way based on a number of factors – hire outside consultants, work with a litigation support provider, rely on their outside counsel to coordinate e-discovery, etc.  So why not predict that reaction, analyze it, and determine where the greatest expense and pain lies in that process?  From that data, the company can decide which portions of the e-discovery workflow, if any, should be brought in-house, and it can seek out best-of-breed solutions rather than settling on the first end-to-end vendor that comes knocking.  The next step is to rely on those time-honored project management edicts – define the business problem and establish concrete requirements.  Then the company will be armed with the most powerful weapon in the marketplace – the power to distinguish.

The burning question, then, is how does the company decide which portions of the e-discovery workflow to bring in-house?  The answer is relatively simple: you follow the money (right out of the front door in many cases).  Where is the company spending most of its e-discovery budget, and are those portions of the workflow good candidates to bring in-house?  Typically, processing data and review are the most expensive phases of any e-discovery project.  The logic here is simple: if you send 100GB of ESI to outside counsel to review, it will be more expensive and time-consuming than sending only 20GB.  Thus, processing, analysis, and first-pass review are great candidates to be brought in-house from an ROI perspective, and bringing these phases in-house could facilitate a form of early case assessment given the right solution.

Now, suppose a company decides to bring processing, analysis, and first-pass review in-house, also leveraging their chosen technology solution for early case assessment.  Now what?  The process can simply be repeated.  Given the solution implemented, what happens if we get sued tomorrow?  What other portions of the e-discovery workflow will need to be outsourced and how will we do that?  What will that cost?  Is there a better way?  The company can continue this process until it determines that either all portions of its e-discovery workflow have been successfully brought in house or the ROI of bringing additional portions of the workflow in house does not justify additional projects at that time.  This analysis should then be repeated on a regular basis to ensure the current solution is still meeting the needs of the organization and that market or industry shifts have not created additional opportunities for cost savings.

Although an effective and defensible in-house e-discovery solution likely cannot be built in a day, a carefully crafted plan of attack and a thorough understanding of the organization’s particular needs can strategically position it for long term success.

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.

As the Mark Twain quote goes, there are “lies, damn lies and statistics.”  In this case, however, and regardless of the exact numbers, two recent surveys provide some very interesting directional trending.  The first is Fulbright & Jaworski’s 6^th Annual Litigation Trends Survey.  In addition to covering a range of general and vertically oriented topics, they also focus on electronic discovery specifically.  Not surprisingly, reducing e-discovery costs bubbles up to the top of the list as major initiatives for most respondents.  Interestingly though, remediation plans attacking this problem seem to fall into two different camps.  On the one hand, 24% of respondents plan on outsourcing certain e-discovery tasks further leveraging preferred partners.  Conversely, the method that leads the pack (at a whopping 47%) is the corporate initiative of taking components of e-discovery in-house.  Other methods were listed, but most didn’t appear to have critical mass, including: using clawback agreements more, enforcing document retention policies, and negotiating with the opposition over the scope of discovery.

Similarly, Clearwell Systems recently conducted a survey in partnership with analyst firm Enterprise Strategy Group titled Trends in Electronic Discovery – A Market Perspective, which attempted to pinpoint similar pain points and solutions. The questions focused more on 2010 planning and they found a general expectation of more litigation/regulatory inquiries where 53% of the respondents expect the number of lawsuits and regulatory inquiries to increase by at least 20% in 2010, with 13% of respondents planning for an increase of 50 percent or more.  Again, not surprisingly, many plan on attacking this increase in litigation (and the corresponding e-discovery costs) by bring parts of the process in house.  In fact, 48% indicated that they currently have an active project to bring segments of the e-discovery process in-house. And for those that aren’t currently in the building process, 87% of respondents plan to budget for technology that specifically supports the electronic discovery process in 2010.

Given the length of time required for planning, RFPs and e-discovery tool procurement, clearly time is of the essence for companies that want to take advantage of internal solutions in the 2010 time frame.  Failure to get off the dime means that an enterprise is more likely to get caught in the middle of deliberation, versus deployment.