Latest News

How to Stop the Bleeding: predicting & controlling ediscovery cost

Guest article by Abtin Buergari, President & CEO, Modus

The investment in eDiscovery software, services and expertise has grown steadily since the Federal Rules of Civil Procedure was amended in 2006. However, although corporations have embraced new business processes and leveraged eDiscovery tools to reduce eDiscovery costs, it hasn’t been enough. General Counsels and Chief Legal Officers continue to be frustrated and concerned because they still lack the ability to predict andcontrol eDiscovery spending. Corporations must demand more from their eDiscovery service providers and vendors and hold them accountable for delivering the tools and pricing models needed to truly control and manage eDiscovery cost.

eDiscovery Costs are Out of Control
General Counsels are increasingly frustrated and concerned because variable litigation costs due to eDiscovery continue to rise. A recent survey1 of corporate General Counsel revealed that managing the cost of eDiscovery was their top concern for thenext 12 months. And, eDiscovery cost overruns was their top pet peeve from the past 12 months.

The exploding amount of digital data is at the center of how business gets done and is the main contributor to escalating eDiscovery costs. National and international legal and regulatory systems depend on digital information to function and there’s more and more data to be sifted and analyzed to determine the facts of matters and investigations.2

Current Cost Reduction Initiatives are Effective but Not Enough
Corporations have not sat idly by or thrown their collective arms up in the arm in surrender. Law departments have undertaken multiple initiatives to handle the volume and complexity of information in an attempt to reduce and control costs.

Corporations are creating business processes surrounding eDiscovery to manage the growing mounds of data. According to a recent study3 more than half of corporations have a formal internal eDiscovery program in place and more and more organizations plan on implementing formal processes. Formal processes improve operational efficiencies and help reduce costs.

Reallocating the work
Many corporations use contract attorneys (onshore or offshore) with lower hourly billing rates for document review. While this approach was effective in reducing review costs, the model breaks down with the growing data volumes. The amount of data in a case today is exponentially bigger than it was just a few years ago. Even though review costs (per document price) have decreased, the complexity and amount of data to review has grown exponentially. Ballooning data volumes offset decreasing prices.

As with almost every industry, using software tools to address labor-intensive and sometimes error prone tasks saves money. This applies to eDiscovery as well. The pressure to reduce costs while ensuring no critical evidence is missed has spurned a greater than $1 billion enterprise eDiscovery software market that is expected to continue to grow.2

One of the greatest challenges in eDiscovery is deciding whether or not the cost and effort of identifying and producing electronically stored information (ESI) is in line with its importance in resolving a particular dispute. Much of the industry’s focus is on providing software tools to address this challenge. For example, Early Case Assessment (ECA) software products facilitate informed decision-making during the early stages of a dispute. ECA tools enable trained users to analyze and cull the data before it goes to review, saving time and money.

Most recently, technology-assisted review (also referred to as predictive coding, computer assisted review) has received a great deal of attention. Technology-assisted review includes sophisticated and verifiable machine-learning techniques that, together with trained users, more quickly and efficiently analyze, code and group documents and quickly get to what might be relevant in any given case2. In fact, recent studies have shown that a combination of computer and human input is the best approach to review4.

However, while significant steps have been taken to cut costs and gain control, they don’t go far enough. General Counsels, Chief Legal Officers and law departments report that controlling and predicting eDiscovery costs remains their top concern and number one management priority for 20133.

The Answer – Demand more from your eDiscovery Service Provider
There are two solutions to controlling and predicting eDiscovery costs, depending on your requirements. In either case, Corporations need to rethink how they engage eDiscovery service providers. The first solution is to ensure your service provider delivers Continuous Case Assessment (see below) for variable cost (e.g., per gigabyte of data), case-by-case eDiscovery support. In these situations, corporations engage with an eDiscovery services provider (either directly or through outside counsel) on a specific matter. The second solution to controlling and predicting eDiscovery costs is to form a fixed fee strategic relationship with a services provider. We’ll discuss each of these separately.

Variable Cost Case-by-case eDiscovery Services and Continuous Case Assessment
For variable cost eDiscovery services, corporations are missing the ability to continuously assess budget vs. actual costs throughout the entire eDiscovery process, no matter what tools are being used. In these variable cost scenarios, companies cannot quickly and accurately answer critical questions such as:

•    How do I manage spend throughout the eDiscovery process to ensure we stay on budget?
•    How do I plan the budget for my next case?
•    How do I determine the right eDiscovery budget for a particular legal situation?
•    How much do I spend on eDiscovery every year? By case? By category?

You Can’t Control What You Can’t See
The reason frustration and concern continue to grow is that the information companies need to control and predict costs is buried in the eDiscovery process. There’s little to no visibility into how much companies are spending, where the money is going, or how close actual spending is to their budget.  If corporations can’t see what they are spending, they can’t take measures to control it.

Continuous Case Assessment
Companies need to be able to quickly and continuously manage their eDiscovery budget (not just the process) in real-time. They are looking for yet-to-be-obtained visibility into budgeted vs. actual spend throughout the eDiscovery process so they can control and predict eDiscovery costs—at a high level down to a granular level. They need insight into current costs and what is forecasted for the life of the project so they can make the necessary adjustments along the way—eliminating surprises.

Another advantage of Continuous Case Assessment is that it allows corporations to look at budget variance data trends in real time to assess and drive the efficiency and performance of outside counsel, contract attorneys, and service providers.

Fixed Fee Strategic Relationship – Managed Services
An increasingly popular approach to controlling and predicting eDiscovery costs is to establish a fixed fee strategic relationship with an eDiscovery service provider. In this scenario, the eDiscovery services provider delivers and manages the matter(s) through the entire eDiscovery process. You can engage the services provider to deliver these managed services in a way that makes most sense for your corporation.
·       Perform all eDiscovery work, including review, for a fixed price and term (e.g., number of years)
·       Perform work for a specific matter
·      Set a fixed fee based on a specific variable, such as fixed price for per custodian

In any of these scenarios, make sure that the company you engage provides visibility (data and status) into all phases of the eDiscovery process – from collections through production.

eDiscovery Service Providers Need to Step Up and Be Held Accountable
No matter which solution you choose, eDiscovery vendors and service providers need to be held accountable for providing corporations with the ability to predict and control eDiscovery costs throughout the entire eDiscovery process. For variable cost case-by case situations, companies should demand their services providers deliver Continuous Case Assessment. Only when corporations can take advantage of Continuous Case Assessment will they truly be able to control and manage eDiscovery cost.

By nature of the engagement, corporations gain cost control and predictability in fixed fee arrangements. However, corporations should demand real-time visibility into data and matter status to ensure speed and accuracy in these situations.

General Counsels and Chief Legal Officers continue to be frustrated and concerned because they still lack the ability to predict and control eDiscovery spending. Whether dealing with a variable costs case-by-case eDiscovery or a strategic relationship with an eDiscovery service provider, corporations must demand more from their eDiscovery service providers and vendors and hold them accountable for delivering the tools and pricing models needed to truly control and manage eDiscovery cost.

1.      2012 Study of Global 250 General Counsel on eDiscovery, eDiscovery Times
2.      Gartner: “Magic Quadrant for E-Discovery Software,” 24 May 2012
3.      “2012 Chief Legal Officer Survey,” Altman Weil Flash Survey
4.      “Technology-Assisted Review in e-Discovery Can be More effective and More Efficient than Exhaustive Manual Review.,” Richmond Journal Of Law And Technology Vol. XVII, Issue 3)