In the first article in this series, we looked at the cost of individual e-discovery projects as they are outsourced. We explored the fact that hours spent on review consume at least 70 percent of a discovery budget and that use of advanced analytics provided a return on investment by saving on review. In the second article, we looked at costs for bringing e-discovery in house. We demonstrated that with staffing, software, training and infrastructure, in-house processing, review and production might cost about $1 million for a modest-sized capability.
The issue of bringing e-discovery in-house has gotten a lot of ink. But since litigation volumes vary from year to year and since in-house installation requires fixed cost and stable staffing, many departments have looked away from it as a cost-saver for e-discovery. Instead, many are making sense of a blended approach using managed services.
Managed services is a way to use a combination of in-house and outside resources to get precisely what you need for e-discovery. The concept is to build what capability you might always need and flexibly outsource tasks for which the demand may fluctuate or for which the technology may vary or advance rapidly.
Mix and Match
For example, you can build internal plans for litigation response and litigation holds. You will need to have these in-house whether you use outside counsel or a consultant to help build and document them. Closely associated with these are software, equipment and staffing to collect electronically stored information (ESI) responsibly and a litigation hold repository of preserved ESI. Many counsel find this early-phase EDRM capability to be the best use of e-discovery in-house investment. The costs are modest for training, software and ESI storage. The staffing may come from dedicated law department staff or be co-opted from IT. It requires close supervision by counsel to withstand challenges on preservation, diligence and authentication, but it can be used in almost every case, including pre-litigation.
By assessing your litigation history over the last one to three years, you can use your buying power to acquire the use of excellent e-discovery outsourcing at predictable prices. These should include assistance to sift through your ESI for appropriate relevant content, to host it for review and production and to do the more mundane data processing tasks associated with these. Your outsourcing agreement should also include availability of advanced analytics, such as concept-based search and predictive coding. You may not want to buy these for use in-house, but you would certainly want to use them for your largest and most consequential matters.
For some, the outsourcing arrangement takes the form of a flat annual fee for all of the search, processing, hosting, review, production, storage, advanced analytics, and modest levels of project management and technical assistance to make it all work. The fee is based on anticipated volumes and divided into monthly payments. The service levels include some risk or “stretch” on both counsel and service provider so that costs are utterly predictable. Worrying about “burst rates” and “true-ups” because of perceived under- or over-use work against utterly predictable costs and won’t get you the best value for your buying power.
How About Hybrid?
For others with larger caseloads, more technology needs and more of their own trained “hands-on” staff, e-discovery managed services may take the form of a cloud-based e-discovery service. With this, counsel rely on the service provider’s economies of scale for large infrastructure, robust bandwidth and 24 hour support to outside counsel. But general counsel’s own e-discovery staff set up projects and manage them, often on dedicated hardware and with software of the department’s own choosing. Advantages to this model are lower annual outsourcing fees (because they include less outsourced staffing) and storage rates that are closer to cloud-based commercial storage.
With this model, counsel leverage the service provider’s knowledge and experience with software and process, so that the e-discovery capability is always robust and cutting edge. With a fully in-house model the choice of technology may become obsolete within a few years. A service provider with dedication to only to e-discovery could not afford that result; new tools will always be available.
With this model, too, counsel can avoid many of the capital costs and scalability concerns about infrastructure, bandwidth and the demanding user and system support that is routine in e-discovery but an anomaly to corporate IT.
Practice Makes Perfect
We pointed out at the beginning of this series that return on investment plays heavily in e-discovery spending. Predictable costs are key to that calculation. In litigation, a single case may overshadow an entire year’s budget. It becomes increasingly necessary for that case to have access to advanced technologies to defray the cost of review.
In a recent project, a population of more than 700,000 emails, attachments and files were evaluated for careful and iterative culling by use of keyword searches. With a homogenous collection, a substantial number of custodians and broad discovery requests, the best that keywords could do was to cut the review to about half. Using predictive coding, the review was limited to less than 100,000 documents, including all the training, assessment, sampling and review for production.
The saving of more than 250,000 documents from review clearly justifies the use in this case of advanced technology. While it pays for itself on a single project, its annual cost in licensing, staffing, hosting and support may not be justifiable behind the corporate firewall. But in a managed services offering, counsel have this capability readily available within a predictable annual budget.
Counsel have many options for managing e-discovery. They appear on a sliding scale from fully in-house to fully outsourced on a per-project basis. Rapid changes in e-discovery technologies and concerns about staffing, sunk costs and return on investment factor into the decision-making. For many, the managed services hybrid solution with absolutely fixed and predictable costs makes the most sense.