End of a trend and the shifting of LDO functions

LDOs no longer feel the need to bring work in house; the work will get done where it is most efficient to do so

In December 2013, InsideCounsel published the Sixth Annual Law Department Operations Survey, a project on which we have been collaborating since its inception. When we launched the survey in 2008, law department operations was a much less mature function that many barely knew existed. In the years since, however, the operations function has gained respect and many general counsel expect their “LDO” (an abbreviation that did not exist when we started) to deliver process, efficiency and cost savings to the law department.

The rise of the LDO, such as it is, has been caused primarily by two big changes in the legal function. First, the crash of 2008 led to more cost pressure than ever before—in many cases for the first time ever. Time will tell to what extent the “new normal” has staying power, but increased cost pressure has created an environment where law departments value process, technology and procurement, all of which are in the sweet spot of LDO.

The other reason is e-discovery. Originally the litigator’s redheaded stepchild, e-discovery became too cumbersome—and too expensive—to ignore. It is also an area where client objectives do not necessarily align with their firms’ objectives as cost is a much bigger factor for in-house counsel. Law departments, often led by their LDOs, have spent much of the last five years wresting control over e-discovery from their outside counsel, leading to a topic the e-discovery “cognoscenti” seems to talk about non-stop: bringing discovery in house.

Data from the recent LDO survey says a lot about how this trend has played out. We listed nine e-discovery processes, ranging from preservation to production, and asked LDOs which ones they handle in-house. As expected, the earlier in the e-discovery lifecycle (the further left in the EDRM model) a process resides, the less likely it was to be handled in-house. For example, almost 84 percent of companies always handle preservation and legal hold in-house, and more than 80 percent handle collection and early case assessment at least some of the time.

At the other end of the spectrum, however, most processes are still handled outside. Less than half typically (responses “always or sometimes”) host, produce or review, and fewer than 17 percent of companies manage any of those processes in house all the time.

This data is not surprising, and it aligns with standard outsourcing theory: the less strategic a function is, that is the further it is from being a core function, the more ripe it is for outsourcing.

We did find a big surprise in the data, however: the battle over bringing discovery in house is over. No more than 8.5 percent of respondents plan to bring any additional e-discovery function in house. If a process hasn’t yet come inside, it’s going to stay out.

I believe that this trend has completed its lifecycle so quickly because it never really was about doing discovery work in house. Companies outsource non-core functions, and reviewing old emails for responsiveness is about as non-core as it gets.

“Bringing discovery in-house” has always really been about control. Where the work is done has never been particularly important. But controlling the work, and making sure its done efficiently and cost-effectively, is extremely important and has become increasingly so as discovery has become a big enough financial issue to get on the radar of general counsel and CFOs.

Here’s another data point from the survey: More than two-thirds of respondents feel they are “in control” of their discovery process—and that’s the key. LDOs no longer feel the need to bring work in house; the work will get done where it is most efficient to do so. As long as the company is in control.

Brad Blickstein

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