How to Stop the Bleeding: Predicting and Controlling ediscovery Cost

Transcription

1 How to Stop the Bleeding: Predicting and Controlling ediscovery Cost ABSTRACT Corporate leaders charged with controlling the cost of discovery continue to be frustrated and concerned with the lack of predictability over discovery spending. While major investments are being made in ediscovery software, and movement towards higher value-add technologies are being considered, the cost containment issues associated with discovery still create budgetary disasters for legal teams. The solution is simple -- more accountability. Corporations should demand fixedfee strategic relationships or Continuous Case (Assessment) to provide clarity and budget transparency. COPYRIGHT MODUS ALL RIGHTS RESERVED Page 1

2 DISCOVERY COSTS ARE OUT OF CONTROL Discovery, by nature, has lent itself nicely to a variable cost business model. ediscovery, an offshoot of the discovery process, has largely followed suit. Because of the explosive amount of digital data in the last 10 years, the cost associated with the review and production of ediscovery has had troubling consequences for corporations. Accelerated by the market downturn in 2007, General Counsel and legal officers were tasked with solving what seemingly was a legal question. A recent survey 1 of corporate General Counsel revealed that managing the cost of ediscovery was their top concern for the next 12 months and that ediscovery cost overruns were their top pet peeve from the past 12 months. However, ediscovery, unlike other forms of discovery, is actually a data management issue. Because digital data is at the heart of how business is performed, budgeting and managing costs through historic business models creates a unique problem for corporations. The associated legal budget is getting larger simply to absorb the increasing volume of data that legal practitioners are handling. More importantly, International legal and regulatory systems depend on digital information to function and data is only growing. Thus, sifting through, analyzing and identifying facts is more complicated than ever before. 2 THE ANSWER - DEMAND MORE FROM YOUR EDISCOVERY SERVICE PROVIDER At its core, ediscovery is a data management challenge, not a legal challenge. Discoverable data, like other forms of data, is measurable, and most importantly, forecast-friendly. 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 solution to controlling and predicting ediscovery costs is to form a fixed-fee strategic relationship with a services provider capable and willing to change their business model to better fit the needs of the corporation. Again, data is measurable, and thus should lend itself nicely to a fixed-fee model. Yet this works counter to the predominant business models being used today by virtually every ediscovery service provider. The second solution is to ensure your service provider delivers Continuous Case Assessment (see below) for variable cost, case-by-case ediscovery support. In situations where a corporation or law firm does not regularly engage in ediscovery needs, ediscovery services providers (either directly or through outside counsel) should provide a means of cost containment through complete transparency and budget control mechanisms. We ll discuss each of these separately. FIXED-FEE STRATEGIC RELATIONSHIP - MANAGED SERVICES An increasingly popular approach to controlling and predicting discovery costs is to establish a fixed-fee strategic relationship with legal service providers. While the entire discovery process may be more difficult to measure, ediscovery certainly is not. In a fixed fee scenario, an ediscovery services provider should manage the process of reviewing documents. This will increase the ROI on attorney billable hours in addition to removing uncertainty about discovery costs. You can engage the services provider to deliver these managed services in a way that makes the most sense for your corporation. A services provider should be able to: Perform work for all matters Perform work for a specific matter Perform work for a specific ediscovery process In any of these scenarios, make sure the company you engage provides visibility (data and status) into all phases of the ediscovery process - from collections through production.

3 VARIABLE COST CASE-BY-CASE EDISCOVERY SERVICES AND CONTINUOUS CASE ASSESSMENT If the budgeting and planning of your legal process has not included a fixed-fee arrangement, or outside counsel is more comfortable with variable cost ediscovery support, corporations and law firms should demand real-time budget accountability, preventing overspend or unexpected spending due to ediscovery. Using Continuous Case Assessment will give businesses the ability to regularly assess their initial budget against the actual costs throughout the lifecycle of the case. The key to success in variable cost scenarios is whether the ediscovery service provider is helping your team evaluate and accurately answer the following questions: Reactive Questions: o Are the decisions I am making in line with my budget? o How are data scope, legal strategy, and case scope changes affecting my budget? o Can I match/map the changes that occurred in my project directly to the affect it had on my budget? Proactive Questions: o How do I plan the budget for my next case? o How do I determine the right ediscovery budget for a particular legal situation? o How much do I spend on ediscovery every year? By case? By category? YOU CAN T CONTROL WHAT YOU CAN T SEE The information companies generally need to control and predict discovery costs are often buried in the ediscovery process. This naturally leads to frustration. How much you are spending, what is the specific spend associated to, and how close actual spending is in relation to the initial budget lacks visibility. If corporations can t see what they are spending, they can t take measures to control it. CONTINUOUS CASE ASSESSMENT Demand visibility. Companies need to be able to quickly and continuously manage their ediscovery budget (not just the process) in real-time. For corporations and law firms to make educated business decisions over the direction of their case strategy, or spending behavior relating to a matter, Continuous Case Assessment is an absolute necessity. This spend refinement behavior should, in real-time, provide high level to granular level information that forecasts the budget lifecycle of the project. Not only will Continuous Case Assessment eliminate surprises, it serves as a strategic decision making lever for the corporation as it determines the value of a piece of litigation. Naturally, Continuous Case Assessment will also allow corporations to look at budget variance data trends in real time, allowing them to drive efficiency and performance of outside counsel, contract attorneys, and other service providers involved in the discovery process. CURRENT COST REDUCTION INITIATIVES ARE EFFECTIVE BUT NOT ENOUGH To address the significant spend increase related to the growth of ediscovery, legal departments have undertaken multiple initiatives to handle internal data volumes in an attempt to reduce and control costs. PROCESSES Corporations are creating business processes surrounding ediscovery to manage the growing mounds of data. According to a recent study 3 more than half of corporations have a formal internal ediscovery program in place, with many additional organizations planning the same. These formalized processes help improve operational efficiencies and naturally reduce costs.

4 REALLOCATING THE WORK TECHNOLOGY Many corporations now use contract attorneys (onshore or offshore) with lower hourly billing rates for at least the initial pass of document review. While this approach was effective in reducing review costs, the model breaks down with growing data volumes. The amount of data in a case today is exponentially larger than it was just one year ago. Although the per document price of review has decreased, the growth in the complexity and amount of data has outpaced the cost reductions. 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 spurred 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. 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, quickly allowing attorneys to find what might be relevant 2. In fact, recent studies have shown that a combination of computer and human input is the best approach to review. 3 While these steps have been taken to reduce the cost associated with discovery, they don t go far enough. Corporate legal departments still lack control and predictability over their ediscovery spending patterns. This problem remains their top concern and number one management priority for EDISCOVERY SERVICE PROVIDERS NEED TO STEP UP AND BE HELD ACCOUNTABLE No matter which solution you choose, ediscovery service providers need to be held accountable for providing corporations the means to predict and control ediscovery costs throughout the entire ediscovery process. The purest form of cost certainty will come from fixed-fee arrangements. The ediscovery industry is ready for a major business model shift, and corporations need capable ediscovery companies to provide them this service. For corporations to measure the effectiveness of fixed-fee arrangements, they should require real-time visibility into data and matter status to ensure speed and accuracy. For variable cost containment where fixed-fee arrangements are not possible, companies should demand their services providers deliver Continuous Case Assessment. Only when corporations gain visibility through Continuous Case Assessment will they truly be able to predict ediscovery cost. SUMMARY Corporate leaders charged with controlling the cost of discovery continue to be frustrated and concerned with the lack of predictability over discovery spending. Whether dealing with variable cost case-by-case ediscovery, or a strategic relationship with an ediscovery service provider, the solution is simple more accountability. Corporations should demand tools and pricing models that provide clarity and budget transparency. ABOUT MODUS

5 Modus is an ediscovery services provider. Some of the world s largest corporations and AMLAW 200 law firms trust Modus to solve tough problems, control costs, and meet deadlines with accurate, defensible data. Inc. 500 recently ranked Modus as the fastest growing ediscovery company in America. Footnotes Study of Global 250 General Counsel on ediscovery, ediscovery Times 2. Gartner: Magic Quadrant for E-Discovery Software, 24 May 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 Chief Legal Officer Survey, Altman Weil Flash Survey