The Discovery-Ready Enterprise II: Challenges and Opportunities on the Road to Litigation Preparedness

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1 The Discovery-Ready Enterprise II: Challenges and Opportunities on the Road to Litigation Preparedness This comprehensive survey report reveals how many organizations are still grappling with being prepared to comply with discovery requests. It clarifies powerful strategies corporate and law firm attorneys are implementing such as establishing ediscovery and records management programs in order to be discoveryready and achieve superior business benefits. Underwritten by:

2 The Discovery-Ready Enterprise II: Challenges and Opportunities on the Road to Litigation Preparedness Table of Contents: 3 Introduction 4 Executive Summary 5 Key Findings 16 Conclusion 18 The Discovery-Ready Enterprise Defined

3 Introduction The 2007 ediscovery survey underwritten by Océ Business Services, Dawn of the Discovery-Ready Enterprise, took a close look at critical challenges corporate and law firm attorneys are grappling with in order to deal with the growing tide of electronic discovery (ediscovery). The critical challenges examined in the survey report span a range of issues that include inadequate records management, changes to the Federal Rules of Civil Procedure (FRCP), escalating costs of ediscovery, and effective outsourcing strategies. One of the most important challenges spotlighted in the 2007 survey is that organizations need to shift from a largely reactive response to being proactively prepared to comply with discovery requests. This year s survey, The Discovery-Ready Enterprise II, looks in more depth at the hallmarks of this proactive approach. From the organizational perspective, the hallmarks include key elements such as implementing a comprehensive records management program, establishing internal ediscovery expertise, and hiring a service provider or law firm to consult with on implementing ediscovery processes/technology. From the law firm perspective, the hallmarks of a proactive approach include establishing ediscovery expertise exclusively within the firm or launching some internal and external expertise with one or more ediscovery service providers. Our 2008 survey also clarifies other strategies attorneys are implementing, as well as the challenges and opportunities they are experiencing on the road to litigation preparedness. The national online survey of corporate counsel, law firm attorneys and litigation support personnel was conducted in March July Many participants are aware of challenges to their organization s preparedness and are taking steps to meet the challenges. For example, in this year s survey, more organizations report having fully implemented records management programs and of those that don t, more plan to implement a program within the next year. The Respondents A total of 128 executives took the online survey. These executives are highly experienced in legal discovery and records management. The group of respondents consisted of 47 percent corporate counsel and legal/it department staff and 53 percent law firm attorneys and litigation/it support staff. Respondents were guaranteed absolute confidentiality. Among the corporate respondents, 55 percent have annual sales of over $100 million; of that total, 36 percent have sales of over $1 billion. A cross section of industries is represented including business services, healthcare/ pharmaceutical, financial services, technology, retail, and government. Among law firm respondents, 53 percent have more than 100 attorneys in their firm; 29 percent work at firms with more than 500 attorneys Océ 3

4 Executive Summary In last year s survey, a majority of corporate counsel and law firm professionals strongly agreed that litigation preparedness which includes having electronic and paper discovery as well as records management programs in place has important business benefits such as minimizing business disruption and controlling costs. The findings in this year s survey clarify several key challenges that organizations still face on the road to litigation preparedness: The Discovery Readiness Challenge: Nearly two years after the new FRCP rules pertaining to ediscovery took effect, only seven percent of in-house attorneys feel that their organization is well prepared to comply with a legal discovery request involving paper and electronic documents. A significant number (39%) consider their company not well prepared. An even higher number of law firm attorneys agree 57 percent of law firm attorneys indicate that their clients are not well prepared to comply with an ediscovery request. There is good news in the fact that some organizations are seizing an opportunity by taking proactive steps to improve their preparedness. These steps include conducting a readiness analysis (49%) as well as hiring employees with ediscovery experience (29%) and hiring a vendor to consult with on implementing ediscovery processes and technology (29%). The Internal Process/Technology Challenge: Some enterprises are facing obstacles in deploying internal ediscovery processes and technology. A significant number of in-house attorneys (42%) say that their company has not implemented internal ediscovery processes or technology. There are several reasons for this inaction, including the view that establishing ediscovery processes takes too much time away from case- and business-related matters. Again, there is some positive news. Many organizations that don t have internal ediscovery processes or technology in place plan to change this scenario. A majority of in-house attorneys surveyed (63%) indicate that their organization plans to establish internal processes or technology in the next six to 12 months. The Records Management Challenge: Records management still represents a significant obstacle on the road to litigation preparedness. Almost half of corporate counsel respondents (46%) say their company does not have a fully implemented records program. This contrasts with law firm attorneys, the vast majority of whom (82%) feel it is important for their clients to have a records management program in order to be well prepared for discovery. Some organizations are getting the message about the importance of records management. Of the attorneys indicating their company does not have a fully implemented records program, the vast majority (75%) say that their organization plans to implement one within the next year. Besides these challenges, this survey report looks at other records and litigation management trends including: how companies ahead of the curve are using their records management programs for important business functions what business benefits organizations are gaining from their records management programs how enterprises and their in-house attorneys are taking a more hands-on approach to litigation management, particularly when it comes to managing key data/document processing functions such as collecting paper documents and electronically stored information 2008 Océ 4

5 KEY FINDINGS: OBSTACLES AND OPPORTUNITIES ON THE ROAD TO LITIGATION PREPAREDNESS 1. Attorneys still grapple with understanding the FRCP. Only 17 percent of law firm attorneys and 20 percent of in-house attorneys specify that that they have a very strong understanding of the 2006 ediscovery amendments to the Federal Rules of Civil Procedure. Thirty percent of law firm attorneys and 34 percent of in-house counsels say they understand the amendments well. However, these findings still leave 26 percent of law firms and 24 percent of in-house attorneys who admit that they do not have a strong understanding of the changes. This finding suggests that attorneys are still grappling with FRCP changes and that there is a significant opportunity for improvement in this area. How well do you understand the 2006 electronic discovery amendments to the Federal Rules of Civil Procedure? Not Very Well Neutral KEY: In-house Law firm Well Very Well Respondent Not Very Well Neutral Well Very Well In-house 24% 22% 34% 20% Law firm 26% 27% 30% 17% 2008 Océ 5

6 2. In-house and law firm attorneys agree: many organizations are not well prepared for ediscovery requests. Enterprises are not well prepared to comply with ediscovery requests according to a significant number of in-house attorneys. Thirty nine percent of corporate attorneys surveyed say their company is not well prepared to comply with an ediscovery request. An even higher number of law firm attorneys agree; 57 percent of law firm attorneys indicate that their clients are not well prepared to comply with an ediscovery request. In-house counsel: How well prepared is your company to comply with a legal discovery request involving paper and electronic documents? Not Well Prepared Neutral Somewhat Prepared Not Well Prepared 39% Neutral 32% Somewhat Prepared 22% Well Prepared 7% Well Prepared Law firm counsel: How well do you think your clients are prepared to comply with a legal discovery request involving paper and electronic documents? Not Well Prepared Neutral Somewhat Prepared Not Well Prepared 57% Neutral 35% Somewhat Prepared 6% Well Prepared 2% Well Prepared 2008 Océ 6

7 3. Some organizations are taking on the ediscovery preparedness challenge. According to in-house attorney respondents, some organizations are seizing an opportunity by taking proactive steps to improve their preparedness. These steps include conducting a readiness analysis as well as hiring employees with ediscovery experience, and hiring experienced vendors with whom they consult on implementing best practices and technology. In-house counsel: What proactive steps have you taken to date to improve your preparedness for complying with an ediscovery request? Implemented a readiness analysis Hired employees with ediscovery experience Hired a vendor to consult with us on implementing ediscovery processes and technology Hired a law firm to consult with us on implementing internal ediscovery processes and technology None of the above Implemented a readiness analysis 49% Hired employees with ediscovery experience 29% Hired a vendor to consult with us on implementing ediscovery processes and technology 29% Hired a law firm to consult with us on implementing internal ediscovery processes and technology 15% None of the above 27% 2008 Océ 7

8 4. Enterprises face challenges in deploying internal ediscovery processes and technology. A significant number of in-house attorneys (42%) say their company has not implemented internal ediscovery processes or technology. There are several business- and technologyrelated reasons for this inaction, including the view that establishing ediscovery processes takes too much time away from case- and business-related matters. In-house counsel: Have you implemented internal ediscovery processes or technology? Yes No Yes 58% No 42% In-house counsel: Why haven t you established internal ediscovery processes or technology? Too expensive (software, etc.) Too risky (potential mistakes/fraud liability) Not scalable (ediscovery activity increases and decreases dramatically) Too difficult to keep processes/technology current Takes too much time away from case- and business-related matters All of the above Too expensive 19% Too risky 13% Not scalable 19% Too difficult to keep processes and technology current 19% Takes too much time away from case- and business-related matters 25% All of the above 25% 2008 Océ 8

9 5. Many organizations plan to establish internal ediscovery processes and technology. On a somewhat positive note, many organizations that don t have internal ediscovery processes or technology in place plan to change their situation. Sixty three percent of the attorneys surveyed specify that their organization plans to establish internal processes or technology in the next six or 12 months. In-house counsel: When does your organization plan to establish internal ediscovery processes or technology? Within the next six months Within the next year Organization has no plans Do not know Within the next six months 42% Within the next year 21% Organization has no plans 5% Do not know 32% 2008 Océ 9

10 6. Implementing a comprehensive records management program represents a major opportunity for many organizations. Almost half of the corporate counsel respondents (46%) say their company does not have a fully implemented records program. This contrasts with law firm attorneys, the vast majority of whom (82%) feel it is important for their clients to have a records management program. In fact, the majority of law firm attorney respondents (64%) say their own firm has a records management program in place. In-house counsel: Does your organization have a fully-implemented records management program? Yes No Yes 54% No 46% Law firm counsel: In order for your clients to be well prepared for discovery, how important is it that they have a records management program in place? Not important Neutral Important Not important 5% Neutral 13% Important 31% Very important 51% Very important 2008 Océ 10

11 7. Organizations are getting the message about the importance of records management. The good news is that most corporate counsels say their company is planning to implement a records management program within the next year. Organizations surveyed seem to be getting the message about the importance of records management programs. Of the corporate attorneys indicating their company does not have a fully-implemented records program, 75 percent say their company plans to implement one within the next year. In-house counsel: When does your organization plan to implement a records management program? Within the next six months Within the next year Organization has no plans Do not know Within the next six months 40% Within the next year 35% Organization has no plans 10% Do not know 15% 2008 Océ 11

12 8. Companies ahead of the curve are using their records management programs for important business functions. Of corporate attorneys who say their organization does have a records management program, a majority indicate that their company s program includes a number of important business functions such as archiving and periodic compliance auditing. In-house counsel: Which of the following are included in your records management program? archiving system Records retention schedule Full-time records management employees Periodic compliance auditing Document management software File-tracking software All of the above archiving system 72% Records retention schedule 64% Full-time records management employees 40% Periodic compliance auditing 60% Document management software 40% File-tracking software 36% All of the above 36% 2008 Océ 12

13 9. Companies ahead of the curve are gaining important business benefits from their records management programs. In addition to using records management programs for key functions as periodic compliance auditing, corporate attorneys indicate that their company s program is also yielding important business benefits. In-house counsel: To what extent do you agree that your organization s records management program provides the following business benefits? Helps locate responsive materials more quickly Enables business records to be retained for the appropriate period of time KEY: Agree Strongly Agree Establishes a consistent process for the timely distribution of documents Facilitates implementing the duty to preserve Lowers risk in the form of penalties, sanctions and damage to reputation Response Agree Strongly Agree Helps locate responsive materials more quickly 60% 8% Enables business records to be retained for the appropriate period of time 60% 16% Establishes a consistent process for the timely distribution of documents 52% 12% Facilitates implementing the duty to preserve 40% 20% Lowers risk in the form of penalties, sanctions and damage to reputation 52% 20% 2008 Océ 13

14 10. In-house is clearly in charge versus using a service provider or law firm when it comes to managing key data/document processing functions. To more effectively deal with ediscovery-related issues, corporate counsels say that their organizations are taking a more hands-on approach to litigation management, particularly when it comes to managing data/document processing functions such as collecting paper documents (87%) and electronically stored information (87%). However, many organizations do use law firms and service providers for specific processing functions. In-house counsel: For which data/document processing functions do you use a service provider, a law firm and/or manage in-house? Collecting paper documents Collecting ESI KEY: In-house Law firm Service provider Processing ESI Search and review Computer forensics Database hosting Production to requesting party Response In-house Law firm Service provider Collecting paper documents 87% 13% 10% Collecting ESI 87% 13% 18% Processing ESI 79% 13% 26% Search and review 76% 26% 24% Computer forensics 49% 6% 46% Database hosting 66% 9% 31% Production to requesting party 54% 43% 19% 2008 Océ 14

15 11. In-house is also in charge on the decision to hire a service provider to manage specific data/document processing functions. Since a significant number of corporate attorneys specify that their organization uses a service provider to manage data/document processing functions including processing ESI, search and review, computer forensics and database hosting, we asked them who decides to hire a service provider. Again, in-house is clearly in charge when it comes to deciding, although a number of organizations collaborate with their law firm. In-house counsel: Who decides to hire a service provider to manage the following data/document processing functions for your organization? Processing ESI Search and review KEY: We decide Our law firm decides We collaborate with our law firm Computer forensics Database hosting Our law firm We collaborate Response We decide decides with our law firm Processing ESI 72% 8% 20% Search and review 70% 3% 27% Computer forensics 67% 6% 27% Database hosting 76% 3% 21% 2008 Océ 15

16 Conclusion Taking on the Records Management Challenge The findings in this report suggest that at least two critical actions establishing ediscovery expertise and implementing records management programs are necessary in order to be ready for the litigation-readiness challenges ahead. Records management in particular continues to be a major issue as originally spotlighted in our 2007 Discovery-Ready Enterprise survey. This year s survey reveals that organizations are still grappling with the records management challenge. A sizable number of corporate counsel survey respondents (46%) assert that their organization does not have a fully implemented records program. The vast majority of law firm attorneys surveyed (82%) specify that they feel it is important for their clients to have a records program in order to be well prepared for discovery. Lack of a records program or an inadequate program can cause a company to falter in the face of litigation involving large document reviews. Specifically, when litigants are unable to search, review and provide responses to requests for electronic data or otherwise miss discovery deadlines, courts will not hesitate to issue adverse rulings and jury instructions which can create serious disadvantages and may ultimately determine the outcome of a matter. There is some good news on the records management front: corporations seem to be getting the message. In last year s survey, of the organizations reporting that they did not have a fully implemented records management program, 56% said they plan to implement one within the next year. In this year s survey, 75% of the organizations without a program assert that they will implement one within the coming year. Taking on the ediscovery Challenge It is clear that a significant number of organizations surveyed (42%) also are facing challenges when it comes to establishing internal ediscovery processes and technology. Reasons for their inaction include the view that establishing such processes takes too much time away from case- and business-related matters, is potentially too expensive and risky, and poses too much difficulty in keeping the systems current. Despite these considerations, a majority of in-house attorneys (63%) indicate that their organization is getting ready to meet the ediscovery challenge and establish internal processes or technology in the next six to 12 months. Another trend revealed in this year s survey is that corporate counsel seems to be taking a more hands-on approach to litigation management, particularly when it comes to electronically stored information (ESI) and other data/document processing management functions Océ 16

17 Survey respondents clearly indicate that in-house is in charge with respect to managing these functions versus using a service provider or law firm. This is particularly the case in such areas as collecting paper documents (87%), collecting ESI (87%), and processing ESI (79%). However, organizations are tapping law firms for specific functions as production to requesting party (43%), and service providers for functions such as computer forensics (46%). The Discovery-Ready Enterprise Although implementing an effective records management program and establishing internal ediscovery capabilities are critical steps to take on the road to litigation readiness, being a discovery-ready enterprise incorporates these and other strategies in an integrated approach that has a key distinguishing feature. This feature is shifting from a largely reactive response to taking action to achieve superior improvements in discovery preparedness. To accomplish this, organizations are implementing new methodologies such as a forwardthinking solution that Océ Business Services terms a Unified ediscovery Platform. This unified approach recognizes the interconnectivity of records, paper and electronic discovery, and compliance processes. Companies ahead of the curve are acting now to better manage electronic documents and prepare for electronic discovery. Any enterprise not taking such timely, effective action to reduce exposure and gain better control of its ESI will fall behind evolving best practices. A unified, proactive approach to discovery and records management no longer appears to be an option, but a critical element of corporate governance Océ 17

18 THE DISCOVERY-READY ENTERPRISE DEFINED Organizations become discovery-ready by shifting from a largely reactive response to taking action to achieve and sustain superior improvements in discovery preparedness and processes. To accomplish this, they implement unified systems, policies and programs to manage records, discovery and compliance. As a result, they significantly reduce costs, save time, mitigate risk, protect corporate reputation and improve their ability to work with regulators, auditors and courts. METHODOLOGY EXECUTION INTEGRATION INFRASTRUCTURE A unified approach that recognizes the interconnectivity of records, paper and electronic discovery and compliance processes. Proactive, systematic management of records retention, archiving and disposition and repeatable discovery processes. Effective integration and coordination of people, processes and technologies to enable enterprise readiness. Investing in technologies and techniques that save time and effort, reduce costs and risk and increase effectiveness. Océ Business Services 2008 Océ 18

19 Advancing document process management to a higher level Océ Business Services, Inc. is one of the world s leading providers of document process management services and technology to law firms, corporations and the public sector. Its spectrum of managed solutions spans the document lifecycle. These include print/copy, fleet, mail services, Six Sigma -based performance management, records management and ediscovery. Océ Business Services is one of the most experienced providers of ediscovery, paper discovery, forensics and web-based review services for complex litigation and regulatory compliance matters. Océ Business Services integrated capabilities allow it to serve enterprise-wide requirements with advanced technology, people and processes. By enabling organizations to manage and control document assets, Océ helps reduce costs, increase efficiency, mitigate risk and introduce innovation. Océ Business Services 460 West 34 th Street, New York, NY Document Process Management Create Distribute Print Access Archive 2008 Océ. Six Sigma is a registered trademark of Motorola.

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