ADVICE FROM COUNSEL: AN INSIDE LOOK AT STREAMLINING E-DISCOVERY PROGRAMS

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1 WHITE PAPER ADVICE FROM COUNSEL: AN INSIDE LOOK AT STREAMLINING E-DISCOVERY PROGRAMS By Ari Kaplan, Principal, Ari Kaplan Advisors

2 EXECUTIVE SUMMARY In the fall of 2011, 31 inside counsel were interviewed for their advice to peers on streamlining and reducing the cost of e-discovery. The majority of these individuals worked for Fortune 1000 companies and all had e-discovery responsibilities. While the advice ranged from key considerations for selecting software and services, to thoughts on the latest e-discovery buzzwords and trends, comments focused on four key areas: SETTING UP AN EFFECTIVE E-DISCOVERY PROGRAM Where does one begin? Respondents advised their peers to develop a strategy in advance, test it in practice, and conduct Six Sigma in order to continuously improve the process. Other tips included developing a data map and designing policies around information governance including retention and destruction. For selecting software and services, respondents advised focusing on offerings that are defensible, cause minimal disruption to the business, are easy to use and deploy, and are from financially strong companies. Always keep in mind that you may need to defend your e-discovery process, and be sure to measure your costs so that you have a target to measure year-over-year cost savings. PREDICTING COSTS AND MEASURING SAVINGS To reduce costs, key takeaways were to work with your adversary to try to reduce the amount of data in play, and if possible, bring some software and staff in house. The early case assessment (ECA) process, as well as advanced technology such as clustering or predictive coding, can help reviewers be more efficient and get to important information faster. Respondents had various levels of transparency into their e-discovery costs and savings, as well as different metrics for calculating costs and savings. These metrics ranged from using low-cost reviewers with negotiated per GB fees, to understanding the average cost to review and produce a custodian s data. NAVIGATING MULTICHANNEL CHALLENGES Given that the vast majority of respondents worked for Fortune 1000 companies, the majority handled multinational matters. Germany and the UK were most frequently listed as collection points in the EU. To comply with European data privacy laws, respondents worked closely with local counsel and either attempted to gain employee consents, or kept the data in the country for processing and review. A number discussed working with global service providers to ensure compliance with data privacy, and listed multinational capabilities as a key consideration for selecting a service provider. TECHNOLOGY ASSISTED REVIEW Review is the most expensive part of e-discovery, and due to the growth in data volumes and number of matters, about half of the respondents expressed openness to advanced tools such as predictive coding for automating legal review, especially around tiering, prioritizing and sampling data. The other half of respondents were either hesitant to use predictive coding because of defensibility concerns, or believed that predictive coding was essentially a new sales gimmick for search technology. The full Advice from Counsel report summarizes these findings in greater depth. It also discusses other best practices and advice from leading e-discovery practitioners. 1

3 INTRODUCTION For the third year in a row, FTI Technology commissioned a survey of corporate counsel, asking their advice for peers setting out to implement cost-effective and defensible e-discovery programs. Their detailed, and occasionally passionate, comments reveal a rise in the level of understanding and focus on e-discovery, as well as the sweeping impact of its management. As in past years, there was consensus on many topics and discord on others, despite the fact that for the first time, 100% of the respondents were in-house counsel (as opposed to a small number of IT or litigation support titled participants in prior years). This report summarizes the top areas of agreement, as well as key issues of contention, with the goal of summarizing best practices for counsel to streamline e-discovery and reduce its overall cost. PARTICIPANTS We interviewed 31 in-house legal professionals with responsibilities that included e-discovery. The participants were primarily from Fortune 1000 corporations and were interviewed by telephone, under condition of anonymity between September and November % select e-discovery tools and vendors; 97% implement e-discovery tools; 93% manage e-discovery tools and vendors; and, 90% develop and implement e-discovery processes. In what can likely be attributed to the maturity of the e-discovery market and a greater appreciation for its impact on an entire organization at its highest levels, the results of this study reflect the largest number of corporate counsel over the past few years, up from 72% in 2009 and 97% in i Almost a third of those interviewed were the general counsel or chief litigation counsel for their organizations and, in an interesting trend, 13% of the participants were specifically tasked with supporting discovery in their job titles. Just two years ago, more than a quarter of the participants were project managers or responsible for records, IT security, strategic sourcing, or contracts. 74% of participating organizations had total annual revenues greater than $10 billion as compared to 53% in 2010, and 81% worked at a company with over 10,000 employees versus 73% in % reported managing more than 500 litigation events in the past twelve months, up from 37% in Participants E-Discovery Responsibilities 90% Develop & Implement E-Discovery Processes 93% Select E-Discovery Tools & Vendors 97% Implement E-Discovery Tools 93% Manage E-Discovery Tools & Vendors 2

4 By industry*: 32% manufacturing 23% financial services industry, including banking and credit institutions, as well as insurance companies 16% life sciences 6% telecommunications 6% retail 6% technology 3% energy and utilities companies 3% transportation 3% construction *Note: Figures do not total 100% due to rounding. Retail Telecomm. Life Sciences Participants by Industry 3% Energy & Utilities 3% Transportation 3% Construction Technology 6% 6% 6% 16% 32% Manufacturing 23% Financial Services Participants by 2010 Total Annual Revenue 2010 revenues: $1-5 Billion 6% Under $1 Billion 74% had total annual revenues greater than $10 billion 10% had total annual revenues between $5 billion and $10 billion 10% had total annual revenues between $1 billion and $5 billion 6% had total annual revenues under $1 billion Number of employees: 81% worked for a company with over 10,000 employees 13% worked at companies with 5,000 to 10,000 employees 3% worked at companies with 1,000 to 5,000 employees 3% worked at companies with fewer than 1,000 employees Number of litigation events in the past 12 months: 10% reported over 2,000 litigation events 3% reported between 1,000 and 2,000 litigation events 32% reported between 500 and 1,000 litigation events 39% reported between 100 and 500 litigation events 13% reported fewer than 100 litigation events 3% did not know the number of litigation events $5-10 Billion 5,000 to 10,000 Employees 10% 10% 74% Greater than $10 Billion Participants by Number of Employees 3% 1,000 to 5,000 Employees 13% 3% Fewer than 1,000 Employees 81% Over 10,000 Employees Participants by Number of Litigation Events in the Past 12 Months Fewer than % Over 2,000 39% % 3% 1,000-2,000 3% Did not know 32% 500-1,000 3

5 KEY ADVICE FOR NAVIGATING THE CHANGING E-DISCOVERY LANDSCAPE Participants Year-Over-Year E-Discovery Techniques The key conclusion from this year s report is that e-discovery is no longer a specialized skill, but a process in which every legal department must be versed. As one respondent stated, It is your duty to handle your litigation properly and to understand the law and your litigation. Simply put, the lawyer recommended that peers Try to get smart in-house. This year s respondents had all considered their e-discovery protocols and engaged their internal teams in a robust evaluation of their strengths and weaknesses. They were all fairly familiar with their options and provided a wealth of resources in each discussion. Many referenced core principles of document management as the foundation for effective practices, and others found success with new technology. 70% 81% % 52% Brought software in-house to reduce law firm or service provider fees Brought staff in-house to reduce law firm or service provider fees The study participants all shared frustrations with respect to cost, reduced resources in the sluggish economy and an overwhelming rise in information management responsibilities. Statistically, however, in-house counsel are incorporating similar techniques year-over-year: 81% brought software in-house to reduce law firm or service provider fees, up from 70% in % brought staff in-house to reduce law firm or service provider fees, up from 50% in % conducted an early case assessment to possibly resolve a matter earlier, consistent with % utilized visualization or clustering tools to speed the review, down slightly from 34% in % utilize contract attorneys for legal review, down slightly from 77% in % utilize managed service providers for legal review, up slightly from 37% in % 87% Conducted an early case assessment to possibly resolve a matter earlier Utilized visualization or clustering tools to speed the review 34% 32% That said, they shared their most potent techniques and best practices below: 1. Measure twice and cut once. 77% 71% Utilized contract attorneys for legal review For the past few years, this report has shared many pieces of advice, but due diligence is the most recurring theme. Despite the maturity of the e-discovery industry, Most attorneys don t really know much about the process of selecting a vendor, implementing a tool, and making sure the technology works, said one in-house lawyer. Start by discussing strategy with your colleagues and trade notes, the lawyer advised. Select the number of vendors you want to meet and based on their Utilized managed service providers for legal review 37% 39%

6 presentations, run a detailed process whereby you test the vendor, the lawyer added. We know the litigation will be expensive anyway, so shop around, said another. A few areas emerged as the focus for research and planning: Pricing: The consensus was that those responsible for purchasing should not jump at the first, or cheapest, vendor. Sometimes a more expensive piece of software works better and is more efficient, said one participant. Another added that It is much more important to get a quality product. Reducing data: Try to reduce the amount of data that comes into play in the matter by working out an agreement with an adversary on what search terms would be applicable and the number of custodians from whom you need to collect. Don t assume that you need to collect the world and do your analysis to reduce the universe, remarked one participant. Processes: A key theme shared by this year s participants was that knowing is the precursor to winning. When you look at all the events where the costs go haywire, it is usually when you are caught unprepared and must use an unfamiliar technology or organization, noted one in-house lawyer. You tend to spend a lot of money in the heat of the battle, the lawyer added. As a result, organizations should conduct planning and develop a strategy that one can proactively apply, rather than reactively create. Legal review: Since most of the cost is a result of attorney review, Make sure that your outside firms are not using associates for first level document review, said one lawyer. And, in a continuing theme of this year s respondents, look for alternatives. There has been significant advancement on artificial intelligence to reduce the amount of information for attorney review, the lawyer added. While a number of respondents indicated that there is no one size fits all approach, many indicated that understanding individual company protocols, litigation profiles and in-house resources, with a special emphasis on legal review, was a good starting point for developing the right processes and selecting the appropriate tools to handle e-discovery. As summarized by one counsel, We have been taking a comprehensive look at our litigation needs and whether we have a methodical approach to managing in this space, but if you don t have a strong framework or guidepost and don t have an understanding of what is acceptable, then that is a problem. 2. Work with someone who has a track record. Because e-discovery is a lengthy and complex process, respondents spent a considerable amount of time discussing resourcing options. The general consensus was that law firms provide valuable legal advice, but for those corporations that can t handle the whole process in-house, they may be better served with an experienced third-party provider to help with e-discovery. Many respondents discussed how partnering with outside third-party experts can reduce costs and free up in-house resources. As an example, one lawyer highlighted, I prefer to pay a vendor and pay the up-front costs to get my ducks in a row rather than use our limited staff. You will be in a better position at the end of the day if you pay someone up front to have an experienced outside vendor to scan and code for easy search capabilities, than if you put it off and try to do it yourself, advised another. E-discovery service providers can also provide expertise in defensibly handling unusual or new challenges, such as global data collection in adherence to local data privacy laws, or collection from the cloud. 5

7 For others just beginning e-discovery, advice ranged from running a detailed process whereby you test the vendor, to using contract reviewers to handle first-pass review. Whatever the level of third-party support, experienced providers can ensure that your program adheres to best practices that help avoid budget surprises or quality issues down the road. When selecting a legal service provider, consider the provider s ability to handle smaller matters, such as internal investigations, up to more complex, possibly international litigation. 3. There is no upside to selecting the shiniest thing that is waved before you. People spend a lot of money on tools and think that buying the magic box will resolve all of their challenges in this space, which is not true. A tool will probably put out the fire, but it will not resolve your broader issues. Technology plays an important role in streamlining e-discovery and reducing its overall cost, agreed the respondents, but there exists a healthy amount of skepticism about technology s ability to solve the e-discovery problem. People get too caught up in the technology aspect of it, but at the end of the day it is discovery and you have to have your legal strategy thought out while using these tools to implement it, said one lawyer. Make sure you have a well-developed process framework, otherwise you can buy a tool with a scattershot approach and then you are just retrofitting or bolting something on rather than changing the way you are doing business, which is important, said another. People spend a lot of money on tools and think that buying the magic box will resolve all of their challenges in this space, which is not true. A tool will probably put out the fire, but it will not resolve your broader issues, added a third. Hundreds of competing (and overlapping) tools exist to handle the e-discovery process from information management to production. As with selecting a third-party provider, counsel advise their peers to fully understand their own requirements first, then select the tools that best meet those needs. Selecting tools that do more of the process on one platform can help reduce costly hand-offs. And as with legal service providers, respondents recommend working with software with a proven track record and companies with strong long-term viability. 4. Hire an e-discovery manager. As in past years, the theme of hiring an e-discovery manager continued to grow, and many were now able to prove significant cost savings as a result of this hire. I can definitely say that I have saved the company a ton of money and it has made the company more effective in responding to appropriate issues, said one respondent. Another added that You must have an internal dedicated resource and understand your own data, e.g., where it lives, who has it and generally all the places data could be, before determining what you need to do to govern it. Interestingly, many organizations have elevated that role to a legal position, rather than one performed by a support professional. As one in-house lawyer serving as the company s e-discovery czar said, It is a role that needs attention and expertise that is developed along the way. 6

8 5. Quite simply, less is more. A key area where in-house e-discovery teams are making an impact is in archiving, data retention, and general records management. By developing policies, and sticking with them, companies are realizing cost savings. The most important thing for us has been to put into place a good robust archive system because so much of this is still about , summarized one lawyer. You should have a destruction program as well as a retention program, said another. If you have as strict a process as possible on the records management side, the rest of it becomes that much easier, advised a third respondent. Other key themes relating to records management included: Know where your data is. Take a hard look at your record creation, maintenance and storage systems. Simplify them to the extent possible before you start to create a process to put litigation holds in place. Once you have done that, create a data map. Those are the things that will save you the most time and money. Limit employee use of external tools in which you don t manage the data. Exercise as much control over your data as possible; to the extent you can keep your data within your four walls the better off you are because the more you allow your employees to use your tools that are not standard in the company, the less control you will have of your data. 6. It comes down to the quality of leadership. Relating to the theme that there is no one-size-fits-all approach, at the end of the day, companies have to make their own processes and stick with them. Oftentimes, this includes tough decisions on a range of issues, from retention and destruction policies, to negotiations with opposing counsel. As a result, respondents stressed the importance of leadership to the e-discovery process. It comes down to quality of leadership, a keen understanding of process management and how one can improve processes over time through six sigma, highlighted one legal executive. It is more about the quality of the leadership and the ability of the people applying the tools and services, the lawyer added noting that his organization s biggest thrust has been to consolidate e-discovery into a team drawn from within its talent pool to ensure that outside firms and e-discovery suppliers adhere to an internal process for completing e-discovery projects. The mere process of delegating leads to inefficiency, inconsistency and a lack of standardization because every law firm has a well-intentioned but different approach. Lawyers need to have a basic understanding of e-discovery to use it well enough to supplement their legal strategy rather than let e-discovery take over the process, suggested another respondent. With so much media and data, you have to defend what you didn t do as well and why. 7. Talk with people in the field and trade notes. While e-discovery is difficult, respondents stressed that inside counsel at any one company are not alone in this endeavor. One noted, Ask people at other companies Go out and observe what happens in a large scale review. See how others are doing it. 7

9 If I were to direct someone to one pressure point for e-discovery cost containment it would be to attorney review. who are faced with the same or similar challenges in confidence how they manage, lessons learned, tools and service providers they considered, liked and disliked. The more people you can ask and speak to, the easier it is to tackle key challenges. Another advised, Make sure you chat with your peer companies in general because every company is different, but you need to pick and choose procedures and tools that are right for your organization. A third explicitly suggested, Go out and observe what happens in a large scale review. See how others are doing it. From conference panels, to case studies, to participation in this annual e-discovery survey, counsel seem increasingly more willing to talk in detail about their e-discovery programs than in past years. If possible, take advantage of this trend to weigh your options before implementing a program. You want your process ultimately to have one throat to choke and the more complicated you make it, the more difficult it is. 8. First pass document review is the easiest initial avenue for cost savings. A big majority named legal review the most expensive phase of e-discovery, and respondents provided a wide range of options to help reduce the cost. These included: Use contract or temporary attorneys for first pass review. Most of the cost is involved in attorney review. Put an emphasis on controlling attorney review processes and making sure that not only are firms not using associates for first level document review, but to get a good handle on what companies are providing temporary attorneys by shopping around for best rates and performance. If I were to direct someone to one pressure point for e-discovery cost containment it would be to attorney review. Technology can help. There has been significant advancement on artificial intelligence (e.g., the Attenex legal review software) to reduce the amount of information for attorney review. Consider outsourcing to reduce cost and project management woes. An internal tool may help with costs, but there are a lot more places where the human interface can go wrong it is unclear whose responsibility it is to get a certain thing done. You want your process ultimately to have one throat to choke and the more complicated you make it, the more difficult it is. Keep track of metrics, including how much volume you are doing, review time being spent, and money you are spending. Another interesting piece of advice related to keeping metrics of your program to help determine cost savings. As one survey taker stated, Keep track of metrics, including how much volume you are doing, review time being spent, and money you are spending. With all of the different pricing models that are out there, you can only identify savings if you have a handle on metrics to compare options. 8

10 OBSERVATIONS As e-discovery programs and the understanding by in-house counsel of the options have become more sophisticated, the answers to the survey questions have grown more detailed than in previous years. As a result, a number of interesting and surprising trends emerged while examining year-over-year changes in answers. Key trends include: COMPANIES ARE MORE FAMILIAR WITH HOW THEY ARE SAVING. For the past few years, survey participants have had difficulty determining what they spend on e-discovery and how much they save by implementing certain cost savings strategies. This year, while 58% still could not provide any approximate measurement of their organization s potential cost savings, many remained convinced that their actions were having a positive impact. That is a dramatic increase from previous years: 2010 only 40% measured their savings in any meaningful way; In 2009, 34% had done so. The first step in this calculation for most organizations surveyed seemed to be simply comparing the cost of reviewers. One in-house lawyer who could not quantify the legal department s cost benefits noted, We measure the savings in terms of using temps and paying X dollars versus law firm associates at Y dollars. Savings ranged from several hundreds of thousands of dollars to millions by making this change. Some were more methodical and determined the percentage that their discovery costs for vendors and outside counsel review consumed of the legal budget. One identified all of the tasks involved in collecting, reviewing and producing data from a single custodian using annual averages with current processing costs and assigned a price for in-house versus a law firm. Then it determined the average number of custodians for an average case and the total number of cases that reach the production stage each year. The cost savings for this company was approximately $24 million per year. Another brought their processing in-house and compared what they spent on software to the market per GB price multiplied by the amount of data they processed. The company realizes a savings of $2 million per year. And, some simply determined that by not spending on certain items, they were achieving substantial results. One noted, We estimate savings at $3 million annually in cost avoidance because we in-sourced where the company could, so we did not repetitively spend with outside vendors was the first full year when many organizations could compare figures for One company reported that the legal team has saved in the ballpark of $15 million since it began measuring costs in A number of companies also apply e-discovery tools to litigation as well as to regulatory and compliance matters in an effort to leverage any strength in data management across different groups. If you build this capability, it should not apply only to litigation because you are never going to get the value in money that you have expected unless you extend it out of that, said one lawyer. 9

11 In its year-over-year analysis, which another company also began in 2008, it reported saving 60% by negotiating increasingly favorable per gigabyte (GB) processing rates. A different company reported that by assigning certain tasks to in-house paralegals and to a small firm in a smaller city than its headquarters, it achieved 20% in savings. Another highlighted it achieved about 30% in cost savings by using a managed review service rather than using law firm resources for review. For some, the cost savings were secondary. I am more concerned with meeting our obligations; the cost savings will happen over the long term, the lawyer said. Discovery and e-discovery related costs are usually half of the litigation budget. BUDGETING IS STILL A CHALLENGE. While many companies are still struggling with determining exactly how much they are spending on electronic discovery, 61% of the respondents were able to estimate their total spending on electronic discovery. The totals ranged from under one hundred thousand dollars to tens of millions. 42% of the respondents noted that they have a tool to preserve or collect data from the cloud or social media. Some simply calculated the license fees they pay for software in addition to certain review costs paid to contract lawyers. Others knew the exact percentage of their total legal budget, or the salary paid to a full-time e-discovery IT manager. One advised, Discovery and e-discovery related costs are usually half of the litigation budget. While the majority of respondents were able to determine how much they spend on e-discovery, only 29% could predict with any amount of certainty how much they spend on e-discovery for any given case. Many attributed this uncertainty to factors that include lack of familiarity with the total number of documents or the actions of the adversary. Even those who claimed to be able to predict offered a formula of some type: Cost per custodian multiplied by the total number of custodians, said one. Generally, I know which will cost a lot and which will not. DATA IN THE CLOUD IS NOT PIE IN THE SKY. 42% of the respondents noted that they have a tool to preserve or collect data from the cloud or social media. A few use internally developed tools, but many noted that It is on the horizon and is an interesting question, or We are looking at that on a case-by-case basis. I think cloud computing is the wave of the future, said another lawyer. An even higher 52% noted that they would be considering cloud offerings for their e-discovery process in the future, which is up from 47% in Unlike some of the other cost savings strategies, there was a sense of inevitability for cloud offerings. Everyone will move on to the cloud at some point, said one participating lawyer. Everyone will move on to the cloud at some point. 10

12 The enthusiasm for cloud computing aside, the following concerns about the cloud resonated: It seems new and may require more management time to ensure we know what we are doing. Security is the issue. There is a concern about confidentiality. We are not quite there yet in terms of comfort with it; looking at it as a way to manage cost. It seems too new and embryonic to jump into it at this stage. All of these developments outpace court rulings so the courts are in a perpetual state of catch-up; until we see clearer guidance, we would prefer to wait. One in-house lawyer noted that all of its organization s review applications are hosted in the cloud because it: (1) does not trust its internal Information Security (IS) department to support the tool; (2) wants to eliminate on site support because of its limited resources; and (3) needs to remain in a position to take advantage of new features as they are released. Ultimately, If it solves the problems associated with human review and the inability to limit the number of relevant items, the general counsel would be very receptive to it, remarked another. There will be a time where we as a profession will be comfortable with the idea that a computer can do as good or a better job at reviewing material. PREDICTIVE CODING HAS PROMISE, UNCERTAINTY AND DOUBT. In what one respondent called the new buzz, predictive coding has promise, and that potential has captured the attention of the in-house legal community. 81% were familiar with the term and many had a positive view. One participant noted, We are very interested in that, and a few have even tested it. That number may not be surprising given that an overwhelming 90% responded that review is the most expensive stage of e-discovery, followed by collection (42%) and processing (26%). Some were even zealously awaiting its mainstream application. We would consider it because it could save people costs and automate, which would be cheaper than to manually do it. Most are still, however, reluctant and are only interested If using that technique would be equally defensible, faster and cheaper. Ultimately, one lawyer summarized the global view of the majority of respondents: The company is looking at it for future use as I think that is where things will be headed generally. There is an expectation that the rising expense of document review will force some type of move to justified automation. There will be a time where we as a profession will be comfortable with the idea that a computer can do as good or a better job at reviewing material, confidently advised one senior lawyer. Overall, 55% would consider predictive coding, but defensibility seems to be the greatest perceived stumbling block. That point was debated in the various comments the participants shared. One highlighted that It is a great tool for tiering, prioritization and sampling, but I am skeptical about its use for final review or justifying to a judge as to why a document was included or not. Another seemed more positive noting, We would consider because of the possibility that it appears to be more easily defended; since it appears to be as reliable as human review, the cost savings component is a significantly attractive feature. 11

13 Some of the other concerns were: We are a little bit hesitant around it because of the courtroom challenges we anticipate. We are not considering it because I don t think the gains from predictive coding are much better than those achieved with well-crafted search so the premiums that are being applied are not appropriate. It is somewhat of a sales gimmick. It is basically using search terms, but they fancy it up. Many companies are struggling through it and there is a very real possibility of getting to one of these offerings, but until we get to clarity, we are not there yet. One in-house lawyer summarized what seemed to be the collective view with this comment: We have seen the accuracy rates, which are probably about the same as with the normal process, but the question is whether or not we want to bet the farm on that. Another trying to creatively find a way not to bet the farm while taking advantage of the perceived benefits of the technology predicted the short-term direction for possible use to overcome some of the concerns: There is a difference between using it for investigation versus production because it can quickly steer you towards relevant data. I believe that those early analytics are definitely being more accepted now by courts, that lawyer added. Ultimately, the overall impressions of predictive coding are positive and the increased concern for cost control seems to be helping to drive its momentum. A company almost has to consider every option at this point. We have always assumed that the best way to review documents is by human review, but the studies regarding the human error rate in document review are fascinating; computers are no worse than people. MULTINATIONAL LITIGATION IS PREVALENT AND REQUIRES LOCAL SUPPORT. 55% of respondents acknowledged their company s involvement in multinational litigation or investigations. Germany and the United Kingdom were the most frequently named countries from which data was collected in Europe, followed by France. There were a number of references to data collection in Asia, with specific experiences in China, Japan, Korea and Taiwan. Brazil, Canada, Mexico, India, Pakistan, and Russia were also records-rich locations. It s much more important to get a quality product; cost is a factor, but not the driving factor. In terms of privacy, most noted that the company s local counsel managed the issues directly and obtained specific consent from the relevant employees. Local counsel also identified how the documents would be used in adherence with the processing rules in each country. It was an added layer of diligence, but we managed, noted one lawyer. Another solution was to engage vendors capable of locally hosting the data at issue. We managed privacy by using consents or not taking data out of the country, said a second participant. In terms of the value of a service provider s international capabilities and experience, 35% considered this important, which is an increase of 5% from % considered multi-lingual features in software to be important or most important on the same matrix, which is down from 44% in

14 COST IS THE TOP FRUSTRATION, THOUGH NOT THE MOST IMPORTANT FACTOR. Cost continues to drive conversations about e-discovery. Whether it is about review, outside counsel, or budgeting, the issues often relate to spending. In fact, 94% rated cost as frustrating while 55% cited it as a very frustrating aspect of e-discovery. Many respondents reported developing an overall case budget, but noted that cost is not a serious pain point. High costs are just the price of doing business; our goal is to reduce them, said one lawyer. There is, however, an expectation that costs will continue to fall, but they do not always follow a predictable pattern. You feel like this is a race to the bottom, but the new miracle technology often costs as much as the last miracle technology, one participant added. Still, There are other things that frustrate me a lot more; cost is an accepted issue and you cannot get around it. In fact, when asked to rate various factors in order of importance when selecting e-discovery software, for example, only 23% ranked cost as most important, while 68% rated defensibility as most important, followed by minimal disruption to normal business process (35%) and integration with existing applications (32%). A greater number of people rated ease of deployment (26%) as more important than cost. The number of individuals who rate cost as most important when selecting an e-discovery service provider was slightly higher at 32%, but it was still far below the leader: defensibility at 68%. Realistically, we know that things cost a lot of money, highlighted one lawyer. I m bombarded with industry articles about the exploding e-discovery cost and from my vantage point, it hasn t been as bad as the sky is falling message that we get, the lawyer added. Many seemed to have determined that cost is a justifiable expense over the long term. Costs tend to even out; sometimes a more expensive piece of software works better and is more efficient, said one participant. Cost is an important consideration, but it is not always at the top of the list. Another individual echoed that comment with It s much more important to get a quality product; cost is a factor, but not the driving factor. Ultimately, the majority of participants remarked that defensibility is more critical than cost. There is elasticity in the cost structure because you cannot have a non-proven defensible solution, noted one in-house attorney. If it is not defensible then it is not worth it at all, added another. That said, in 2010, 74% rated cost as generally important when selecting software (as opposed to most important ), but this year 97% designated it as important. This jump may be from expectations that costs would fall faster than they have. Close behind cost in frustration was noise or hype from an overcrowded software and services market, which 77% identified as frustrating, with 35% characterizing it as a very frustrating aspect of electronic discovery. After all, Everyone has a miracle solution, remarked one respondent. 13

15 The reason for the frustration level seemed to be the result of two issues. First, certain vendors may be pitching the wrong organizations or the wrong people within those organizations. I spend a lot of time taking calls from vendors and explaining that we don t generally need their services, said one. There is a lack of understanding on the part of those charged with selling e-discovery products about what an in-house litigation professional actually does, noted another. Second, many make similar claims. It is frustrating because there are so many people who seem to say they can do the same thing, remarked another lawyer. The reality is that I don t think that many people can do the job right; it normally comes down to the same two or three vendors performing the service. Still, there are supporters. The vendors in the marketplace have done a good job honing their message and explaining what they do well, highlighted one participant. UNANSWERED QUESTIONS JUDICIAL GUIDANCE As in the past few years, the respondents debated the nature of judicial guidance on e-discovery. 81% said it was frustrating, while 16% characterized it as very frustrating. I don t think the judges have dealt with modern e-discovery issues and understand the issues modern companies face, said one lawyer. I think there is some clarity being developed, but it is not particularly interesting or helpful, noted another. Others simply disregarded any perceived confusion. In fact, 19% did not find the lack of judicial guidance frustrating. I think the rules are basically the same for e-discovery and paper discovery; there is nothing new under the sun, remarked one lawyer. Of the things that frustrate me about e-discovery, lack of guidance is not high up there, said another. Many noted the flexibility from the courts recognizing the many acceptable ways to handle electronic discovery as long as relevant information is being located and produced. They also highlighted the flexibility of the courts, particularly with respect to new technology. Some key comments included: It can vary from judge to judge, but for the most part, judicial guidance has been pretty good. Things are better now than three or four years ago because the judiciary is more engaged. I m surprised at how good it is. Courts seem to be trying to stay out in front of it. I think the judicial guidance is coming out a bit more often and improving. Others were not as positive: The general body of cases is focused on what was done wrong as opposed to what was done correctly. Some of the guidance is lousy and some is simply murky. I think judges getting involved in providing guidance has been a negative; they end up causing lurching movements of technology and cost in different directions. 14

16 One participant summarized the future: At some point, all of the judges will defer to a set of standards from Sedona. It is not a core competency for judges or lawyers so we should let IT professionals come up with something to follow. Whether that comes to fruition is as uncertain as the direction in the next e-discovery opinion. PROJECT MANAGEMENT With efficiency serving as a key goal for most organizations struggling to balance resources in the down economy, project management is likely to become a more important issue. In fact, 65% of the respondents find the complexities associated with project management frustrating. We are beginning to get a handle on it, but this is not what everyone went to law school to do, admitted one participant. In fact, one lawyer noted that while law firms will take direction if in-house teams properly provide it, he admitted, If we have a problem, many times it is our own creation because of mismanagement of the project by outside counsel. If we are on top of it, it runs according to plan, the lawyer added. Others claimed to be guiding projects effectively and encouraged their peers to build the capabilities. After you get a rhythm down, it is manageable. That said, there is likely to be a greater emphasis on project management in

17 STUDY RESULTS As part of the survey, respondents were often asked to rate certain criteria on a scale of one to five, with one as least important and five as most important. They could select five or most important as many times as necessary. When it came to selecting software, respondents stated that the following were most important : 68%: defensible and proven, up from 57% 35%: minimal disruption to normal business processes, up from 30% 32%: integration with existing apps, up from 28% 29%: company viability, down from 30% 26%: easy deployment, up from 13% 23%: cost, up from 20% 19%: ability to scale up or down, up from 13% 13%: using fewer vendors to do more 10%: flexible software offerings 0% multilingual, down from 10% Important considerations for selecting software were rated between a three and five on the five-point scale: Considerations Rated Most Important When Selecting Software Vendors Defensible & Proven Minimal disruption to normal business processes Integration with existing apps Company viability Easy deployment Cost Ability to scale up or down Using fewer vendors to do more Flexible software offerings Multilingual 35% 30% 32% 28% 29% 30% 26% 13% 23% 20% 19% 13% 13% 13% 10% 10% 0% 10% 68% 57% 100%: company viability, up from 93% 100%: easy deployment, up from 83% 97%: defensible and proven 97%: cost, up from 74% 90%: integration with existing apps, down from 94% 90%: minimal disruption to normal business processes, down from 93% 84%: flexible software offerings, up from 70% 83%: ability to scale up or down, up from 80% 77%: using fewer vendors to do more, up from 70% 32% multilingual, down from 44% Considerations Rated Important When Selecting Software Vendors Company viability Easy deployment Defensible & Proven Cost Integration with existing apps Minimal disruption to normal business processes Flexible software offerings Ability to scale up or down Using fewer vendors to do more Multilingual 32% 44% 100% 93% 100% 83% 97% 97% 97% 74% 90% 94% 90% 93% 84% 70% 83% 80% 77% 70% 16

18 For selecting legal service providers, respondents stated that the following were most important or a five on a five-point scale: Considerations Rated Most Important When Selecting Legal Service Providers 68%: defensible and proven, up from 48% 55%: customer support 32%: cost, up from 20% 29%: minimal disruption to normal business processes, up from 27% 29: company viability, up from 27% 26%: ability to handle both structured and unstructured, down from 33% 26%: ability to scale up or down, up from 13% 10%: using fewer vendors to do more, down from 13% 3%: international capabilities, down from 7% Important considerations for selecting legal service providers were rated between a three and five on the five-point scale: 100%: company viability, up from 87% 100%: customer support 100%: defensible and proven, up from 93% 97%: cost, up from 70% 87%: ability to handle both structured and unstructured, down from 90% 87%: minimal disruption to normal business processes, up from 67% 84%: ability to scale up or down, up from 83% 84%: using fewer vendors to do more, down from 93% 35%: international capabilities, up from 30% Defensible & proven Customer support Cost Minimal disruption to normal business processes Company viability Ability to handle structured AND unstructured Ability to scale up or down Using fewer vendors to do more International Capabilities Considerations Rated Important When Selecting Legal Service Providers Company viability Customer support Defensible & proven Cost Ability to handle structured AND unstructured Minimal disruption to normal business processes Ability to scale up or down Using fewer vendors to do more International Capabilities 32% 20% 29% 27% 29% 27% 26% 33% 26% 13% 10% 13% 3% 7% 35% 30% 68% 48% 55% 55% 70% 100% 87% 100% 100% 100% 93% 97% 87% 90% 87% 67% 84% 83% 84% 93% 17

19 When asked whether they had ever tried the following measures to reduce e-discovery costs, respondents answered as follows: Bring software in-house to reduce law firm or service provider fees Yes: 81, up from 70% No: 19% E-Discovery Measures Tried to Reduce Costs Yes Yes 81% Bring software in-house to reduce law firm or service provider fees? 52% 48% 19% No No Bring staff in-house to reduce law firm or service provider fees Yes: 52%, up from 50% No: 48% Conducted an early case assessment to possibly resolve a matter earlier Yes: 87% (no change from 2010) No: 13% Yes Yes Bring staff in-house to reduce law firm or service provider fees? 87% Conducted an early case assessment to possibly resolve a mater earlier? 32% 68% 13 No No Utilized visualization or clustering tools to speed the review Yes: 32%, down from 34% No: 68% Yes Utilized visualization or clustering tools to speed the review? 71% 29% No Utilize contract attorneys for legal review Yes: 71%, down from 77% No: 29% Yes Utilize contract attorneys for legal review? 39% 61% No Utilize managed service providers Yes: 39%, up from 37% (LPOs) No: 61% Utilize managed serice providers? FORECASTS: Based upon the survey responses, it is possible to forecast coming trends that e-discovery teams should be aware of: In-house counsel will begin experimenting with predictive coding for non-governmental internal investigations before deploying it for active matters. Legal teams will begin using more advanced cost-benefit analysis and metrics to better understand and inform e-discovery budgeting. Project management is likely to become a larger part of the e-discovery lexicon. 18

20 NEXT STEPS: Learn more about themes discussed in this paper: E-Discovery cost control: Budgeting for E-discovery: Understanding Pricing Models for Cost Control and Transparency ( Managed document review: The End of Piecemealing: Improving All-in-One Legal Review ( Multinational data discovery: E-Discovery and Legal Frameworks Governing Privacy and Data Protection in European Countries ( Collecting data from the cloud: Controlling Data in a Social Media World ( 19

21 ABOUT ARI KAPLAN The New York Law Journal called Ari Kaplan s first book, The Opportunity Maker: Strategies for Inspiring Your Legal Career Through Creative Networking and Business Development (Thomson-West, 2008), a must-have treasure box of marketing ideas, and CEOs have described his new book, Reinventing Professional Services: Building Your Business in the Digital Marketplace (Wiley, 2011), as an essential guide that expertly showcases the multitude of opportunities the digital age has brought to the professional services market. After nearly nine years practicing with large law firms in Manhattan, Kaplan, recently named to the Fastcase 50 list of innovators in the law, has become the leading copywriter and industry analyst in the legal community. He was the keynote speaker for the 2010 ABA Techshow, and has shared ideas with students and professionals throughout North America and the United Kingdom. The author of over 200 articles, Kaplan received Apex Awards in 2010, 2008 and 2007 for feature writing. He has been recognized in the Wall Street Journal s Law Blog, the Chicago Tribune, the Miami Herald, the New York Post, the ABA Journal, Above the Law, the National Jurist, the Chicago Lawyer, and the California Recorder, among other publications. He also served as a legal commentator for CNET Radio and has been interviewed on CNN, WGN- TV Chicago and Good Morning San Diego. Named a Law Star by LawCrossing, Kaplan provides law-related ghostwriting for a number of companies, firms and individuals in the legal industry. He also provides consulting to individuals and organizations interested in creating deeper connections with law students, lawyers, legal administrators, and other legal professionals. i All 2009 and 2010 figures cited in this report for comparison purposes are based on research conducted by Ari Kaplan Advisors in Advice from Counsel: Best Practices on Controlling E-Discovery Costs (2010) and Advice from Counsel: Evolving Strategies for Increasing the Efficiency and Efficacy of E-Discovery Programs (2011), respectively. 20