Best practices for comparing apples to apples in e- discovery pricing and services
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1 Best practices for comparing apples to apples in e- discovery pricing and services A real- world case study of how six service providers priced the same hypothetical matter with wildly varying results. By Anju Khurana Lead Consultant esentio Technologies For ACEDS.org
2 Vendors may try to distinguish their pricing in ways that appear to add value but in fact hide the true costs of their services. Although e-discovery costs and pricing models have drastically changed in the past three to five years, a perception persists that e-discovery is too expensive. There is also a perception oft accurate of vast differences in how vendors price and bundle their services, making direct comparisons between options challenging. These comparisons are further complicated by the fact that vendors may try to distinguish their pricing in ways that appear to add value but in fact hide the true costs of their services. This lack of transparency has created tension between law firms and their clients. Discrepancies in pricing models make it very difficult to predict expenses and establish budgets for e-discovery. When evaluating proposals from vendors, do you know if you re comparing apples to apples? Are your clients paying too much for e-discovery services? And if so, is misunderstanding of how vendors price offerings the reason why? Whether a firm is implementing a single or preferred provider model or handling on a case-by-case basis, the ability to effectively compare pricing models is vital to conducting a successful vendor selection program. This ACEDS White Paper focuses on identifying key variables in vendor pricing and gives strategies for making apples to apples comparisons. 1 ACEDS.org esentio was recently engaged by an Am Law 100 firm to re-evaluate its e-discovery business model and conduct a comprehensive analysis of its processes, tools and technology. The firm sought to explore cost savings and efficiencies through: Streamlined processes, Improved workflows, Adoption of a revised cost recovery model, An assessment of replacement options for its current document review tool, and, Selection of the best service provider(s) to meet its needs. esentio encouraged the firm to consolidate review tool hosting and support services with a single provider, or with a small group of preferred providers to obtain competitive pricing and superior levels of service for its clients. After conducting interviews and reference checks, esentio recommended further evaluation and assessment of six service providers. Although each vendor under consideration had a strong reputation and offered a broad range of services, there were differences in their levels of geographic support, staff/ company certifications and expertise, scalability, security, infrastructure, firm stability, pricing and future strategic plans for growth. These differentiators necessitated a thorough and comprehensive Request for Proposal (RFP) to identify the service provider(s) that would allow the firm to deliver the highest value to its clients.
3 provide pricing options that were The objective was to identify the service provider(s) that could offer: Superlative, dedicated 24-7 service and support, A dedicated project management team, Scalability of resources necessary to meet the firm s case and project requirements, Predictable and transparent costs, Competitive market rates, Alternative pricing models, and, Volume discounting. Vendors were asked to respond to a comprehensive RFP which consisted of more than 200 detailed questions and requests for supporting documentation pertaining to the providers corporate profile, data collection services, processing, hosting services, production, project management, subject matter expert consultation, security, information governance and pricing. Vendors were initially asked to provide pricing for pro-rata services pertaining to the entire E-Discovery Reference Model and provide alternative, flat- or fixed-fee pricing, and annual subscription pricing. esentio encouraged the competitors to be creative with their options for alternative pricing based on volume discounting ranges (2-5 terabyte, 5-10 terabyte, 10+ terabyte) and subscription models. Respondents were expected to provide pricing options that were transparent and predictable for the firm and its clients. Vendors were also asked to detail their proposed per-gigabyte cost structure and pro-rata services that were included in a pergigabyte fee. esentio analyzed the vendor responses, scored them, and created a decision matrix. Scoring pricing, however, proved to be quite challenging due to significant differences in vendor pricing strategies and philosophies. 2 ACEDS.org Making an apples to apples comparison was nearly impossible. The following factors contributed to pricing variability: Measuring Data Volume: Vendors differed in how they measured data volumes. Some providers multiplied their per-gigabyte pricing by the gross volume of data, measuring hosting costs against all the ingested data regardless of whether the ingested data was hosted for review. Others multiplied their per-gigabyte pricing by the net volume of data or the review set which remained after keyword and date-range culling of the gross data volume. Data Expansion: Processing often causes the volume of data to expand. For example, an NSF (Lotus Notes) file can expand as much as 80% while a PST (Outlook personal storage file) and OST (Outlook offline folder) can expand anywhere from 5 to 40%. Vendors differed on whether they calculated on preexpansion or post-expansion volumes, which made predicting costs a challenge without knowing the source data. Standard and Complex File Types: Vendor prices differed on how they handled standard file types such as PSTs, Microsoft Office products files including Visio, PowerPoint and Access, PDFs, TXT, CSV, TIF and JPG versus complex file types such as CAD-program files, Photoshop files, Mac-generated files, Open Office, and proprietary file types. Methods of calculating Volume Discounting: Some vendors offered volume discounting across multiple cases while others only offered volume discounting on a per case basis. Bundled Services in All-In Pricing: Certain vendors were reluctant to bundle what were considered higher ticket items (e.g. project management) in their all you can eat alternative pricing. Vendors also
4 differed in their definitions of basic processing and what was considered exception handling (e.g. OCR of files without extracted text, encryption cracking, and analyzing unique file types). Hosting Inactive Data and Case Migration: Vendors differed in pricing models, strategies and workflows for nearline/offline data storage, data archiving and case migration. Given the tremendous variances in vendor pricing models, it was important to normalize the above factors by drafting a typical case scenario which described the expected volume, culling rates and types of data to be handled. The following scenario was presented to the vendors: Please provide us per-gb pricing based upon the parameters relayed in the following scenarios: 1. Data received from a firm client containing active data collected from 37 custodians amounting to 2.2 TB of data. Custodians data sources include a mix of forensic images and custodian-created data collected in a forensically-sound fashion from users desktops/laptops, corporate file shares, and exported user-level PST files from corporate Exchange server. File types are generally standard files and include PSTs, MS Office products files (inc. Visio, PowerPoint and Access), PDFs, TXT, CSV, TIF, JPG, etc. 2. Data received from a firm client containing active data collected from 37 custodians amounting to amounting to 2.2 TB of data. Custodians data sources include a mix of forensic images and custodian-created data collected in a forensicallysound fashion from users Mac workstations, corporate file shares, user-level NSF files exported from corporate Domino (Lotus Notes) server. Scoring pricing proved to be quite challenging due to significant differences in vendor pricing strategies and philosophies. File types are generally non-office files and include CAD-program files, Photoshop files, Macgenerated files, Open Office files, etc. The firm needs to have an understanding of what it would pay, in an All-In, Per-GB price, to de-nist, deduplicate, apply search term and date range filtering (assume 80% reduction in the 2.2TB for these efforts), hosting the data for a year, 20 hours of project management/tech analyst time, and TIF-ing a subset for production including image branding, load file generation, and re-ocring redacted items. Also included should be access to all e-discovery review tool analytics and assisted review, and database setup. Project pricing needs to be provided as a flat rate for the project, with no exceptions to that rate. The per-gb rate should be assessed at the volume remaining after the 80% reduction noted above, but also include indications prior to data expansion (archives, mailstores, etc) and after data expansion. Responses should assume 5% of the reviewed data volume, or approximately 2 million pages, are rendered to TIF for production. Note that the project management estimate for this All-In scenario was low compared to what would be required in a typical case and the production page count was on the high side as most ESI orders have XLS files provided in native format so the TIF count would be reduced. 3 ACEDS.org
5 $160,000 to as high as almost $1,000,000 for this scenario. The results were shocking. Proposals ranged from as low as $160,000 to as high as almost $1,000,000 for this scenario. So what accounted for such a wide discrepancy in vendor pricing? It mostly resulted from differences in the vendors workflows and processes. For example, some of the higher pricing estimates were submitted by providers that were measuring hosting costs against all ingested data. The lower rates were generally based on assumptions that the data not earmarked for review could be moved to nearline storage or decommissioned from the hosted environment. By implementing the concept of early case assessment, and excluding the likely irrelevant data from volume calculations, vendors were able to offer more competitive pricing. This eye-opening exercise stresses the importance of deep-diving into vendor pricing and understanding: The impact of data volume, How that volume is measured, Physical location of data and, Analyzing the risks and benefits of various alternative pricing models. Vendor Pricing Breakdown: 2.2 TB, 37 custodians Vendor 1 Negotiated Vendor 2 Vendor 3 Vendor 4 Vendor 5 Vendor 6 Standard Data Pre-Expansion $160,000/ $240,000* $250,000 $250,000 $320,000 $620,000 $990,000 Method of Calculating Volume Gross Volume Gross Volume Per GB/mo average on Net Data Volume 440 GB $30 / 45 GB $47 GB $47 GB $61 GB $117 $187 GB Per GB/mo average on Gross Data Volume 2200 GB $6/$9 GB $9 GB $9 GB $12 GB $23 $37 GB *Vendor 1 did not offer pricing for unlimited licenses but offered pricing for 30 and 100 licenses. Vendors 2-6 provided pricing for unlimited licenses. Vendor 1 was also pre-existing long-term service provider of client and represented negotiated rates. Rates of Vendors 2-6 are not final negotiated rates. 4 ACEDS.org
6 The ability to effectively compare pricing models is certainly important to conducting any successful vendor selection program. But firms should be aware that price is just one factor to consider when evaluating process and that lower prices do not always translate into cost efficiencies. Placing too much emphasis on price can sometimes lead to choosing providers who lack capabilities and repeatable, defensible workflows. These shortcomings lead to missed deadlines, spoliation, lost evidence, costly sanctions and overall higher project costs. Firms should not have tunnel vision when it comes to processing costs. Most e-discovery costs occur not in the processing phase but during the review stage. Paying additional up front costs for culling, ECA and technology-assisted review (TAR) can certainly reduce overall litigation expenses. While it is true that the costs of software functionality, network infrastructure, and data storage are becoming increasingly commoditized, there are still apples to oranges differences in the quality of vendors high-value services such as project management, technical support services, workflows and levels of quality control and expert consulting and firm experience, stability, staffing capabilities, client references, security, process and infrastructure. When choosing strategic partners, it is important to consider company culture. Firms should ask, What are the company s core values and philosophies? and How has this company added value to similar clients? Being a savvy buyer means strategically partnering with providers that not only solve your current problems but also grow as your needs change. Being a savvy buyer means strategically partnering with providers that not only solve your current problems but also grow as your needs change. Pay close attention to vendor behavior during the RFP process. Vendors that responded in a comprehensive and timely manner to our RFP exhibited the same characteristics on projects with their clients. While certain vendors complained about the tedious nature of the RFP, one service provider noted that our RFP had left no stone unturned and thanked us for the opportunity to make process improvements in their company as a result. It is no surprise that this vendor has a reputation for superlative service and many long-term relationships with clients. Finally, do not be afraid to negotiate aggressively on price. It is important to note that the proposals and response to the pricing scenario above were NOT final negotiated prices. Some of the initially higher-priced vendors sharpened their pencils during the following days and re-submitted revised quotes that were more in line with other proposals. However, firms should be careful not to beat people down on price as behavior and courtesies exhibited during the RFP process will set the stage for building a long term, quality relationship. 5 ACEDS.org
7 Anju Khurana is an attorney and lead consultant for esentio Technologies. She has more than 15 years of experience as a former partner and litigator, consultant, law lecturer and subject matter expert in the areas of litigation technology, e- discovery, case and evidence management and trial preparation. Her found at ACEDS.org for e- disocovery and data management professionals in the private and public sectors. ACEDS provides a global forum and is held by practitioners worldwide. Visit ACEDS.org for more information on training, membership Contact Us: Miami, FL customerservice@aceds.org Web: ACEDS.org 6 ACEDS.org
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