Article ediscovery Pricing Models by John Burchfield and Austin Maddox $ www.dsicovery.com 877-797-4771 414 Union St., Suite 1210 Nashville, TN 37219 (615) 255-5343
The lack of consistent pricing language is one of the greatest challenges facing corporations and law firms during an evaluation of ediscovery services. Not only is it difficult to predict what the final costs will be, but it is also nearly impossible to compare pricing from one vendor to another. Some providers may show a full breakdown by line item of all tools and processes. Others may provide a total cost model with no breakdown. One provider may have a price per page, while another may have a price per document, and another may have a price per gigabyte. These various options make it difficult to analyze apples to apples pricing across the various models. Plus, the budgeting problem can be compounded when the services offered are not fully explained and understood. Does Vendor A s Advancedlook ECA service provide the same filtering options as Vendor B s Transparent Analytics service? It can be frustrating. Luckily, this frustration is leading to the standardization of ediscovery pricing. Within the ediscovery industry, two main pricing models have emerged: (1) line item pricing, and (2) total cost pricing. Both focus primarily on cost, but the approaches are very different. Understanding the distinctions of both pricing models will help you better estimate the final costs and determine which approach works best for you and your case. Line Item Pricing Similar to a menu with a la carte pricing, this model provides individual rates for every step of the ediscovery process. This allows the firm or company to easily examine pricing from multiple vendors and find the least expensive cost option for collection, processing, filtering, review, hosting, production, etc. With the lowest price services determined for each step, the total cost can be estimated but could mean using multiple vendors for a project instead of just one. This is an enticing model: It makes sense to those involved in vendor selection, and is easy to understand because all costs are specified individually. Choosing the lowest estimate across the board means that the entire process should yield the most bottom-line friendly price. DSicovery.com 1
The dilemma with line item pricing is that the cost will often be more expensive than anticipated. An ediscovery project doesn t always go exactly as planned, no matter how much planning goes into it. The data size may change, or it may not be as responsive (or more responsive) than estimated, or the filtering process may require additional keywords or sampling, or any number of other possibilities could occur. Essentially, this pricing model often results in a lack of cost predictability wtihin your ediscovery project. Choosing the lowest price, which is typically the goal of selecting a vendor based on line item pricing, can also have a negative impact on software options. Choosing the lowest price, which is typically the goal of selecting a vendor based on line item pricing, can also have a negative impact on software options. Technology that is priced inexpensively will most likely lack the kind of features that improve productivity or minimize risk. Also, it can be hard to estimate project management, which is an invaluable part of the process the result being that little or no time is included for overseeing the data workflow, providing constant quality checks and producing detailed reports. This can be compounded when using multiple providers, because extra time or costs may be required to prepare data for the next vendor. Plus, the providers may have differing standards of quality, which can affect the next step of the process and the efficiency of review. Those concerns may dissuade a law firm or corporation from choosing this pricing method. Yet, if the firm or company is prepared to think about and plan for the potential issues, line item pricing does have many benefits, including the flexibility to choose different vendors or tools on a case-by-case basis. Next page: Total Cost Pricing DSicovery.com 2
Total Cost Pricing This pricing model depends on having one provider for every step of the ediscovery process. The provider gives a flat rate that covers consulting, technology and project management for each stage involved. This flat rate may be based on the number of documents, gigabytes, or custodians, or a combination of those factors. The total cost pricing model gives a flat rate that covers consulting, technology and project management for each step of the ediscovery process. This model can be appealing to both the vendor and firm or corporation. For the provider, controlling the entire process means being able to implement internal methods that are already integrated, proven and streamlined. The vendor has an incentive to lower their per-piece costs because tasks and processes will be bundled together for the customer. The firm or corporation benefits because the budgets are more predictable and typically more economical. Plus, the all-inclusive pricing model means any anticipated costs are outlined before data is processed. Total cost pricing also allows the service provider to be more flexible and scalable as the case data requires. Keeping the process under one roof ensures higher quality and reduces turnaround times. Plus, any finger pointing is eliminated because one single provider has full accountability for the entire process. Within this pricing model, there are two main categories: 1. Per-document: This rate is based on the number of documents reviewed and is calculated after collection and processing. The per-document model requires an assumption at the outset of how many documents will need to be reviewed. The more experienced the service provider, the more accurate the assumption. DSicovery.com 3
2. Per-gigabyte: The flat rate is determined by the number of gigabytes in the project, and is based on the amount of collected data. In this model, the amount of data collected may vary quite a bit from the data size after filtering has taken place. Since the price is determined based on the collection amount, some may be tempted to pre-filter the data internally before collection. That reaction can create the unnecessary risks of not collecting all pertinent documents or spoliation. The assumptions required for the per-document model mean that the final cost could potentially be much different than initially anticipated. Even so, in the hands of an experienced provider, this option can provide more accurate pricing than the line item approach. Of these two options, the per-gigabyte pricing model is the most predictable. Costs are determined at the beginning of the project and include everything from collection to filtering to review to production, providing a true total cost for the project before it starts. In addition to predictability, this all-in pricing can benefit the law firm or corporation in other ways. There is one provider responsible for the project from beginning to end, giving you one place to call for any problems or questions that may arise. Having one project management team or, better yet, a dedicated project manager overseeing the entire process ensures a high standard of quality and consistency. Additionally, the vendor is incentivized to ensure the process is managed for maximum efficiency, and, to that end, employs advanced technology and integrated systems. This, in turn, provides the customer with innovative features resulting in faster productivity and streamlined workflows. So is the total cost model the answer? Many think so, but this pricing model has a downside. It might be more predictable, but it s also often more expensive. If you go with a per-custodian or per-gigabyte price, the vendor has to make assumptions in the estimate. The cushion provided in the estimate may offset the benefit of the predictability by resulting in a higher overall project cost. In conclusion, both pricing models offer strengths and weaknesses, emphasizing the critical need for both client education and vendor transparency to help identify not just the best technology but also the best pricing model for each ediscovery project. DSicovery.com 4
About the Authors John Burchfield DSi Vice President of Business Development John Burchfield has over 20 years of experiences in in marketing, client relations, management, and process streamlining and development. He has improved internal processes, implemented new procedures and helped to create new service offerings, such as DSi s Remote Governance and Collections (RGC) platform. A regular speaker at events across the country, John has been featured alongside such top industry experts as Michael Arkfeld. Austin Maddox DSi Senior Litigation Technology Consultant Austin Maddox is a seasoned expert in the fields of e-discovery and digital forensics. Responsible for client relations, delivery of consulting services and oversight of ESI-related matters, Austin is a trusted advisor to some of the largest corporations and law firms in the country. About DSi Serving law firms and corporate legal departments worldwide, DSi (formerly Document Solutions, Inc.) is a litigation support services company that provides a wide variety of ediscovery and digital forensics services. Through five core business processes DSicollect, DSintake, DSinsight, DSireview, DSisupport DSi s highly trained staff will help you harness today s most forward technology to gain a competitive advantage. DSi is headquartered in Nashville, Tenn. with offices in Knoxville, Tenn., Cincinnati, Ohio, Charlotte, N.C., Austin, Texas and Minneapolis, Minn. DSicovery.com 5