By Brian Ingram, LexisNexis
According to a recent survey by eweek.com, "cost control" is now the biggest concern of Chief Legal Officers (CLOs), beating "compliance" by more than two to one. Almost one half of all CLOs participating in the survey say they plan to expand their in-house legal departments in the next year, and more than a quarter of them also plan to decrease their use of outside counsel. Litigation budgets have long been one of the most costly areas for corporations and the explosion of data volumes have made this particular area a primary focus of cost-savings. Surveys indicate that discovery expenses can make up 50 - 60 percent of litigation costs and in instances where eDiscovery is a primary component these costs can escalate to be up to 90 percent of the total cost.
With this exponential growth of electronically stored information (ESI) driving up discovery costs, organizations are starting to bring more of their e-discovery processing tasks back in-house. This is being done as a cost-savings measure, as well as to regain control over eDiscovery and mitigate the risks associated with outsourcing data processing.
- What drives the decision to keep processing in-house vs. sending to a vendor?
- How do you know if bringing e-discovery in-house is the right move for your company?
- What is the expected ROI from bringing e-discovery processing in-house?
- What are the challenges associated with in-house data processing?
What drives the decision to keep processing in-house vs. sending to a vendor?
The pressure from CLOs on outside counsel to reign in discovery costs has brought additional focus to the costs incurred by utilizing outside service providers, or vendors, to perform tasks such as ESI processing. As illustrated above, the explosion of ESI has made the discovery process very expensive. More organizations are no longer willing to pay the increased costs associated with processing these increased volumes of data and are taking a more active role in the decision making process behind what gets collected and processed and what doesn't. By taking these initial investment decisions out of the hands of outside counsel, they are able to better maintain control of the overall eDiscovery and document review budgeting. By most industry standards, document review is the costliest step in the pre-trial discovery process. If an organization can control the amount of data that needs to be reviewed, they will see great cost savings and by taking control of these initial stages of eDiscovery, such as ESI processing, they will be in better position to do so and this is what is driving their decision.
How do you know if bringing e-discovery in-house is the right move for your company?
There are data analysis and processing solutions on the market that can help organizations work through their data in short order and are priced favorably enough to enhance their ability to greatly reduce their costs in this area. That being said, not all organizations should consider bringing a solution in-house and what may work for one company may not be the best fit for another. If an organization does decide to look into purchasing a solution for internal use, it's important to determine if the move to bring it in-house will actually result in cost savings as well as make sound legal sense for their organization's situation. Bringing an eDiscovery processing solution in-house is an option for organizations of all sizes and instead of basing the decision on the size of your organization, a better method to determine if it is appropriate is to determine the approximate number of cases as well as the size of the cases your organization is involved in each year. If the organization is involved in enough cases and some of those cases are substantial enough, then it seems prudent to at least explore the option. Remember, even a small matter can sometimes involve sifting through Terabytes of data.
According to a Gartner Research analyst, "Most companies with any kind of level of litigation at all - maybe even ten cases a year or one or two big cases a year with multiple custodians - should really give serious thought to bringing the process in house."
The explosion of data volumes often makes the decision to bring processing in-house a no brainer even when only a handful of cases are litigated each year. Any significant reduction in the amount of document review hours by outside counsel will more than pay for the investment in an in-house processing capability. Regardless of the ultimate decision though, the exercise and analysis the organization will go through will be of great benefit and the organization should be prepared to include personnel from several other departments outside of Legal including IT and Records. If the organization ultimately makes the decision that in-house ESI processing is appropriate, they should not wait until they are involved in a large litigation to pull the trigger on any purchases. It's best to make the purchase at that time and get the protocols and procedures in place before litigation is upon them. The processing software and surrounding technology are often secondary to the people, the processes and the adoption of a new business culture in general.
What is the expected ROI from bringing e-discovery processing in-house?
So now that you have decided to begin processing your own ESI and taking a more active role in managing eDiscovery, what benefits should you expect?
The first and most sought after benefit is directly related to the cost savings you'll recognize. As stated above, document review continues to be the most expensive part of the discovery process and by taking more control over your own data, and ultimately what gets processed and reviewed by the attorneys, you will be able to reduce billable hours pegged to the review process immediately. The fewer unnecessary documents and custodians that need to be reviewed, the lower your review costs will be. It's your data and you are more familiar with the custodians and their document management practices than anyone, so determining what gets processed for review is a decision best made by the organization as opposed to outside counsel. When you are responsible for processing your own data outside counsel will be less likely to fall back on the method of "casting a wide net" and therefore reduce your risk of over-collecting and processing non-responsive data to be loaded into the attorneys review tool.
Other equally important returns you can expect from your investment are better defensibility of your eDiscovery policies and procedures, and a reduction of your exposure to eDiscovery related risk and potential for sanctions against your organization. The risks are still there just as they were when outsourcing this capability to a third party, but by having the ability to "own" your process you can control your risk by making the process consistent, repeatable and transparent. When a third party is controlling the process, it is more difficult to enforce your eDiscovery policies.
What are the challenges associated with in-house data processing?
Like any new technology initiative, there will be challenges to implementing your own ESI processing capability. Anyone deciding to bring this service in-house has to know that processing ESI is not as simple as installing some software on a PC and pushing a button. Having personnel with the necessary skill set to operate the system is of utmost importance and the opportunities for making mistakes along the way are great. The technology has come a long way with processing tools now being easier than ever to administer, but knowing that eDiscovery is a constantly evolving "process" as opposed to simply a piece of software is a key factor in a successful implementation. Having the appropriate training and guidance from the software manufacturer is important in ensuring you have the proper integration with your workflow and that best practices are being documented and followed. Partnering with your chosen software provider and knowing they will be there for assistance for years to come is crucial.
The sheer volumes of data that can potentially be involved in a litigation can make the task of processing internally very burdensome. Properly laying the groundwork and managing expectations with regards to how much time is involved in processing large ESI sets will alleviate some of the stress for everyone involved. By making sure you have the appropriate personnel managing the systems and knowing what the software can and cannot do you should be able to head off most challenges before they get out of control.
Making sure the organization as a whole has completely "bought in" to the concept of performing certain eDiscovery processes in-house is equally as important to making sure the technology itself does what it is purported to do, fits into the organization's IT infrastructure and works well with other existing systems. Involving personnel from corporate IT and Records during the process will help maintain the integrity of the system and capability as a whole.
In conclusion, the question of whether to bring ESI processing in-house or not is one that is being looked at by many organizations in many industries. One cannot ignore the potential for enormous cost savings by doing so but whether or not it is the proper fit for your organization can only be answered by you and after thorough analysis and consideration. Creating your own processing capability correctly with the appropriate tools, processes and personnel will enable you to take better control of your eDiscovery challenges and costs.
Brian Ingram is head of the Litigation Technology Consulting division at LexisNexis. During more than 20 years in the profession, he has worked in e-discovery at CSX corporation and has managed litigation support departments at a number of law firms, including King & Spalding, Alston & Bird, and Paul Hastings & Troutman Sanders. He is a frequent speaker at industry trade shows and conferences. Brian.firstname.lastname@example.org.
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