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Reducing eDiscovery Costs vs. Law Firm Profits

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Sunday, January 25, 2009

Reducing eDiscovery Costs vs. Law Firm Profits

I have spent the better part of the last two (2) weeks talking with top litigators from AM 100 Law Firms, eDiscovery service providers, eDiscovery consultants and the General Counsel from corporations that are either currently involved in cases with major eDiscovery costs or have recently complete a case with major eDiscovery costs.

What has been interesting is watching the ongoing battle between the General Counsels trying to reduce the overall costs of eDiscovery and the Partners from the AM 100 Law Firms trying to maintain their profits margins.

I have posted several extensive articles on the cost of eDiscovery and therefore I am not going to go over the details again.  As a review, Businesses and other organizations spent more than $2.7 billion on electronic data discovery last year, and spending on eDiscovery will grow to more than $4.6 billion by 2010, according to consultants George Socha and Tom Gelbmann, who presented their Sixth Annual Socha-Gelbmann Electronic Discovery Survey in a report published earlier this year on Law.com.  And, according to well know legal technology Blogger, speaker and general industry expert, Brent Barney, in a posting on law.com titled, "Subdue the Costs of Document Review", document review can account for 50 percent to 90 percent of the costs involved in a litigation matter.  And at $150 - $400 per hour, the classical docuemnt review portion of the eDiscovery process is a very large profit center for the AM 100 Law Firms. 

However, with the emergence of the discipline of Early Case Assessment (ECA) and associated technologies from legal technology vendors such as Clearwell Systems and earlyCASE,  designed to dramatically reduce the amount of Electronically Stored Information (ESI) or Electronically Stored Evidence (ESE), profits from document review are beginning to dwindle. And, the law firm partners that I have talked to are not very happy about it.  As a result, they are investigating whether or not they should be jumping into the ECA technology waters and setting up computer forensic practices to offset the loss in profits from document review.

Interestingly enough, and really the point of my article, is that the General Counsel and their associated Information Technology (IT) departments that I have talked to are also looking into whether or not they should be jumping into the ECA technology waters and setting up either internal computer forensic practices or partnering with independent third party computer forensic partners and third party ECA service providers to dramatically reduce the amount of ESI/ESE before it is sent to their outside counsel for review.    This investigation by both parties to this issues is shaping up to be a classical market paradigm shift and one that I and most of the eDiscovery world will be watching with great interest.

Please note that I will be attending LegalTech in New York February 2-4, 2009 and will post any and all additional opinions and data points that I can gather regarding this topic.

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