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The eDiscovery Paradigm Shift

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Monday, January 26, 2009

Cloud Computing Will Emerge as a Viable Option for eDiscovery in 2009

As a follow-up to my September 23, 2008 article titled, "Cloud Computing is Coming to eDiscovery," it appears that Cloud Computing is beginning to gain favor with the eDiscovery crowd. 2009 will be a big year for Cloud Computing in general as analysts are predicting that that by 2011 the volume of Cloud Computing market opportunity would amount to $160bn, including $95bn in business and productivity apps (email, office, CRM, etc.) and $65bn in online advertising. Given this fact and based on what I am seeing and hearing in the eDiscovery market, I am now willing to predict that it will be one of the big litigation technology trends for 2009 in eDiscovery.

Melanie Rodier, commented in a January 23, 2009 article appearing in the Regulatory Compliance Section of the Wall Street and Technology website titled, "Cloud Computing Gives E-Discovery a Lift," that, "With the amount of infrastructure required to support e-discovery capabilities, firms are looking to cloud computing’s utility model as a way to rein in storage and retrieval costs while improving their regulatory response. I agree with Melanie and believe that our current economic crisis that is forcing Information Technology (IT) budget cuts along with the associated and quickly emerging regulatory and compliance requirements, will prompt enterprises, who may have previously been considering an "in-house" solution, to consider Cloud Computing based eDiscovery / eCompliance solutions much more aggressively in 2009.

In a January 25 2009 Blog posting titled "E-Discovery Cloud Computing Marketplace Outlook," Brad Jenkins states that, My prediction (and I am not alone) is that e-discovery cloud computing will make a significant impact on the EDD marketplace and how data is processed. I expect that software companies moving to a Web 2.0 platform and offering on-demand web-based solutions will gain significant market share over the next few years."

However, not everyone is on board. I continue to hear detractors claiming that Cloud Computing is nothing more than "baked over" ASP and will never amount to anything. Or that enterprises are never going to allow their data to reside outside the firewall. And others of pointed out that "the Internet pipe" still isn't big enough to move all the massive amounts of Electronically Stored Information (ESI) required for eDiscovery and eCompliance. And some, such as Richard Stallman, founder of the Free Software Foundation and creator of the GNU operating system, have resorted to name calling and says cloud computing is "stupidity" that ultimately will result in vendor lock-in and escalating costs.

Well, many once thought that the world was flat and that turned out to not be true (unless you live in Kansas). So, I am going to stand by my prediction that Cloud Computing will be a big trend in eDiscovery in 2009.

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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  And, according to well know legal technology Blogger, speaker and general industry expert, Brent Barney, in a posting on 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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