eDiscovery Software Pays for Itself in a Matter of Months

According to a Gartner report from December of 2009, eDiscovery software purchased by the Enterprise can pay for itself with one big case or at least within the first year. This type of ROI is almost unprecedented within the Enterprise for business software and literally provides a “no brainer” for justifying the capital outlay and associated expenses.

According to the Gartner report, eDiscovery is a maturing market with entrants from multiple categories, including storage and archiving, search and information access, content and records management, and workflow, as well as tools designed as end-user applications for legal professionals and forensic data collection tools aimed at security professionals, regulators and law enforcement agencies. All of these categories of software vendors have added e-discovery to existing suites or purport to cover various aspects of the eDiscovery process. There are also pure-play e-discovery vendors to consider.

Enterprises purchasing eDiscovery software can reduce the costs of litigation by improving their control over unstructured content, and semistructured content, most notably e-mail. Our client references consistently report that they have cut costs and risks by taking control of litigation hold, litigation-hold-tracking, file collection, file processing and legal review, instead of outsourcing these functions.

The selection of eDiscovery software is a joint decision and sometimes a joint purchase between the IT department and the legal department. These two groups must work together to determine the needs of the organization and the individual users, and to build the business case for purchase. Although many corporations do not know the true costs of their legal activity, there is evidence that those costs are substantial. Because the work of legal and regulatory response is spread over different departments, and legal matters can span multiple years, traditional cost accounting does not do a good job of tracking the cost of litigation and regulation.

The legal department pays for outside counsel's services and eDiscovery providers; business units pay liability costs if a plaintiff wins a monetary judgment; and the IT department bears the expense of any internal discovery work. That makes it difficult to track costs in a meaningful way. In addition, litigation can go on for years, meaning a single case must be tracked over its lifetime. This, of course, does not follow the way accountants do things, which is on a yearly basis. Legal departments seldom have "budget" allocated to them but, of course, must pay the bills of outside counsel and other providers of legal services, and that money comes out of the legal reserve (see Note 1). Gartner clients that do track "all" legal costs, and that have purchased eDiscovery software, report that the software pays for itself in a matter of months, or is justified by the projected cost of "one big case."

The cost savings as reported by clients for early case assessment, along with in-house collection and preservation, can more than justify the purchase of moderately priced eDiscovery software ($100,000 to $500,000), or even more expensive software (costing more than $500,000). When interviewed for this MarketScope, clients reported a return on investment (ROI) within three to six months or, alternatively, after one big case, particularly intellectual property disputes (see Note 2). The main areas of cost reduction are in processing data by external service providers, as less time and, therefore, money is spent on outside attorney review, as less material is passed to them. These benefits are achieved by defensibly culling the amount of data that is passed on to further steps in the e-discovery process, by allowing in-house attorneys to "go back to the well" and refine their searches, either coming up with more data (to avoid sanctions) or refining existing data sets to the relevant documents to pass on for further consideration.

eDiscovery takes place at the request of outside counsel, or before counsel is retained, at the request of an internal legal department. The amount of material turned over to outside counsel for review has a direct bearing on the cost of litigation or regulatory investigation. Opportunities to reduce spending on both the processes of eDiscovery itself and the subsequent review by attorneys of materials obtained during eDiscovery are the heart of the eDiscovery vendors' value proposition.

Using this report, data center managers, information security officers, information architects, in-house legal personnel and records managers can find information to build a business case, create a list of possible vendors and determine which ones best meet their needs.

To review the full Gartner Report, please visit: http://www.gartner.com/technology/media-products/reprints/ca/vol2/article2/article2.html

Labels: 2010 eDiscovery Predictions and Trends, eDiscovery, Gartner, in-house corporate counsel

posted by Charles Skamser @ 2:53 PM