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 1 Comments

eDiscovery Jumping Back In-House

Gartner predicted that spending on eDiscovery software will grow to more than $1 billion in 2009, up 33 percent from 2008, with much of the spending comming from moving eDiscovery in-house. Bud­gets for man­ag­ing elec­tronic data tripled this year at average-​​sized U.S. com­pa­nies, accord­ing to a study, as busi­nesses braced for an influx of law­suits stem­ming from a reces­sion that’s been partly blamed on fraud. As I have reported on this Blog, I find Gartner's prediction of more spedning in 2009 to be reflective of what I am seeing in the industry worldwide as long as you view the increase from the perspective of increases in in-house IT spending to address the overall need to provide next generation document mangement infrastructure and Governance, Risk and Compliance (GRC) with support for eDiscovery being a willing benefactor.

To add even more credibility to the arguemnt, in addition, a recent survey by Kroll Ontrack Inc indicated in that com­pa­nies spent about $1.29 mil­lion each on man­age­ment of elec­tronic data this year, com­pared with $437,000 last year, accord­ing to the sur­vey by con­sult­ing com­pany.   That is almost a 300% increase. The data, released  in late October 2009, were based on inter­views in June, July and August with in-​​house lawyers and tech­nol­ogy spe­cial­ists at 231 U.S. and 230 U.K. companies.  Again, most of this additional expenditure is probably not showing up as an increase in spending on eDiscovery.

The most recent evidence was reported on November  16, 2009 on the NearShore Journal Site in a press release by Clearwell tittled "Survey Finds 73 Percent of Enterprises Plan to Bring E-Discovery In-House in Response to Rise in E-Discovery Requests".  In the press release, Clearwell announced findings from a survey conducted in partnership with analyst firm Enterprise Strategy Group (ESG). The survey, titled “Trends in Electronic Discovery: A Market Perspective” quantifies both the rise in e-discovery and litigation over the past year. Additionally, the survey findings reinforce the need for increased enterprise readiness to manage the expected growth in volume of cases in 2010.  This is probably the most eDiscovery centric indication of the increase in spending as I would assume that Clearwell was looking for evidence that corporations were spending more money on Early Case Assessment (ECA) solutions

I realize that not everyone in the eDiscovery industry is seeing these trends and reaping the rewards of this increase in speding.  However, the spending is real, it has just jumping in-house and may not be listed under a line item called eDiscovery.

Prediction: With the impdening crash of the worldwide commerical real estate market and the subsequent institutional  failures and eventual legal actions, I see 2010-2012 being even bigger. However, it is not clear if these will be handled in-house or by law firms.  I think that this may be one last bite at the eDiscovery processing apple outside of the corporation.

Labels: Clearwell Systems, Early Case Assessment, ECA, eDiscvoery, in-house corporate counsel

posted by Charles Skamser @ 9:36 AM 0 Comments

Does it Make Sense for Corporations to Bring Litigation Services and Technology in-House?

After having the opportunity to discuss several interesting case studies at LegalTech in New York last week with leading Early Case Assessment (ECA) vendors in which they provided technology for corporations to do their own ECA and then spending some time with the General Counsel of a Fortune 2000 company this week that wants to do his own email archiving and eDiscovery when required, I am beginning to wonder if the proverbial pendulum has swung and corporate legal departments have decided that it is time to bring eDiscovery in-house?

As the amount of litigation, investigation, and regulatory compliance related eDiscovery costs continue to grow at an accelerating rate coupled with the downturn in the world economy, corporations are looking everywhere for ways to reduce costs and eDiscovery appears to be a target rich opportunity.

Businesses and other organizations spent more than $2.7 billion on electronic data discovery last year, and spending on EDD 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 last year on Law.com.

Therefore, looking at this $2.7 billion cost from the perspective of a corporate GC with the knowledge that many law firms are marking costs by at least 100%, it would be natural to assume that it might be less expensive to bring some, if not all, of the eDiscovery work in-house. However, I am going to contend that the issue of what to bring in-house and the actually savings is very complex and therefore it is a path the the corporate GC should consider with great care.

As such, over the next few weeks I am planning to compile a list of issues that the corporate general counsel should consider before making the decision to bring litigation services and technology in-house. Following is my preliminary list:

1. Do you currently understand what you are being billed by your outside counsel and other third party litigation services and technology vendors?
2. Have you talked with them about reducing costs?
3. Have you compiled a list of opportunities to reduce costs by brining them in-house?
4. Is this an all or nothing decision or is there some middle ground to bring some things in-house and leave other things with the outside counsel and third party providers?
5. What technology infrastructure will be required?
6. What eDiscovery expertise will be required?
7. Have you considered the issues with being able to provide the "experts" that can prove that they following the appropriate rules in regards to how your eDiscovery collections and processing was done?
8. Are there cloud computing and or Software-as-a-Service (SaaS) based solutions that may provide a cost effective alternative to building and/or maintaining in-house systems?
9. Does your corporation have enough litigation to justify the cost of a full time eDiscovery department and staff?
10. Are there relationships that you can develop with the 3rd party providers that don't require you to do through your outside counsel?
11. Are there viable off-shore solutions that could reduce costs?

This is obviously not a comprehensive list. However, I would encourage any GC's or staff members from corporate legal departments that are considering bringing eDiscovery in-house to respond to and/or comment on this post with their list of ideas and concerns for reducing eDiscovery costs by brining eDiscovery in-house.

I would also like to encourage technology vendors and other third party service providers to respond to and/or comment on this post with their list of ideas and concerns for reducing eDiscovery costs by brining eDiscovery in-house.

Labels: Bringing eDiscovery in-house, Early Case Assessment, eDiscovery, General Counsel, in-house corporate counsel, reducing costs, Saas, Software-as-a-Service

posted by Charles Skamser @ 2:09 PM 3 Comments