Forty billion dollars. That’s the approximate annual budget for discovery in the United States. Most of that discovery involves electronically stored information (ESI) rather than physical items or papers.
It’s no surprise, then, that ediscovery represents a massive expenditure for most corporations. Accurately measuring that spend and minimizing it — while maximizing the value you gain from it — is key to your business’s success. But many businesses don’t realize how much ediscovery costs, because they’re focusing on a single line item instead of looking at the whole picture.
Costs may be hidden within individual cases or dispersed among different departments, preventing you from accurately evaluating your ediscovery spend. Whether you’re managing ediscovery entirely in house, sending everything out to a third-party vendor or a law firm, or something in the middle, there are bound to be areas where you can better capture and reduce your spend.
As Peter Drucker said, what gets measured gets managed. Let’s look at some ways to account for ediscovery spending and effectively manage it.
Three Ways to Frame Ediscovery Costs
The cost of civil torts in the U.S. was estimated at nearly $265 billion in 2010, with discovery costs accounting for 20 to 50 percent of all litigation expenses. Ediscovery costs include legal holds and collections, data storage, processing, staffing needs for IT and legal departments, outside counsel fees, software, and myriad other categories of expenses. We’ve identified three main ways to capture those costs.
First is the linear approach:
SECOND, THERE’S THE HOLISTIC APPROACH:
FINALLY, WE HAVE THE DIRECTIONAL OR PAYEE APPROACH:
THE LINEAR APPROACH:
Preservation alone can cost a large company over $2.5 million per year — and most of that preserved data will never even advance to collection, much less later stages. Consider making a decision tree to guide your data preservation and collection strategy. Harris often uses this flexible approach with clients to account for all the moving parts that affect discovery in any given case. “There are so many factors to weigh, including the judge, the venue, your adversary, the specific facts, and any experts or key factual witnesses. And then you have to account for the number of custodians, how you’re going to negotiate and narrow the scope, what kind of data types and data volume the company has — it helps to have a customizable approach, recognizing that every case is different.”
Ensure that you aren’t overpaying for data hosting as you progress along the EDRM stages. If a project is temporarily inactive, you shouldn’t have to continue paying the active hosting rate for it. An in-house data-hosting and management system that allows you to effortlessly toggle projects between active and inactive statuses can make a sizable dent in your storage costs.
Finally, given that discovery costs accumulate as a case proceeds, aim to minimize the time you spend on a matter before making a decision about it. The faster you can reach an informed decision, based on a solid understanding of the facts, the more cost-effective your ediscovery process will be. In-house ediscovery offers a distinct advantage in this regard, as it eliminates the weeks or even months you might have to wait for a law firm to analyze your data, improving your speed to insight.
THE HOLISTIC APPROACH:
With staff, make sure you’re accounting for training as well as hiring and retention costs. Additionally, you’ll need to increase your budget as you decrease your reliance on external service providers. Harris observed, “I’ve seen companies trying to bring ediscovery in house without increasing their resources. Remember that your IT and legal departments are already spread thin. If you’re asking them to do more, you have to give them more resources to work with.”
THE DIRECTIONAL APPROACH:
This last method of assessing costs asks a familiar question: do you want to rent or buy? As it does in the housing market, renting has its advantages and disadvantages. It can be efficient over the short term, especially when initial capital is low, but it leaves you at the mercy of a landlord, or, in the case of ediscovery, at the mercy of the vendor or law firm handling your data.
Everything that you do as a business to better understand your data saves you both time and money, on this matter and on every matter to follow. The better you can quickly categorize and locate data, cull it down to its essentials, and eliminate it after its useful life is expended, the better you can protect your bottom line.
If you’re ready to start investing in your own business instead of sponsoring external vendors or law firms, start calculating the ROI of in-house discovery today.
- Zapproved ROI calculator
- Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery
- 13 Filtered Ediscovery Statistics to Warm up for #LTNY16
- Defining the Problem of Cost in Federal Civil Litigation
- The Ultimate Ediscovery Guide: A Six-Step Approach to Moving Ediscovery in House (and Part 2)