eDiscovery – in-house or outsource?

A couple of pieces have more than caught my attention recently, largely because they were written by people I know and respect well in the industry. One was by Brad Harris of ZApproved in the USA talking of key considerations for corporates bringing eDiscovery in-house. This was published in Charles Christian’s Legal Technology Insider (as an aside, I have known Charles for many years and indeed I used to live quite close to him in a beautiful rural part of the UK before the lure of the City of London took me there!).

The second was by my good friend Jo Sherman of EDT on similar lines when she asked why corporates were more inclined to bring eDiscovery in-house than law firms. I briefly commented on Jo’s piece in Linkedin contributing my “2 cents” but having thought more and then seen Brad’s article I felt I might make it “4 cents”!

Firstly, they are both right (who am I to argue?) in that more corporations, particularly in the USA have brought or are bringing eDiscovery solutions in-house. Brad gives a number of compelling reasons and Jo talks on the same lines. In my view, two huge drivers for corporations are information governance and their annual spend on eDiscovery. If you are a corporation that is either subject to a regulator or you are litigation prone, then of course it makes perfect sense to get your house in order as to the former and to look at costs reduction as to the latter. Both Brad and Jo speak far better than I can on the subject of cloud computing which is clearly of material assistance here, and the security and costs savings are incontrovertible once the decision to bring in-house has been made.
 
So, if it is that much of a “no brainer” why are there not more law firms with an in-house solution? I want to add a little more meat to the comment I made on Linkedin to Jo’s piece.
Firstly there is clearly a capital outlay or annual licence fee for the software and users, which is not exactly “cheap”. Then there is the cost of infrastructure to support the platform and store the ever burgeoning volumes of data – not just storage costs but secure storage costs to combat cyber attacks on law firms which are prevalent and increasing. Yes, the cloud can be used to lessen these costs and fears but they still cost! Next, is staff to properly manage the infrastructure and then more staff to manage the solution. Those of us within the industry know all about the difficulties (and cost!) of recruiting good quality experienced, technical staff who understand this field.
 
In my view there are three more important factors. One is keeping pace with the technology. Brad said this is not a problem as upgrades deal with this. I do not wholly agree. As is my norm, I am not mentioning names of specific software but there is a “graveyard” of dead or dormant installations that found their way into law firms years ago only to be consigned to archives as the lawyers prefer more modern solutions. Solutions are ever changing but some never catch up or include the kind of features that you want. Some solutions need a complete “re-architecture” and that cost is so great it is not covered within an upgrade. Some solutions disappear or change dramatically as the company goes into liquidation or is sold and the playing field changes markedly with new owners. 

The next consideration concerns the cloud and possible effects on Data Protection and Privacy. Where exactly is the data stored? I know there are varying types of cloud installations and storage, which can deal with this point but it is yet another problem for lawyers to consider.

Finally, there is the main problem – ROI. How do lawyers recover the cost of the capital outlay and the ongoing costs? Truthfully, and of course I am speaking generally, they find it very difficult to do so. In the same way, law firms have in house Litigation Support Managers and teams, then they decide to dispense with this cost and outsource, then they bring someone in again. We have seen it all before so many times. The big problem for a law firm is they often do not know how to bill their clients for these services. A separate line item every month for technology and or users (imagine the problems here when the client questions the number of users and hours etc.)? A hike in hourly rates to cover the notional costs? Again, imagine explaining to a coveted corporate client the reason that your rates are higher than the law firm next door because you offer this service in house. Mostly, lawyers will take the easy way out by using external providers and billing the client as a disbursement each month.

Let us be clear, there are many, many law firms in the USA with an in-house solution although many still use external providers for some matters. In the UK, there are very few (there used to be quite a lot in London but they got burned!). In Australia a number of the larger or long standing firms have in-house solutions but out sourcing is still high. In my short time in SA I have come across one major law firm which has brought some aspects of eDiscovery in-house and have done it very successfully. Indeed I take my hat off to them as they did it for reasons which apply very much to them in particular and they are smart enough to know that some cases need to be outsourced.
 
In summary, this is a debate which will be perpetual and as I said at the beginning, here is my “4 cents”.