Editor’s note: This is the fourth installment of a series examining the ways in which firms are managing e-discovery work and whether there is profit to be had in such endeavors.

When it comes to e-discovery software, manufacturers need to serve multiple masters in multiple ways.

As corporations look to handle more of the e-discovery process in-house, they are looking for one software that can handle everything from collections to production, software providers said.

But on the law firm side of the spectrum, multiple software platforms are being used within one firm — and they all have to be able to “talk” to one another. Even if a law firm uses only one platform, chances are opposing counsel uses another and that attorney needs to be able to read what she is being sent.

About 10 years ago, many e-discovery software solutions were written directly by the service provider or consulting company, according to Nick Robertson, head of sales and marketing at kCura, known for its software platform Relativity. For the past five or so years, customers were looking for more “shrink-wrapped” software solutions. Now, clients are demanding those off-the-shelf products talk to one another, Robertson said.

Robertson likened the process to using Google’s products for spam filtering while operating on Microsoft’s email platform.

In the year or so since AccessData purchased e-discovery platform Summation, the company has looked to expand Summation’s capabilities beyond its traditional use by a number of law firms as one of the first document review platforms to include early case assessment functionality on the front end and broader review capabilities toward the end stage of the e-discovery spectrum.

As part of the upgraded technology, Director of Legal Marketing Caitlin Murphy said, AccessData has created its own export software that includes a drop-down box of seven different competitors’ file types to make it easier for firms and corporations to share data.

Where the Clients Are

Craig Carpenter, vice president of marketing at Axcelerate software manufacturer Recommind, said the company has increasingly worked with corporate legal departments and that segment group has now outpaced the law firms the company services.

On the law firm front, the question comes down to whether the firms want the technology, which is known for its predictive coding capabilities among other functionalities, in-house or hosted on a cloud. Increasingly, he said, firms are moving to the cloud.

“In the last year or two, big law firms seem to find themselves at a fork in the road,” Carpenter said.

They are either doubling down on the technology and people they have invested in to handle the work in-house, or they are outsourcing to managed services providers that are using the various software available, he said.

The reason many firms are outsourcing, Carpenter said, is to avoid chasing the better mousetrap when it comes to upgrades in technology and reduce the headcount within their firms.

“There’s an increasing number of firms that have said, ‘We’ll just work with strategic partners on the outside,’” Carpenter said.

A few years ago, Robertson said, conventional wisdom was that in order to get a hold of e-discovery costs, firms needed to “build a factory” in-house. Then the pendulum swung back in the opposite direction and, in the last year, has settled somewhere back toward the middle with firms having some capability to handle e-discovery in-house but often hosting it with a managed services provider, Robertson said. That model “represents a state we will see for a while,” he said.

KCura provides the software, which is then run by the firms that buy it or the vendors that use it. Robertson said there are 74 law firms that have purchased a license for the software. There are a total of 215 licenses out there, across law firms, corporations, government agencies and vendors. Through the vendors, 3,500 different organizations use Relativity each month, he said.

Murphy said that while large firms and corporations are the vanguards in using e-discovery software, smaller shops are getting into the mix. She said Summation has a version with limited data and user amounts at a lower cost that is good for a smaller firm with smaller amounts of data to manage.

Outside of the e-discovery realm, AccessData has provided forensic consultants and law enforcement with mobile phone forensic capabilities. That is starting to catch on in corporations and law firms, Murphy said. As more people use personal phones in the workplace, the “smoking gun” could often be found there, she said. AccessData brings in a tablet-like device that hooks up to a phone and downloads the data for easier viewing. The e-discovery clients are starting to ask for this, Murphy said.

Tempering the Price Shock

While tech lovers get into the industry out of a love for the ever-changing advancements in their respective fields, that is exactly why many law firms stay away from spending millions of dollars on e-discovery software.

The software industry has now looked to temper firms’ fears of backing a losing horse through moving away from charging a licensing fee and instead offering annual or multiyear subscriptions.

Robertson said software companies have to stay in close contact with their users to know what isn’t working or what they like better on other software. KCura conducts a few detailed interviews a week with clients to that end and has also created an online community forum on its website for users to vote on ideas the company is considering implementing.

Relativity is offered on a subscription basis. Firms can purchase a three-year subscription and, if kCura doesn’t do a good enough job of keeping the software relevant, firms can choose not to renew for another three-year term, Robertson said.

It’s both the law firms and law departments that are forcing software developers to “bend the price model,” Carpenter said.

Corporations may have a good handle on how many matters they average a year, but one thing that continues to go up is the amount of data involved. Carpenter said the prices in the marketplace aren’t coming down fast enough to keep up with the increase in the terabytes of data corporations are dealing with.

Vendors have talked about moving to subscription rates for years, Carpenter said, though he noted Recommind never had until just this summer when it launched Axcelerate Unlimited. Carpenter said the product is geared more toward corporate clients who aren’t concerned with how much volume they may have to process, but rather just need a set price they can rely on for budgeting purposes.

In the last year or so, law firms and corporations have seemed to gain a better understanding of their annual e-discovery needs and are more willing to sign onto a software deal, particularly when it is a subscription and not an outright purchase, Carpenter said.

He said Recommind can sign multiyear deals with large corporations with a discount built in for the second or third years. The company also allows for the parties to sit down after year one and determine whether the volume is there to warrant the subscription rate as it was initially structured and tweak it if need be, Carpenter said.

There’s no one-size-fits-all, Carpenter noted.

That seems to be true of the technology, the pricing packages and the end users when it comes to how the legal industry is combatting the ever-growing layer of litigation that is e-discovery.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.