This is the first of three articles to assist with cost factors and ROI for e-discovery.
Assessing e-discovery costs can be challenging. Compared to outside legal fees or offers of settlement, the value isn’t always transparent. So it may be useful to assess e-discovery technology by return on investment (ROI).
ROI as king
There is rarely investment without projection of return. ROI weighs heavily in any spending, whether for new product development or a marketing campaign. Usually expressed as a ratio of savings over the cost of investment, for technology it also includes total cost of ownership (TCO). In this study we look simply at cost factors and ways to assess savings.
Early in the era of litigation automation, counsel asked, “How many boxes would justify automating my case?” The costly repetitive task was to identify documents needed for witness kits. You could compare the cost to prepare 10 witness kits from 10 boxes to the costs of scanning, OCR and database work. You might have found savings in one project, even with the cost of hosting. If you invested modestly in hardware and software, you might recoup costs in two or three projects and save considerably thereafter.
By current e-discovery standards this model is correct but crude. Assumptions for e-discovery costs are more complex and the variables can often be hidden.
Eschew too much review
E-discovery leaves no doubt that you need technology support. You cannot, for example, pre-identify only relevant emails for review, or alternatively, review every email for relevance. No one has the time and almost no case has the budget for that.
A large and recent study indicates that “with more than half of our cases reporting that review consumed at least 70 percent of the total costs of document production, this single area is an obvious target for reducing e-discovery expenditures.”
What e-discovery spending might yield overall savings in cost? Will the funds dissipate by the document and the hour, or might you get some tactical value for the budget?
Interview first, ask questions later
Forget technology for a minute and get some data from interviews of business clients and IT staff. You need these interviews anyway, so ask a few extra questions that will help to assess costs for technology and review. These are some of the variables and assumptions you need:
- Number of custodians
- Number of gigabytes
- Estimated number of files and emails (totals and per-gigabyte)
- Estimated rate of reduction
- Estimated percentage of total likely to be produced
You also need to know the total and the average sizes of mailbox and files per custodian. Can you make some assumptions about what percentage of ESI is likely to be responsive?
What’s more, how will you review for production? Will it be one pass by law department staff or multiple passes by outside counsel or contractors? What is the average cost per hour, and what is the estimated average rate of review?
Finally, challenge staff or consultants on methods for reduction. Your “reduction rate” is the percentage of the collection that you will review to reach the production set. Reduction may include de-duplication, near-duplicate detection, date range filter, use of ECA tools use of concept analytics and keyword filters that have been tested, revised and refined
Each task comes with an associated rate per custodian, hour, gigabyte or document. Each has an associated cost whether you use inside or outside resources. But it is not enough to compare rates. You want an estimate based on rates applied to your assumptions. Here are some examples why:
- Two vendors have identical service levels and identical rates for reduction, processing hosting, and production. Assuming reduction rates to 40 percent, one charges $8500 more for a 50-gigabyte project because it performs data reduction after processing rather than before.
- In the same project, concept analytics costs $100 per gigabyte versus basic keyword and other data reduction at $50. Performed correctly, they might yield reduction to 40 percent and 25 percent respectively. The cost of reviewing the difference of 15 percent of the collection at an average of $90 per hour may cost $11,250 or more.
- Usually, a review for privilege is for use on a single case. But with one particular workflow, for key clients who are often deposed, you may be able to reuse some of the privilege review.
To assess value, compare the total costs of technology and inside and outside services to the total costs for review. If you can substantially reduce review by incremental use of technology, you are likely moving in the right direction. If you are looking to compare internal investment and staffing to outside services, please watch for part two of this series