The cost associated with ediscovery insourcing and increasing dedicated ediscovery personnel and hardware has skyrocketed in the last few years. To keep pace with dramatic increases in data scale and complexity, many organizations are facing increases in annual ediscovery spend without the accompanying ediscovery budget to support it.
This conflicting need and resource allocation is swinging the pendulum back towards reduced insourcing in favor of sending matters to vendors or moving to a full managed service offering for many organizations. A recent survey conducted by Ari Kaplan found 76% of corporate respondents would consider an ediscovery managed services subscription to lower their annual spend and over 50% currently employed an outsourcing model.
In response to this seeming paradigm shift Kapln noted, “I’ve been studying the insourcing component for years now, and it’s like a pendulum swinging back and forth.” He explained that the level of insourcing “tends to be dictated by the size of the matter and the sophistication of the organizations. Very few organizations will handle very large, significant matters on their own, and many organizations will try to address small compartmentalized matters themselves.”
In my prior life running a global ediscovery program, these were the 10 main drivers that impacted a decision to insource vs. outsource a matter.
1. Data volume
The sweet spot for most law firms and even many enterprise clients to manage matters internally generally ranges from a few hundred GB to a terabyte (TB) or possibly two if the internal program is especially robust. Beyond that, the ability of most discovery programs to scale to support a massive multi-million document, multi-terabyte case diminishes.
As data volumes on matters increase, many discovery programs are scaling up their ability to support higher volume of data — but there is a limit. When, for example, I had a client who wanted to migrate over 50 TB of data, the decision to outsource was not a difficult one. A cursory discussion with my IT department quickly let me know that it would be time- and cost-prohibitive to maintain internally. For context, adding an additional instance in a single city of my review platform and analytic platform ran north of $500,000 for personnel, hardware, and software.
On a matter-by-matter basis, practitioners make similar calculations based upon their individual program’s capacity and flexibility to scale. Relying on trusted partners to offer excess capacity and to handle matters that outpace internal infrastructure is a common solution.
2. Weird data
Weird data is the new normal. Increasingly, key data for an investigation or litigation is resident in atypical data sources not supported well by the suite of tools deployed in most on-prem solutions. From ephemeral messaging to collaboration tools and various instant messaging applications, there is a wealth of potentially relevant data that does not always play nice with off the shelf ediscovery technology. To bridge this gap, I increasingly relied on middleware and parsing capabilities developed by my technology partners. I did not have the engineers or expertise internally to develop these custom workarounds and scripts, but partners like DISCO had a stable of engineers continually innovating around weird data and bridging that gap.
3. Global data
With the influx of global data privacy regulations like GDPR, China’s state secrets, and increasingly frequent domestic regulations relating to data privacy, the location of data played an important role in the determination to outsource. When data extended across multiple geographies and was beholden to local regulation, outsourcing to a partner with an appropriate global footprint is key. Expanding globally to keep pace with evolving regulatory obligations was not tenable.
Thus, relying on my partners was necessary. Technology partners with global data centers and/or localized global private clouds (like what DISCO deploys) extended my capabilities and enabled me to handle matters that would otherwise be problematic.
4. Sexy analytics or middleware I did not yet possess
As anyone who has worked in a corporate or law firm discovery program can attest, the process to bring new technology is an arduous and slow one. When new and sexy solutions entered the market, at best I could hope to build the business case, run a pilot, and get the requisition to and through procurement in 18 months.
Technology and the challenges facing practitioners are constantly evolving and require continual investment to keep pace. When there was a pressing need for an active matter to use an emerging technology, I could not react quickly enough directly through internal channels.
To expand the capabilities of my team beyond our internal stack, I often engaged with technology partners that had the sexy tools I wanted to try. Using my outsourcing partner as a pilot program and building up internal stakeholders with experience using and liking specific functionality greatly reduced my time to bring new solutions in-house and enabled my program to offer more robust partnered solutions that kept the firm cutting edge.
Much like adding new tools to my stack, adding additional headcount, hardware, and software suffered from the same latency. The budgetary cycle, need for comprehensive business cases with ROI, and a slow-moving procurement process all contributed to slowing down scalability and adaptability.
For some organizations, their program may not have approval to expand in terms of either infrastructure or headcount. This is especially true for small to mid-sized law firms or corporations.
In the case of a law firm, the ability to leverage a much larger footprint through a partner allows the firm to take on cases that may otherwise be beyond their reach. Furthermore, organizations facing a large “bet the farm” matter are able to have the appropriate volume of computational power and personnel to support a large matter without undertaking longer-term permanent capital expenditures for hardware, software, and personnel.
When my program was at or near capacity in terms of humans or hardware, I was often forced to outsource because I could not shift resources quickly enough. Simply hiring the right person to alleviate overworking the team could take months — and hardware procurement was not much better. Having a few trusted partners on deck allowed me to quickly scale up in the interim. This was especially helpful in the event the matter was a one-off and the overall workload did not justify capital investment across the program.
Certain matters benefit from the optics of engaging a neutral third party. Whether a joint defense, a case involving my firm, or case that was extremely high profile, in some instances having some separation from the ESI was necessary.
7. Expertise and 24/7 support
Certain types of matters require a greater amount of support than my arguably great internal team could offer. Whether it was the ability to testify on specific forensic findings, support a large case team 24/7, or knowledge related to a specific niche subject matter, technology partners offered a way to bridge the knowledge gap and support even the most complex matters. This expertise comes at a fraction of the cost of directly hiring professionals with this niche subject matter expertise.
8. Cost savings by matter
Managed services and subscription-based models offer benefits to the service provider in terms of predictable revenue and larger volumes of data. As a result, the pricing structure offered to incentivized buyers is more favorable than standard one-off transaction prices.
These cost savings can either be passed on directly to clients or used to build in profit margin in the event that a firm is creating a profit center around their ediscovery services.
9. Data security
As we have seen with recent high-profile hacks, law firms in particular are targets for malicious actors. According to one study, 73% of law firms failed cybersecurity readiness testing. When you consider that the average cost of cybercrime to U.S. corporations is above $1M, this statistic is concerning. When you factor in the slow speed with which enterprise and law firms alike are able to adapt and scale up infrastructure and expertise, the option of outsourcing to certified, security-vetted managed service providers like DISCO becomes more appealing.
Law firms and corporations seeking to handle everything in-house often have difficulty in meeting the requirements of HIPAA, SOX, FINRA and client-driven security assessments. Working jointly with certified technology partners has the added benefit of assisting in passing these security audits.
10. Long-term partnership
In some instances, the drivers to outsource extend beyond a one-off need for scale or expertise and organizations may contemplate a managed services arrangement where the entirety of an ediscovery program is supported through a third party. Long-term managed services partnerships in lieu of transactional one-off engagement allow an organization to create a more impactful collaboration and to demand more from their partners. In particular, business intelligence across multiple matters, a dedicated playbook, and wealth of institutional knowledge across a larger portfolio of cases can provide great value.
The more matters of varying types you collaborate with the same provider on whether in a transactional or managed services basis, the more data points you and they have to optimize the collaboration. A long-term ediscovery partner can ramp up more quickly and ultimately help lead the discovery process in a more efficient, speedy, and secure manner.