Now we turn our attention to money.
Estimates for the year 2019 show a little over $11 billion will be spent on eDiscovery software and services in the U.S. Three out of four legal operations professionals say their firms would benefit from reducing their eDiscovery costs, according to the OpenText Legal Ops Survey. Around half of the respondents said they have either consolidated their eDiscovery solutions or are in the process of doing so.
Some vendors have muddied the conversation about eDiscovery by presenting cost structures that lack clarity, transparency, and predictability. Once the various options have been deciphered, different models may prove advantageous under different variables.
Each pricing model has pros and cons, so decision makers must choose the model that best fits the amount and complexity of the data to be managed, the expected length of the case, and the technical expertise of the vendor and the in-house staff.
Larger firms and in-house counsel may opt for building out “in-house” litigation support services and software. But most mid-size and small firms will be reviewing “outsourced” solutions so that is where we will focus the content of this blog.
Know the most prevalent pricing models
Choosing a vendor with the pricing model that delivers cost certainty and control for your situation is a critical part of the vetting process when outsourcing eDiscovery projects. There are four basic eDiscovery pricing models prevalent in the market today:
1. Traditional, Line-Item Pricing
The traditional model consists primarily of line-item pricing for each activity provided by an eDiscovery vendor: collection, processing, predictive coding, hosting for review, and production. Vendors will charge an ingestion fee for potentially discoverable content, a processing fee for the operations performed on this data, such as optical character recognition (OCR), image conversion, deduplication, filtering on search terms, culling, and hosting fees.
Using the traditional model, vendors will charge a hosting fee for each month an eDiscovery “job” is hosted on the vendor’s servers, and often a per-seat fee for everyone that must have access to the processed data or tools.
2. Fixed Fee Per Matter or Per Custodian
This model charges a fixed fee per matter and/or per data custodian. In a typical case, each custodian requires varying levels of data volume and process complexity, so this model may not provide good value. If there are few custodians, each with a substantial amount of data to process, this model offers reasonable value. If there are a larger number of custodians, each with a small amount of data, this model is less cost efficient. This model’s primary benefit is cost predictability since there is a fixed fee that is negotiated upfront and the number of custodians is typically well-known, but there is a good chance that a customer will be paying for data or functionality that will not be used in a case.
3. Fixed Fee Upon Ingestion
In this model, an organization gives a vendor all its data for a case and the vendor provides a flat cost per gigabyte ingested to manage the data through to the end of the case.
Although offering high predictability, this model assesses charges before much of the data may be culled. If a customer will be handing off a substantial amount of “noise” that has not been pruned from the data, the customer will be paying for data that will never make it past the initial stage of processing. Conversely if the data set is very “clean”, this cost model offers good value.
4. Fixed Fee for Reviewable Content
The last pricing model charges a fixed fee per record or gigabyte of content, for the duration that the data is actively used in the case. The pricing is proportional to only the data in review and only when it is being reviewed. Customers pay exclusively for what will be useful in their case and they will not be required to pay for data that is not relevant.
All the eDiscovery services provided by the vendor are included in a single fee, not charged piecemeal as in some other pricing models, thus introducing more simplicity. Unlike the fixed per custodian or per matter pricing models, this fixed fee approach bundles easily with the purchase of review, as a price per record is also a unit by which managed document review services are purchased. When technology and review is priced at the same basic unit – the record reviewed – it enables easier end-to-end aggregation and estimation of total cost.
While offering several advantages, there are some potential downsides to this model. The per-document pricing inherent in this model is typically priced by vendors to include the risk of large and complex documents, and so pricing could be high for cases in which documents are simple and/or small.
Comparing eDiscovery pricing remains apples to oranges. It is imperative to weigh carefully the various models, based on the information known to the buyer, and choose the model that best leverages that information. From a strictly value-based perspective, the best approach to eDiscovery project management and scoping will most frequently be one that focuses on content in review during a case. Customers should seek to minimize the amount spent on data that is irrelevant and allocate most of their costs towards the information of highest value. In most cases, this will mean that only relevant records should be reviewed and managed solely for the length of time they are in review.
This concludes our 3-part series of E-Discovery Made Simple and we hope we've provided you with the necessary tools and knowledge to choosing the right eDiscovery solution for your firm.