Understanding Complex Pricing Strategies and Insuring Value for Your Clients
eDiscovery vendors and software companies have been providing document review solutions to attorneys for over 20 years. The service is a necessary component of the legal discovery process and it allows lawyers to examine their client’s documents and determine which documents should be produced to other parties in a litigation. Once identified through review, these documents facilitate legal decisions based on their content and subject matter. The costs associated with document review generally fall within 3 categories: billable time for the senior attorneys managing the merits of the case; billable time for the legal team performing the document review; and costs associated with the eDiscovery vendor facilitating the document review with hosting software and consulting.
The most commoditized and highest dollar spend among these categories is the billable time associated with the legal team performing the review. Due to the volume of documents to be reviewed and the amount of man hours involved in the effort, this process is often performed by contract attorneys at low bill rates. However, even with the low hourly rate, the total cost associated with this effort is substantial. For example, it is not uncommon for a mid-sized discovery review effort to require relevance decisions on over 1 million documents. Given the time and cost involved with reviewing these documents, clients and legal teams have been investing more money into the technology deployed by the eDiscovery review vendors with the goal of developing solutions to minimize the number of documents requiring a manual review.
eDiscovery vendors and software developers have answered the call and have been deploying a wide variety of technical innovations that lower the total number of documents requiring review. Advanced search and culling strategies using concepts, artificial intelligence, and visualizations provide solutions to lower the number of documents that will be placed into the review effort. Additionally, technology assisted review (TAR) solutions have been used to take the place of a human reviewer and in turn lower the overall cost of a document review. Even with all of these technical innovations in use, the overall growth of enterprise-wide electronic communications continues to the increase and as a result the volume of documents requiring review also continues to increase.
As these technical advances have become more prevalent, the total cost of eDiscovery vendors and the technical solutions they deliver has increased and pressure continues to build on these vendors to commoditize their services and lower the pricing of computer aided review solutions. eDiscovery services are typically priced according to standard units of measure related to data volume: data size in gigabytes (GB), document counts, page counts, etc.; and units of measure associated with time: monthly hosting, hours worked, etc. Although the terms used to describe units of measure are generally consistent among eDiscovery vendors, the meaning of these units and the formulas they use to calculate fees vary greatly. Asking the right questions and understanding how your eDiscovery vendor is charging for services can save you and your clients a great deal money.
The most common price point among eDiscovery vendors is data hosting. Without a doubt, hosting tends to be the largest line item over the course of a lengthy litigation. The costs associated with secure, scalable, fast, and maintained internet storage represents a constant cost center for the vendor regardless of the technology or review solution being deployed. Most vendors price this service on a unit basis over time. For example, it is common to see a unit price per gigabyte (GB) that will be charged each month while the data is hosted and available for review. The concept of this is fairly straight forward, however in practice the application of these charges vary greatly. Some vendors will charge for the volume of data that you provide to them and not charge for any data growth that occurs through processing, review and production. Others charge for the full volume of data on their hosting servers during a given month which means the number of gigabytes may start out small, but continues to increase as the review progresses. This data growth is significant - often times equating to 5 or 6 times the original size of a documents loaded to the review platform – this tends to be exacerbated when document productions start to be generated as the TIF images tend to take up more storage space than the files they represent. Additionally, others also charge for the storage of non-hosted datasets associated with the processing and preparation of documents for the review platform, essentially collecting a hosting fee for a duplicate collection of the documents. A buyer may not be aware of the different variables that make up this calculation when purchasing these services, but a reliable vendor can explain their pricing in these areas to clarify any questions that might arise. If you are comparing pricing from vendors and simply use the dollar value associated with the monthly hosting charge as a pricing comparison, you may find that if you don’t consider these other variables, the lowest unit rate in your comparison may not the lowest amount that will be spent on this service.
Additionally, the concept of culling documents from the review based on keywords, metadata, concepts, and visualizations may only remove these documents from consideration during the review. “Culling” may not always remove documents from the review platform and its related hosting calculation. As a result, even if the attorneys running a matter decide that 50% of the documents within the database are outside of the scope of the litigation and can be ignored during review, many vendors continue to charge a monthly fee associated with hosting those documents because they don’t provide a solution to delete documents from the hosted environment.
In addition to hosting charges that recur monthly, eDiscovery vendors also charge for technical services associated with collecting data, processing data, analyzing data, applying TAR technologies to data, and producing data. The pricing associated with these services should reflect a vendor’s experience, expertise, and the technical solutions they deploy. While its typical for vendor’s to also charge for QC efforts to ensure deliverables conform to quality standards, be wary of a vendor that charges hourly to perform a service that is also being charged through a unit fee.
In summary, spend time to understand the charges being presented in a proposal and build out some scenarios to calculate total charges over time based on assumptions of data growth, culling, and production volumes. You may be surprised that the vendor with a higher hosting rate is actually less expensive when considering the other variables at play. Additionally, it’s important to work with an eDiscovery vendor that will partner with you to ensure the legal team is achieving the highest value possible from the technology in use.
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