EXPERT ADVISORY. ediscovery Insourcing vs. Outsourcing: A Guide to Self-Assessment SERIES. Advanced Discovery White Paper

Transcription

1 EXPERT ADVISORY SERIES Advanced Discovery White Paper ediscovery Insourcing vs. Outsourcing: A Guide to Self-Assessment 2017

2 ediscovery Insourcing vs. Outsourcing EDISCOVERY SERVICES AND THE CURSE OF INTERESTING TIMES There is a widely-known curse, apocryphally attributed to the Chinese, which goes: may you live in interesting times. Participants in our industry, on all sides, have certainly come to know the meaning of this curse firsthand in recent years, as interesting upheavals have abounded in our markets and industries, in our tools and technologies, and in our standards and expectations. These upheavals have multiplied organizations choices, with new platforms, new service models, and new risks and opportunities all to consider. What has remained constant is that ediscovery services are a critical, complex, and costly component of the litigation process. And, as their invocation becomes a more and more frequent occurrence, organizations of all types are wrestling with the question of which ediscovery services to insource and which to outsource. Corporations and law firms alike are struggling with questions of cost versus control, predictability versus responsibility, transparency versus security, and more. CURRENT CORPORATE CHALLENGES For corporations, the historical role of the general counsel is evolving as legal departments are becoming more like business units, subject to the same financial rigor and analysis as other units. It is no longer acceptable to simply throw matters over the wall to an outside firm to handle. Oversight, accountability, and efficiency are expected of GCs and their legal departments, and this extends to the outside firms, ediscovery service providers, or legal process outsourcing companies they choose to engage. In addition to reduced resources and increased expectations, GCs and their legal departments are also facing some of their most complex challenges ever, many of which have connections to ediscovery, including: ethical issues, regulatory compliance issues, data security issues and data breaches, privacy law issues, and information governance issues. CURRENT LAW FIRM CHALLENGES For law firms, the whole industry is changing as evolving client expectations, shifting economics, and increasing competition make efficiency and flexibility paramount. In the quest for optimal efficiency and competitive advantage, many law firms are adopting business process management practices, including for their ediscovery work and service providers. Others have experimented with secondary revenue streams, including from providing ediscovery services. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 2 2

3 Currently, most firms still work with a pool of preferred e-discovery service providers, and many do at least a little work in house too, but this is beginning to change. For all firms, the inefficiency of this à la carte mix is becoming problematic, and a move away from it is beginning. Increasingly, the question is not whether to aggregate and standardize such work, but whether to do so in house or through partnership with an outside provider. In this guide, we will discuss the potential benefits and challenges of insourcing and outsourcing solutions, common models to consider, and key organizational factors to review when assessing your organization. MODELS, BENEFITS, AND CHALLENGES OF INSOURCING Models All solution models for insourcing (and outsourcing) strike different balances between control, cost, and accountability. Because these factors will balance differently for each organization, there is no one-size-fits-all solution for meeting an organization s ediscovery needs. Some organizations have adopted total insourcing or total outsourcing, but for most organizations, a hybrid solution, in which only some functions are insourced and some aggregated and outsourced, is usually the right one. Broadly, most organizations insource one (sometimes two; rarely all three) of these three categories of functions: 1. Collection and preservation functions 2. Processing and production functions 3. Hosted review and analytics functions The first, collection and preservation functions, is the one most often attempted by corporations, for two reasons. First, it aligns most closely with their existing infrastructure and expertise (e.g., IG, Compliance, IT/IS). Second, it allows the corporation control over the top of the ediscovery funnel to control the scale and scope from the start of the process. The third, hosted review and analytics functions, is the one most often attempted by law firms, for two similar reasons. First, it aligns most closely with their existing infrastructure and expertise (e.g., litigation management, document review). Second, it allows the law firm greater control over the costs and processes associated with the document review phase of the process. The second, processing and production functions, is sometimes attempted in conjunction with one of the other two, but less often than either due to its complexity and dissimilarity to existing organizational infrastructure and expertise. Processing may be paired with collection to further White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 3 3

4 reduce the document population before hand-off to outside counsel, and processing may be paired with hosted review to further control document review and to control production. BENEFITS The primary benefit of insourcing ediscovery functions, for both law firms and corporations, is increased control over those functions. For corporations greater control over what is collected and, potentially, how it s processed and filtered. For law firms, greater control over how analytic and review processes are executed and what they cost to complete. This control allows for tighter integration between functions and customization to an organization s specific needs, potentially leading to increased speed and efficiency and reduced cost over time. Additionally, greater control can be leveraged to implement greater consistency across matters and over time, which reduces risk and enhances defensibility. CHALLENGES The primary challenge of insourcing ediscovery functions, for both law firms and corporations, is the large upfront and ongoing costs of the software and hardware required. Whether a corporation is insourcing collection and preservation, or a law firm is insourcing review and analytics, relevant software licenses can range from tens of thousands to hundreds of thousands of dollars. Hardware costs can be comparable if purchased outright, or more moderate but ongoing if hardware is leased or cloud computing resources are employed. New equipment also must be depreciated over time, software licenses and maintenance & support contracts must be renewed, and all of it must be periodically updated and upgraded to remain current and operational. Additionally, new personnel or new training and certifications for existing personnel will be required to administer and utilize the systems being acquired. In addition to the challenges posed by all those costs, there is the additional challenge of heightened responsibility. Insourcing an ediscovery function makes an organization more directly responsible for how that function is executed, what processes are employed, and what standards are upheld. The organization s employees will become the affiants or witnesses testifying about those processes and their execution. Moreover, there is the additional responsibility being assumed for data security and access control for the new systems acquired and the myriad sensitive materials they will contain. Despite these challenges, there are organizations for which the benefits will outweigh them and make insourcing the right choice for some ediscovery functions. MODELS, BENEFITS, AND CHALLENGES OF OUTSOURCING Models White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 4 4

5 When we talk about models for outsourcing ediscovery functions, we are speaking of aggregated outsourcing of those functions. Before moving to either an insourced or an aggregated outsourced solution, most organizations start out using an à-la-carte approach characterized by: White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 5 5

6 A mixture of in-house and outsourced work, A pool of vendors used for different tasks or projects, and Reactive, case-by-case decision-making about what should be done where and by whom This approach, despite its use of a pool of outside vendors, is not what we mean by outsourcing. We mean managed services solutions that aggregate together all of certain categories of work and outsource those ediscovery functions (just as those categories of work would be aggregated if insourced). Only through aggregation are the benefits discussed below realizable. As with insourcing solutions, all managed services solution models for outsourcing strike different balances between control, cost, and accountability, and because these factors will balance differently for each organization, there is no one-size-fits-all solution for meeting an organization s ediscovery needs. Broadly, most organizations outsource two (sometimes one; rarely all three) of these three categories of functions: 1. Collection and preservation functions 2. Processing and production functions 3. Hosted review and analytics functions The outsourcing of collection and preservation functions, is the one most often attempted by law firms, for two reasons. First, it is the function most foreign to the existing infrastructure and expertise of a law firm. Second, it allows the law firm to avoid making its employees into likely affiants or witnesses regarding collection methodologies, chains of custody, etc. The outsourcing of hosted review and analytics functions, is the one most often attempted by corporations, for two similar reasons. First, most corporations are not in the business of conducting large-scale document reviews themselves, which makes this function the most foreign from the existing infrastructure and expertise of a corporation. Second, it allows the corporation to avoid the substantial sunk costs and ongoing technical challenges of establishing and maintaining such a function internally. The outsourcing of processing and production functions, is commonly done in conjunction with one of the other two due to its complexity and dissimilarity to existing organizational infrastructure and expertise. Most often, processing and production are paired with hosted review and analytics functions for outsourcing because of the close connections between those activities. Collection work, on the other hand, is as likely to go to a service provider with specialization in collections as it is to go to the same full-service vendor as processing, production, hosted review, or analytics work. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 6 6

7 Benefits There are a few categories of benefits to moving from an à-la-carte approach to an aggregated outsourced approach for one or more ediscovery functions. First and foremost, aggregating a category of work together and negotiating a managed services agreement with a single provider allows the organization to leverage that greater volume to negotiate lower service rates than would otherwise be available. Moreover, these lower prices remain fixed for the duration of the agreement (typically one, two, or three years), providing cost consistency and predictability. For corporations, this means reduction in, and better control over, legal spend For law firms, this means more competitive, more accurate bids for legal work The second category of outsourcing benefits are process benefits, which accrue whether moving to outsourcing from an à-la-carte approach or from an existing insourced solution. Aggregating and outsourcing an ediscovery function means that the processes for those functions will be: 1. Designed and managed by subject matter experts in those specialties, 2. Executed using hardware and software tools configured and maintained by dedicated technical experts, and 3. Applied and documented consistently across all matters This takes significant burdens off of internal personnel and resources and reduces risk by ensuring processes consistent with industry standards will always be employed. Additionally, such aggregated processes can be quantified through tracked metrics to facilitate iterative improvement and customization over time, further increasing quality and efficiency. Finally, switching to a managed services solution for ediscovery functions further reduces risk by reducing the vectors for data loss or theft. Rather than attempting to secure litigation data and manage user access itself, or allowing litigation data to become scattered across numerous outside service providers and platforms, an organization instead can have all of its litigation data in one secure repository, in one certified, thoroughly-evaluated environment, all created and maintained by dedicated technical experts. Challenges Of course, outsourcing carries some inherent challenges as well. First, for both legal departments and law firms, outsourcing will result in a lower level of process integration with attorney activities than is possible with an insourced solution. This can result in some loss of efficiency compared to an insourced solution. In addition, the organization will have reduced insight into and control over the processes being employed, which can lead to oversight challenges and frustration. Finally, some organizations are uncomfortable being dependent on a single service provider for a function because of the risk associated with a single point of failure. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 7 7

8 One additional challenge that is unique to law firms transitioning to an aggregated, outsourced solution is the challenge of write-downs and write-offs. In many law firms, it is common for partners to reduce or eliminate ediscovery charges appearing on firm invoices as part of their invoice collection negotiations with clients. In their eyes, it is often preferable to reduce or comp litigation support activities before agreeing to reduce or comp attorney activities. Because of the degree of independence many firms allow to individual practice groups and partners, it is also common for law firms not to realize the full extent of such practices when making assumptions about firm-wide ediscovery needs and solutions. So it is important to investigate and quantify any such behavior in advance. Giving away work for which a firm must still pay a third party is a very different proposition from giving away the firm s own work. Despite these challenges (loss of some control, looser integration, a single point of failure, etc.), there are organizations for which the benefits (cost savings, consistency & reliability, improved security, domain expertise, etc.) will outweigh them and make outsourcing the right choice for some ediscovery functions. CONDUCTING AN ORGANIZATIONAL SELF-ASSESSMENT Process Overview The process of assessing an organization s ediscovery needs to determine the suitability of available solutions has three key parts: identifying and interviewing key stakeholders, gathering and evaluating litigation data, and gathering and evaluating financial data. Depending on the size of your organization and the size of your litigation portfolio, this may be a large undertaking. If you re uncertain about the feasibility of self-assessment, outside experts from service providers (like Advanced Discovery) can conduct such an assessment for you or perform an independent review of your internally completed assessment to provide an outside expert opinion. Identifying and Interviewing Key Stakeholders The first part of the assessment requires the identification of key stakeholders to interview. Key stakeholders would include both current service consumers (in-house and outside counsel, paralegals and legal secretaries, compliance or regulatory departments, IT/IS, etc.) and current service providers (internal litigation support, internal document review, IT/IS, regular outside vendors, key outside counsel, etc.). Ideally, you want to identify at least one representative (preferably more) from each department/entity potentially affected by ediscovery activities. When interviewing these key stakeholders, your broad goal is to gather as much information as possible about: White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 8 8

9 1. How things are actually accomplished now 2. How, if at all, they think those things might be accomplished better 3. How, if at all, they expect their needs/the organization s needs to change What specifics you go into (legal, technological, financial, human resources, etc.) will depend on who you are interviewing and their role in the organization. If you are conducting a large assessment, it will be helpful to pre-write interview scripts specific to each functional area so that the right information is gathered from each group, so that similarly-situated stakeholders all get asked the same things, and so answers are recorded in an organized (and therefore useful) way. For smaller assessments, one higher-level script and more informal notetaking may be sufficient for all interviews. Gathering and Evaluating Litigation Data The second part of the assessment requires you to gather data about the organization s typical and recent litigation activities. This includes documentation of numbers and types of matters, services and service providers used, document volumes and types involved, document review methods and sizes, and more. This information will likely need to be gathered from a combination of internal and external sources (the legal department, outside counsel, service providers, etc.) The goal here is to create an accurate, quantified picture of the organization s ediscovery needs through recent history (including any trends that can be projected forward) and how those needs have been met. This information will be essential for scoping needs and assessing the suitability of potential solutions. Gathering and Evaluating Financial Data The third part of the assessment requires you to gather data about all of the costs associated with how the organization is fulfilling its organizational needs now. This will include not just invoices from outside service providers, but also relevant items from outside counsel bills, internal employee or time allocations, hardware costs and depreciation, software licenses and renewals, employee training and certifications, and more. The goal here is to create an accurate snapshot of what the organization is spending now. This information needs to be sufficiently granular and organized to assess the all-in cost, the typical project cost, the average volumetric prices being paid, the per custodian expenses being incurred, etc. This information too will be essential for assessing the suitability of potential solutions. Bringing It All Together Once interviews have been conducted and answers aggregated, litigation data compiled and insights mined, and financial data gathered and costs calculated, it s time to bring all of this information together in a useful way. Typically, this involves documenting the key insights and findings in a written report to management that is organized around: White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 9 9

10 White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 10 10

11 1. A comprehensive description of the present state 2. A description of one or more improved future states 3. A discussion of what solutions would suit the future state(s) 4. Organizational Self-Assessment: Legal Factors Legal factors, in this context, refers to the specifics of the organization s litigation or investigation portfolio. That portfolio will vary widely from organization to organization, and it will provide the most important set of factors for determining ediscovery needs and assessing the suitability of potential solutions for your organization. Legal factors are assessed through a combination of interviews with legal stakeholders (e.g., GC, AGCs, Partners, Associates, Litigation Support) and reviews of records from past matters (e.g., invoices, software reports, production records, etc.), as described above. Legal factors include: industry and matter types; matter scale and scope; common custodians and data sources; existing procedures and stakeholders; and, international issues. Industry and Matter Types The industry in which an organization operates will dictate a lot about its litigation portfolio. Highly-regulated industries such as energy or pharmaceuticals often carry special document retention obligations, special oversight and investigation matter types, and extensive interactions with state or federal regulatory agencies. Other industries may dictate a primary legal focus on intellectual property matters (e.g., software, entertainment), while others will be focused primarily on contracting (e.g., manufacturers, wholesalers) or tort suits (e.g., insurance). The types of applicable laws and regulations, if any, and the relative prevalence of each matter type will dictate the ediscovery obligations that must be met and the tools that will be best suited to meeting them. Saving everything for years and being prepared for rapid, nonpublic agency actions, requires different processes and tools than being prepared for periodic patent troll suits. Matter Scale and Scope How many matters did you handle in the past year? How many in each of the five years before that? Which way is frequency trending? What about matter sizes for the past year and years past? What s the average volume of materials collected? Processed? Reviewed? Produced? Largest and smallest volumes? What about the values at risk for matters from the past year and years past? Does your organization have a high volume of low value matters? A low volume of high value matters? Does the typical amount at risk vary materially by matter type? White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 11 11

12 Understanding these numbers will help you determine how much technological and human throughput you might need, what kind of peaking capacity or overflow solution might be required, and what levels of risk are really being allocated where when solutions are being chosen. Common Custodians and Data Sources The next legal factor to consider is the custodians and data sources implicated by the litigation portfolio: Are matters repetitive, hitting the same custodians and sources again and again, or one- offs without substantial overlap? Are financial sources the focus? Employeecommunications? Research and development? Contracts, leases, and licenses? Are any uncommon or proprietary data types a recurring issue (e.g., audio recordings, CAD renderings, proprietary ERM/ERP systems records, etc.)? Assessing the custodians and data sources you are likely to need to collect can dictate whether insourcing or outsourcing collection and preservation makes more sense, what tools would be capable of collecting and preserving the needed data, whether reuse of prior data and work product might be effective, what platforms or workflows might be required to review that data, and more. International Issues Additionally, it is crucial to identify any international implications from past cases, or any new international implications likely to arise in the future. The need to comply with relevant data privacy and data transfer laws in other countries can create a need for local human or technological resources sited in those countries, specialized policies and workflows, and more. Does your organization do business in or have customers in more than one country? Does it have employees or data sources in more than one country? If so, do any of those countries have data privacy or data transfer laws that must be observed? If so, how have those obligations been handled and satisfied in the past? Existing Procedures and Stakeholders Finally, as you are assessing the legal factors described above, you should also be probing the actual procedures and stakeholders currently leveraged to meet ediscovery needs. It is often the case that day-to-day realities lead to makeshift solutions, undocumented workarounds, and the involvement of more stakeholders than initially assumed. Understanding not just the official reality, but also the real reality is crucial to designing an appropriate solution. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 12 12

13 ORGANIZATIONAL SELF-ASSESSMENT: TECHNOLOGY FACTORS Technology factors, in this context, refers to an organization s overall technology resources, sophistication, and comfort level. The specifics of this will vary widely from organization to organization, and are the second most important set of factors for determining ediscovery needs and assessing the suitability of potential solutions for your organization. Like legal factors, technology factors are assessed through a combination of interviews with relevant stakeholders (e.g., IT/IS, Compliance/Regulatory, Current Service Providers) and reviews of records, in this case financial records, lease/license records, Hardware Hardware in the discovery context can refer to: discovery-specific specialty tools (e.g., forensic collection kits); self-contained discovery appliances (e.g., a Clearwell or Nuix plug-and-play box); or, general servers and networked storage sufficient to support document processing or review software platforms (e.g., kcura s Relativity) and the large databases involved in using them. If your organization has already invested in one or more of these, you will be evaluating: Whether the current hardware meets current needs Whether/for how long it will continue to meet projected future needs Whether support of this hardware overlaps efficiently or problematically with core hardware functions of the implicated department(s) (e.g., IT/IS, Compliance, etc.) If your organization has not yet invested in relevant hardware, you will be evaluating: What hardware would be required to meet current needs What the expected useful lifetime of that hardware would be What capacity in what departments would be required for support Software Software in the discovery context can refer to enterprise collection tools (e.g., EnCase Enterprise), processing and imaging systems (e.g., Ipro ecapture), or early case assessment and document review platforms (e.g., kcura s Relativity). In almost all variations, these are large, complex, and expensive applications with significant underlying hardware requirements. Thus, if you re an organization with substantial IT resources and a high comfort level with enterprise software deployments, you may have the needed capacity already, and adding key discovery applications internally may be an easy, rational choice. But, if you re an organization with a lean or outsourced IT function, an organization for which new enterprise software deployment is distant from core competencies, then insourcing discovery applications would pose significant challenges. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 13 13

14 Other Factors Whether you are considering hardware acquisitions, software acquisitions, or both, it is important to account for the associated and ongoing requirements that come with your intended uses. Any new systems acquired and deployed will carry facilities requirements, physical and virtual security requirements, allowance for future scalability, and sufficient internal and external bandwidth to support planned usage levels. Moreover, many ediscovery systems carry significant support and up-time requirements to be used as intended. For example, achieving needed processing speed often requires aroundthe- clock operation and support monitoring, as can intensive document reviews. Large document reviews can also require management and support of hundreds of users spread across multiple time zones and locations. These peaking-capacity challenges and support obligations are among the primary reasons that corporations tend to focus on insourcing collection tools and outsourcing review platforms, as discussed above. ORGANIZATIONAL SELF-ASSESSMENT: FINANCIAL FACTORS Financial factors, in this context, refer to an organization s sunk costs, recurring costs, and potential future costs with each solution under consideration. We ll elaborate on each of these categories below. Like legal and technology factors, financial factors are assessed through a combination of interviews with relevant stakeholders (e.g., relevant department heads, organizational finance officers) and reviews of records, in this case departmental budgets, law firm and vendor invoices, hardware and software contracts, etc. The primary difference in assessing this category of factors is the primacy of the records and their analysis. You are attempting to build an accurate financial picture of an unwieldy business function that crosses departmental boundaries, along with its potential future permutations. You will be spending more time with spreadsheets than interviews for this category of factors. Sunk Costs In this context, I am using sunk costs to refer to all the money already invested in establishing the current state of affairs for ediscovery service delivery for the organization, including: purchased servers or networked storage; purchased ediscovery appliances; purchased forensic collection kits; purchased software tools or platforms; and, past investments in recruiting, training, or certifying employees in use of the acquired systems. Your goal is to figure out how much has been spent so far to get to where you are, including depreciation to date and remaining useful life of any depreciable assets, so that you know how White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 14 14

15 invested you are in the status quo and so when combined with recurring costs you can compare total solution cost of the current model with that of your preferred alternatives. These past investments may be spread across two or more different departments within the organization, which can make putting together a complete picture challenging. Recurring Costs Recurring costs refers here to everything currently being spent on an ongoing basis to provide the organization with its needed ediscovery services: This includes internal expenses, like: the salaries for fully- or partially-allocated employees; recurring software, hardware, or facilities leases (or percentages of larger IT leases); and, annual budgets for ongoing training and certifications of employees. This also includes external expenses, like: forensic collection or analysis services; processing and hosting services; contract attorney fees or managed review services; and, ediscovery portions of overall law firm matter invoices. As with sunk costs, this may require combining portions of records from multiple departments within the organization, but it is essential to assessing the real total cost of the current approach so that it can be meaningfully compared to the alternatives under consideration. For law firms, specifically, there is one additional recurring cost that must be considered and assessed: write-downs and write-offs. In law firm billing, it is common for monthly invoices to clients to be adjusted downward to keep clients happy sometimes after a client inquiry or complaint and sometimes preemptively, before the invoice even goes out. In some law firms, it is common for internal ediscovery services to be among the first targets for write-downs and write-offs (along with paralegal hours and other non-lawyer support services). Some practice groups routinely offer free internal ediscovery services as a loss- leader to make their bids for work more competitive. As long as the practice group is still profitable overall, many firms are okay with this approach. It can present a problem, however, when transitioning from an insourced to an outsourced or hybrid solution. Law firms may feel differently about giving away services for which they must then pay a third party, and important practice groups and partners may feel strongly about changes to their standard operating procedures for bids and billing. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 15 15

16 Potential Future Costs How difficult this category of costs is to assess will depend on whether you are assessing a move from insourced to outsourced or the reverse: When assessing outsourced solutions, the providers under consideration should be able to provide clear documentation of the relevant costs. In that scenario, your primary challenge is achieving apples-to-apples comparisons of different providers solutions. When assessing insourced solutions, you will have to build an imaginary model of the new insourced services and document the likely costs of each element. If your organization has little experience in this area, engaging an experienced service provider in a consulting capacity for this stage can be helpful. ORGANIZATIONAL SELF-ASSESSMENT: HR FACTORS HR factors, in this context, refer to all of the employees internal and external involved in meeting the organization s ediscovery needs, along with their locations and training and certifications, and how those things might change, over time, with different solutions. We ll elaborate on each of these ideas below. Like legal, technology, and financial factors, HR factors are assessed through a combination of interviews with relevant stakeholders (e.g., relevant department heads, service providers, peer organizations) and reviews of records, in this case timesheets, invoices, training program records, etc. HR Allocation and Location The first set of human resources factors to be assessed are the allocations and locations of all employees currently involved in meeting the organization s ediscovery service needs. (Do not overlook identifying whoever is providing collection and discovery process-related affidavits and depositions when compiling this information. This is an infrequent but critical task.) For internal employees, this will require interviewing relevant process owners and managers from a variety of departments like legal, IT/IS, litigation support, compliance/regulatory, document/records management, etc. For services currently being provided by outside service providers, you will need to review invoices to quantify what hours from what positions are being utilized by your organization. Additionally, you may need to interview some of your service providers to learn more about the team with which they are currently meeting your needs, when invoices do not supply sufficient detail about the individuals involved. Your goal is to figure out: (a) what percentages of what full-time employees (FTEs) and part- time employees (PTEs) are being utilized to fulfill current needs; (b) how much of that fulfillment is internal White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 16 16

17 and how much is external; and, if applicable, (b) how those FTEs and PTEs are geographically distributed across different office locations: Geographic distribution of FTEs and PTEs is a factor often overlooked in first-time assessments. Switching between insourcing and outsourcing often also means switching between less-centralized and more-centralized service delivery models. For employees in the trenches, handing day-to-day ediscovery work, there is a material difference between interacting locally with an on-site member of a distributed team and interacting remotely with a member of a centralized team in another location. There are advantages and disadvantages to both arrangements, and which balance is best for your organization will be dictated by the kinds of support typically needed by your employees and by the current and desired future workflows for ediscovery projects. HR Training and Certification Once all of the relevant FTEs and PTEs have been identified, the next set of HR factors to assess are the relevant training and certifications that those service providing employees have now, receive on an ongoing basis, renew periodically, etc. For example: Hardware/networking training Software/storage training Legal/discovery training Forensic certifications Processing software certifications Review software certifications Analytics tools certifications Training and certification for relevant employees is another commonly overlooked area that can have significant ramifications. Training and certifications for employees cost money annually, take up employee time frequently, and require planning and administration continually. Failing to consider and quantify these burdens will yield an incomplete picture of the current state and inaccurate assessments of both needs and solutions. HR Current and Future The final set of HR factors to consider are the most difficult because they are projections forward. Once you have fully assessed the current allocations, locations, training, and certifications of the current state, you must attempt to project the change that will occur in HR needs over time under both the current state and the potential new solutions under consideration. What attrition/turnover rate is expected for current staff? How long until an expanded staff is needed? In what functional areas will additional staff be needed? Will staff of different types, with different expertise, become needed? White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 17 17

18 How will training and certification burdens grow or change over time? In addition to the other HR costs, what recruiting expenses will there be? Such projections will always be imperfect, but making your guesses as educated as possible is worth the effort. The more complete your current state picture is (not just in the HR category, but in all of them), the easier these future-state projection exercises will be (not just in the HR category, but in all of them). For areas of the picture where your data is incomplete or your experience insufficient, gather input from your peers at peer organizations to inform your guess. KEY TAKEAWAYS As we discussed at the beginning, the proliferation of new tools and platforms, new service models, and new expectations, have left organizations of all types wrestling with the question of which ediscovery services to insource and which to outsource. Corporations and law firms alike are struggling with questions of cost versus control, predictability versus responsibility, transparency versus security, and more. Beginning to address these questions in your organization requires understanding the models available to you and their respective benefits and challenges. Conducting a self-assessment to assess possible solutions requires quantifying your organization s ediscovery needs and how they are currently being met by investigating key legal, technology, financial, and HR factors. Below are the key takeaways from our discussion of these topics: Current Challenges: Shrinking Legal Budgets and Growing Expectations Corporate legal departments are facing tighter budgets and larger litigation portfolios, coupled with a growing expectancy of business-like efficiency and process optimization. Law firms, in turn, are being asked to do more for less, while also facing increased competition at all levels. Insourcing: Control and Customization Costs but May Be Worth It The primary benefits of insourcing are increased control, customization, and integration, and the primary challenges are the costs, both up-front and ongoing, and the increased responsibilities. Corporations most often insource collection, and law firms most often insource hosting for review. Outsourcing: Surrender Saves but May Challenge Law Firms The primary benefits of aggregated outsourcing (a.k.a. managed services) are the reduction in costs and in logistical burdens, and the primary challenges are the loss of some control and some transparency. Corporations most often outsource hosting for review, and law firms most often outsource collection. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 18 18

19 Self-Assessment: Interview and Investigate to Document the Current State Your goal is to create a complete enough picture of the current state of affairs and recent developments to reasonably extrapolate future trends and effectively compare alternative solutions. Your primary tools are in-depth interviews with key stakeholders and document collection and review. Legal Factors: Diversity, Frequency, and Value at Risk Can Dictate In vs. Out High volumes of matters and repetitive matters can both mitigate in favor of insourcing. High- stakes matters and infrequent matters can both mitigate in favor of outsourcing. Other key factors to consider include commonality of custodians and data sources, potential for international complications, and industry-specific issues. Technology Factors: Existing Infrastructure, Expertise, and Comfort Can Dictate In vs. Out Significant existing technology infrastructure and expertise can lower the barriers to insourcing and make it more feasible. Limited technology resources and experience can make outsourcing much more appealing. Other key factors to consider include security requirements, future scalability, and support requirements. Financial Factors: Sunk Costs, Recurring Costs, and Future Costs Can Dictate In vs. Out Substantial prior investment in ediscovery tools or platforms, and associated hardware, may mitigate in favor of staying the insourced course for the useful life of those investments. Impending upgrade or replacement costs may mitigate in favor of transitioning to an outsourced solution. Other key factors to consider include recurring costs over time, allocation of costs and benefits across departments or practice groups, and current write-off practices (for law firms). HR Factors: Allocation and Location, Training and Certifications, and Expected Future Needs Can Dictate In vs. Out Sufficient existing capacity and expertise can mitigate in favor of insourcing, but accommodating peaking capacity and future growth can mitigate in favor of outsourcing. Investing in ongoing training and certification acquisition and renewal costs time and money, but it yields benefits in improved practices and processes. Other key factors to consider include the importance of geographic distribution and the type and level of support expected by users. FINAL THOUGHTS As we noted above, you also have the option of seeking an outside assessment, if the prospect of conducting a self-assessment seems infeasible or if your organization desires a second opinion on (or expansion of) its own assessment s findings or conclusions. Service providers (like Advanced Discovery) have teams of experienced legal and technical practitioners available to consult on ediscovery process assessments and solution designs. White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 19 19

20 ABOUT ADVANCED DISCOVERY Advanced Discovery is an award-winning and leading global ediscovery and risk management company, partnering with law firms and corporations since Advanced Discovery and its global family of companies, Altep, Millnet Document Services and Legal Placements Inc., offer a complete suite of solutions to clients around the globe, including ediscovery, information governance, Riskcovery and compliance risk assessment, cybersecurity, legal operations consulting, data forensics and investigations, paper discovery and digital printing, as well as legal recruiting and placement. The company employs leading professionals in the industry, applies defensible workflows and provides patented and industry-proven technology across all phases of the ediscovery and risk management life cycle. This devotion to excellence has earned Advanced Discovery inclusion in the Inc Hall of Fame for being named to the fastest-growing companies list for six successive years and recognition as the highest-level Best in Service Relativity solutions partner for five consecutive years. CONNECT WITH ADVANCED DISCOVERY Website Contact Us Blog v p.db White Paper: ediscovery Insourcing vs. Outsourcing I 2017 Page 20 20