E-discovery Profit Center: Changing Law Firm Economics – Part Three

September 18, 2013

Law moneyIn this final installment on changing law firm economics, I want to discuss the nuts and bolts of making e-discovery a profit center. Discovery has evolved in the past 30 years to include a variety of technology and personnel that were previously unnecessary. Paper-based discovery was transformed into computer-based e-discovery. The e-discovery model relies heavily on vendors who make millions from imaging, hosting, processing, and outputting data into reviewable format for other vendors who specialize in providing document review teams. All of which occurs outside of the law firm revenue stream.

Prior to the existence of predictive coding, keyword search was the only reasonable means of culling large electronic document sets. The results from keyword search had to be reviewed by low cost document review teams, as this was the only economically viable option for law firms. The document sets returned from keyword searches were (and are) generally very large. The law firm has high cost per man-hour that a document review vendor can easily undercut. The option to review in-house simply was not cost effective or time efficient. But the methods and means of predictive coding is giving law firms a competitive edge over e-discovery vendors and document review teams.

This edge is a two-fold result of predictive coding. First the training of software by a senior associate or partner familiar with the case is an initial higher cost input.  But those few hours upfront result in a much smaller responsive document set to review. This document set can then be reviewed by an in-house team of associates in a smaller time frame. This allows the law firm to bypass the e-discovery vendor and the outside document review teams.  The same services can be provided to the client for a much lower cost (fewer documents to review means less time, and less time means it becomes a task that the law firm can manage in-house).

Second, by bypassing the outside vendors, the law firm can now reap the revenue stream that comes from providing this service to its clients. This revenue stream allows the partner who specializes in discovery and litigation strategy to turn their role into one of revenue-generating instead of a necessary cost. For example, in a larger commercial litigation involving 100s of GB of data, the partner over the case can redirect the client expense of processing and review to a revenue stream of billable hours. The charge to the client will cover the hours the partner or senior associate trains the software, and then the review of final responsive documents.

Other benefits include more control over the e-discovery process. As many attorneys have seen, the back-and-forth that comes with communicating with outside vendors can range from effective to time consuming to costly. Not only do the outside vendors have to communicate to the lawyers the information they discovered, but as is common for lawyers, there will be a multitude questions asked to fully understand what was and was not discovered. In addition, the attorneys at the firm still need to review the most responsive documents themselves. All of these tasks add up in time and money for the client that can be streamlined with the use of predictive coding. It will also mean one less conversation with the client explaining why it is critical that they hire an expensive outside vendor and why they should pay for the added costs of review, when they are already paying the firm for the attorneys’ time.

Predictive coding can be implemented in a variety of ways, and it is not an all or nothing process. Incremental adoption is an option, and will give attorneys and litigation support staff time to understand the usefulness and revenue streams that can come from the implementation of predictive coding.

Predictive Coding: Changing Law Firm Economics – Part One

Software Expertise: Changing Law Firm Economics – Part Two

E-discovery Profit Center: Changing Law Firm Economics – Part Three

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