D4 eDiscovery Service Blog
Feb 14
2013

By Josh Headley, Discovery Engineer

4 eDiscovery Service Provider Myths: Service Providers do not have unlimited funds and resources, they do not recover much labor cost through billable hours, "Hosting fees" are not "data storage fees", ESI “processing” is far from a commodity service.After a near 6-year tenure as a litigation technology specialist at an AM100 law firm, I decided to hop over the fence into the backyard of what e-discovery technologists refer to as “the dark side.” No, I’m not referring to the iconic 1973 song by Pink Floyd, nor am I tipping my hat to any Star Wars fans, although I appreciate the use of music and movie references to liven up an otherwise drab topic. I am referring, of course, to the continuously evolving microcosm of eDiscovery service providers, or “vendors” to use a rather crude term (I’ll address this later.) Was the change due to dissatisfaction? A feud? A particularly difficult partner? Not in the slightest. The change was due to, well, change itself: the innate human needs to learn, to grow, to develop. So far so good.

In Part One of this blog, I’ll describe some of the common myths and rubs that are typically associated with e-discovery service providers. Many of these items are things I’ve experienced or wondered about myself, but never had an answer to until my perspective changed. In Part Two, I’ll describe some of my observations from the dark side of the industry that relate to the law firm / service provider relationship.

OBSERVATION #1: As it turns out, service providers do not have unlimited resources.
I always pictured our service providers’ data centers as barn-sized warehouses filled with racks upon racks of humming servers. Tiny LED lights blink on and off in rapid succession like an Ibiza discotheque at 4am, indicating the continuous processing of all those 1’s and 0’s. The barn’s pipe out to the Internet must resemble the Keystone Oil Pipeline, stretching thousands of miles and tall enough to stand in. Inside the nerve center, hundreds of drones buzz feverishly around an endless expanse of LCD screens with bar charts, pie graphs, progress bars, alerts, and widgets of every design. Devices and hard drives come in through the loading dock on pallets, a Coin Star-like machine automatically performs data triage, someone hits the “Easy” button, and load-ready datasets shoot out the other end like assembled iPhones at a Foxconn plant. On the desk of the Queen sits a red telephone, just in case.

This, of course, is not reality. Just like in your own place of business, there are finite resources to shuffle around in service provider land. The beehive is of a certain size and, unlike bees, we cannot simply reproduce overnight to augment our capacity to do work. What I have found impressive, though, is the amount of work each bee can accomplish.

The technology tools available today for eDiscovery and forensic work are rather amazing. If you’ve been living on this planet for a while, take a minute and close your eyes (after you read the rest of the paragraph, of course.) Picture some of the computing hardware and software you used to use on a daily basis, say 3, 5, 10, 20 years ago or more. It’s enough to make you smile and shake your head. As a service provider, we owe it to our clients to walk along the bleeding edge of technology each and every day. We tirelessly take new tools for test drives and, basically, do our best to break them. Your e-discovery partners do the very best they can with the bees in their hive.

OBSERVATION #2: Despite the number of bees at their disposal, service providers generally do not recover much labor cost through billable hours.
Law firms, if the past century of history is any guide, are infinitely skillful at passing the cost of labor through to their clients. E-discovery items you are billed for include, but are certainly not limited to: digesting the claims, demands, protective orders, and discovery agreements; interacting with the client’s IT staff; advising clients on preservation methods; performing custodian interviews; devising document culling and review strategies; monitoring review progress and managing reviewers; providing ongoing status updates to clients; and managing the document production process. Any reasonable person would argue that these are generally valuable services that the executor should be compensated for providing.

On the other hand, the following tasks are generally performed by the same labor pool and billed at the same rate: time spent moving data around; troubleshooting software and processing errors; performing data processing and QC’ing images; helping staff print an entire discovery database; assisting legal teams with keyword search syntax; and burning, labeling, and mailing CD’s. An ethical service provider would never nickel-and-dime you over these tasks. The sum total of this labor will manifest itself on your law firm invoice under such narratives as “Strategize with legal team regarding deposition preparation.” Translation: “I ran a search for the deponent’s name, printed all the resultant documents (single-sided), put them in a colorful binder with tabs, and FedEx’ed them to the deposition site. This activity took me 3 hours at a billable rate of $200 per hour.”

Absent a specific consulting engagement, many service providers also swallow the costs of providing the more value-adding services outlined earlier in order to foster and maintain relationships with clients. It’s normal to see such fees come through on a law firm invoice, but in many cases service providers aren’t afforded the same luxury.

OBSERVATION #3: “Hosting fees” are not “data storage fees.”
Yes, they are generally tallied by the number of gigabytes in storage or promoted to review. No, they are not simply a pass-through charge for disk space. I always wondered why it seemed to cost so much for our service providers to store data on a server somewhere and why it cost me $10-100 per gigabyte per month. After you buy a computer from Dell, do they send you a bill every month based on how much of the hard drive you have filled up with pictures, movies, and e-mail ? Of course not. Why do service providers do this?

Well, after leaving BigLaw and pitching my tent in D4’s backyard, I realized that there are many hard and soft costs baked into that “hosting fee” that are borne by the provider. There is overhead for physical infrastructure including hardware, availability of Internet and electrical connectivity, on-premise security, heating and cooling, and disaster recovery. On the softer side, there are document review software license fees, ever increasing VM Ware invoices, ongoing software support and maintenance fees, and utility bills. On the human side, the hosting fee includes nearly all of the labor from the left side of the EDRM to the right: project scoping, solutions architecture, media intake, processing, culling, loading, troubleshooting, quality control, litigation support, running productions, and getting the deliverable to the client. Hosting fees deliver a much larger scope of services to the client than simple data warehousing.

OBSERVATION #4: ESI “processing” is far from a commodity service.
Before I started doing this type of work myself in a former life, I imagined that service providers operated a series of underground sweatshops in humid climates that employed both human and primate labor to “process” ESI. Situated right next to the Nike labor camp, the ESI processing camp (EPC) employed the boys, girls, chimpanzees, and orangutans with the fastest mouse-clicking skills. I imagined that Spider Monkeys were particularly good at it due to their reflexes and high energy. All that’s needed to succeed at EPC is the ability to hit “Next” and “OK” in the processing software as fast as you can because, well, that’s all processing is, right?

Not so much. What is viewed by many as a fully automated process or simple button-clicking actually requires a great depth of general computer knowledge, problem solving skills, and attention to detail. Most files process just fine, but it takes a keen eye to note the discrepancies, abnormalities, and gotcha’s. The operator also needs to be aware of the case details and understand where the data came from and where it’s going. A matter relating to financial transactions or procurement may tip off the operator that the couple MS Access databases in the data set may be relevant and to bring them to the project manager’s attention. Are there a lot of spreadsheets? Documents that appear to be instant messages? A slew of e-mail attachments that appear to be voicemails? An operator with his/her eyes open can alert you to these types of things early in the game before the data ever hits a review database. Maybe we just learned something about our custodians’ data storage habits or workflow and we need to adjust our preservation or collection scope. Their technical acumen can also result in projects completing faster. They know the bottlenecks in the system and can advise on alternate methods to approach certain datasets based on their characteristics. Don’t underestimate the brain power behind all that button-clicking.

In your experience, are these really myths, or are they reality? Are there any misconceptions that aren’t mentioned here?

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