Choice, Control and the Cloud: E-discovery survey finds consolidation benefits companies, but resistance persists

Saturday, January 30, 2016 - 17:17

Hal Marcus, Director of Product Marketing for Recommind, a leader in data analytics and e-discovery technology, discusses the company’s recent survey of Corporate Law Departments, including their openness and resistance to an e-discovery consolidation strategy. His remarks have been edited for length and style.


MCC: Recommind’s 2015 Corporate Legal Survey delves into how legal operations, analytics and the cloud are reinventing the corporate law department. What were the most surprising and important takeaways from the survey?


Marcus: Most surprising for me was the counterpoint between the concerns over data security around e-discovery, with 72 percent concerned about sharing data with outside law firms and other service providers, and the very low number that reported ever conducting audits of their outside counsel regarding their technological competencies. Put those two side by side and it’s hard to reconcile them. It’s one of those great poster children for the challenges facing an industry that can’t turn on a dime and has a lot of overhead associated with the things being done. Despite that, I’ve worked with some large firms that indicate anecdotally that they’re receiving more security audits then ever before. What this shows is a trend toward law departments taking matters into their own hands. 


MCC: What was the single most important thing that came out of the survey?


Marcus: Most important for us, as we look at our strategy and where we apply our energies, is the benefits of consolidation of e-discovery. We saw a lot of things we expected, but it’s great to have it fleshed out. This was as much a qualitative survey as a quantitative one, more so perhaps on the qualitative side. These were full interviews, so we got a lot of candid, anonymous remarks. We saw that those that have done consolidations have accrued great cost savings and other benefits. They noted challenges as well, and those tend to relate to things like being locked into certain service providers, communication practices, billing practices and the like. That speaks to the model we’re pursuing and what cloud technology is making more readily available today, which is that corporations can control their data and still have a variety of choices around service providers and outside counsel. 


MCC: There seems to be a shift underway as many corporate law departments follow their companies, which are adopting the cloud for many purposes. So while some are getting over their fear of the cloud, plenty continue to be scared. What’s driving this tension?


Marcus: We should probably start with the resistance. Some of it makes sense based on history. Some companies are concerned about lack of control, security and being beholden to others. These concerns are not necessarily valid in the current environment, but they persist. For some of our clients, among the best technology companies in the world, it makes sense that they want to manage their own data given how well they know their own security parameters. That’s logical. Regarding the other side of the equation, the openness to moving forward despite those concerns, that’s because the best options are available in the cloud, and that’s increasingly the case.

Moreover, organizations are being pulled there whether they want to be or not. There’s a forced paradigm shift underway. End users within corporations are leveraging consumer chat systems and consumer sharing systems such as Box and Dropbox. They’re doing this to collaborate and have easy access to data whether their organizations support them or not. The corporations, for the most part, are coming around to providing support and institutionalizing things so there’s more consistency. As they’re being pulled in, they’re becoming more open to the cloud. On the security front, there’s a growing recognition that it may be best to leave security to cloud providers that live and die by it and focus on it night and day. They’re evolving their solutions and providing the tightest security available. Relying on them gives companies a degree of accountability.

One additional point worth highlighting is that as we see more cloud usage in businesses generally, that means the data is already there. Keeping the data in the cloud for a review and production process makes sense. That said, not all of the data is in the cloud and this point sometimes gets lost. Even with high-end tech companies that are very well set up with technology, there will still be a real need for hybrid solutions for the foreseeable future. You need to be able to collect and cull from on-premise sources. That touches on both resistance and openness, if you will. The legal department needs to find a way to straddle both.


MCC: E-discovery is top of mind for inside and outside counsel, especially with the changes to the federal rules that took effect in December. To what extent is that the driver shaping attitudes toward moving to the cloud? 


Marcus: A couple of things have happened with e-discovery that are forcing a broader recognition of the cloud. One part is that all of us in e-discovery that have been providing hosted solutions over the last couple of years and hosting large cases in that environment are giving corporate legal departments a reason to begin using cloud solutions. That’s especially the case when no other approach allows for the same level of collaboration by getting outside counsel, other services providers and themselves on the same page with the best solutions. They’re coming to recognize that the cloud is a good way to go.

Now we’re seeing that mature. Corporate counsel are starting to consolidate their providers, including outside counsel, so they can benefit from standardized best practices. One example would be prioritization of review – using analytics, machine learning, search and other tools to streamline the review process and not go document by document. With consolidation, they’re reaping economies of scale. It delivers more predictable, lower costs, and it lets them reuse data stores from matter to matter. You commit to an amount of data and leverage it as you see fit. It’s a much more efficient and cost-effective way to go. 


MCC: Given that security is top of mind for corporate law departments, they’re not auditing outside counsel the way you would expect given the level of concern. What are the companies that are addressing this doing to minimize risk, to make things more efficient and to reduce costs? Is there a set of best practices emerging? 


Marcus: Not to be a broken record, but the first answer is consolidation. Or maybe it’s better to say they’re addressing it through adoption of a centralized provider. Having a centralized provider system, where you’ve conducted your audits and you’re monitoring and tracking them, reduces the burden of trying to keep track of a dozen different service providers, a dozen different outside counsel and many different parameters. Consolidating makes this a much more manageable process. Those that are leveraging the best-in-class systems rather than creating their own stacks can point to a higher degree of security.

The other aspect is standardizing on better platforms. A big part of knowing your security, knowing your data, knowing what’s out there is having the visibility into the data systems. That comes from leveraging platforms that give you great analytics, let you leverage the tools for better review efficiency, and give you earlier insights into your data. The more you standardize on those kinds of tools, the more you can keep track of your entire case portfolio and know where it is in real time at any given moment. 


MCC: Many companies you surveyed reported they hadn’t yet consolidated data, yet three out of four of that nonconsolidation group said they’re considering it. If I’m in that group and I have to articulate the benefits and risks of an e-discovery consolidation strategy, what should I focus on? 


Marcus: You could break down the benefits into three core benefits. The first is security. That means leveraging the best data centers you have, the best business continuity, things like being sure that your data is encrypted both at rest and in transit, and knowing that that’s the case across the board. Another would be predictability. That’s a fairly obvious one from a cost perspective, but it’s a bit more nuanced than that. It’s also about knowing you can adjust and adapt very flexibly, as needed, by scaling up, scaling down and leveraging services wherever and whenever you need. You can work on a self-service basis where you’d like, bringing in third-party providers when you’d like, and do all of that very flexibly. The flexibility that’s emerging is a bit of a change from what we’ve seen in the past. The third would be visibility. That means being able to really look right into your data, into the practices of your outside counsel and other services providers, into the efficiencies they’re achieving, the tools they’re using, and see all that without hounding them for static reports on a monthly or quarterly basis. 

On the risk side, some of the feedback in the survey and from other sources shows receptivity of the consolidation model from a cost perspective, but challenges with a particular service provider. Since they don’t want to be locked in, having the flexibility to manage the data and choose outside counsel and service providers as needed offers the opportunity for much more control, which is a way to get around that risk. If the data is really under the corporation’s control, the rest flows from there.


MCC: Many corporate law departments are deploying metrics to manage their work, which in part is being driven by the proliferation of in-house legal operations professionals. Corporate counsel have long focused on outside counsel spending, but they’re extending beyond that. What should corporate law departments measure to drive real improvement, something noticeable to the GC and the board? If they could measure only one thing, what should that one metric be? 


Marcus: This touches on one of the other interesting things that came out of the survey. Of all the metrics that were being tracked around e-discovery, efficiency was the aspect focused on by the fewest law departments. It was 30 percent while all the others were considerably higher. That’s telling. The one thing that they should be tracking is review efficiency, as long as they have the right definition. Everything else pretty much flows from it. The definition I would propose is: How much irrelevant data do you have to review to find the relevant data that you actually need? There are different goals for every matter – an investigation is different from a review for production in a massive litigation – so the goals change in terms of what you need to review and what you need to find. But for any kind of matter you can look at a very simple metric of irrelevant content versus relevant content in what was reviewed. It could be one to one – one irrelevant document reviewed for every relevant document found – or it could be far worse than that, or it could be better. If you’re tracking that number across all of your matters, and you can visualize those down to the type of matter, the service provider, the counsel that worked on it, and compare and contrast, you’re going to see what kind of practices are in place. Everything else flows from that: early data analysis, prioritization of review, staffing choices, outsourcing, choosing the right analytics and technologies, leveraging search effectively. All of these things come together in the level of efficiency you’re achieving. 


MCC: Why aren’t companies using this metric more? Is it just too hard? Are they worried what they’re going to find? 


Marcus: At the risk of overstating it – this did not come out of the survey – I’m pretty confident that one key reason is that review efficiency is not consistently defined. It’s not entirely clear what it means to people to track review efficiency. For some, it’s where we stand on budget. If we’re on budget, we’re efficient. For some, it’s whether we turned it around on time. If we turned it around on time, we were efficient. For some, it’s that we only looked at 10 percent of the data because we effectively leverage technology. That’s undeniably efficient if it got you the results you needed, but there are so many other factors that go into it.


MCC: One takeaway from the survey that litigators especially should find interesting is the impact e-discovery costs are having on litigation strategy. In many ways, this is the most compelling reason why a strategy such as consolidation, with real potential to drive down costs, is attractive.  


Marcus: I’m an ex-litigator from a Wall Street firm and I’m always intrigued by how people think, based on what they see on TV, that lawyers, especially litigators, are big risk-takers and adventurists. My take is quite different.. Generally speaking, and with good reason, they’re actually quite risk averse. We went back into the survey data specifically to see what we would find if we broke it down by those that had consolidated and those that hadn’t. Was there a delta in terms of impact on litigation strategy? We were pleased to see there was a significant delta. That’s pretty telling. It’s more than about saving money. It’s also about the autonomy of the legal department to do what it sees fit. They don’t want to be forced into dealing with an action, or settling early on unfavorable terms, just because they have to bear the expense of e-discovery.


Hal MarcusDirector of Product Marketing at Recommind. 415.394.7899