Focus: To insource or outsource e-discovery

One of the biggest challenges litigators face in a world where digital records dominate paper is helping clients keep a rein on runaway costs for document production and review.

Sarah Millar, head of Osler Hoskin & Harcourt LLP’s e-discovery management group, hopes her team is part of the solution.

“We are working to bring down the costs associated with [e-discovery],” she says. Millar confines her practice to discovery issues.

As part of that, her group has been tasked with building an internal e-discovery and review service that provides litigation support to Osler’s lawyers, and the service is offered to clients as part of the firm’s Osler Works initiative.

It’s a nearshoring service that clients can tap, as opposed to using a third-party e-discovery outsource provider.

Osler has built its system using Relativity, the popular e-discovery software, as the backbone.

Its team comprises lawyers, e-discovery review experts and computer technologists, whose sole job is to focus on e-discovery matters.

Millar says her firm decided to bring e-discovery in-house as part of its “menu of services” because “we felt we knew how to use the back end and the tools just as well as any vendor.”

However, it goes further than that.

For Millar, there is an ethical component to e-discovery.

“This is a legal process,” she says, and lawyers need to be in charge of the process and drive the bus to protect things such as solicitor-client privilege.

A second reason, she says, is the immediacy associated with litigation.

When a demand letter arrives and a company is put on notice that it is being sued, “you need to be able to hit the ground running,” she says.

The delay in getting an e-discovery vendor approved as a company supplier eats up valuable time.

“Internal investigations at our clients need to be looked at today,” she says.

When it comes to providing e-discovery litigation support, most law firms are either opting to work with one of the growing outsource vendors or choosing to build their own offering.

Dominic Jaar, a former litigator and national practice leader of forensic technology services at KPMG Canada, says there has been an ebb and flow to how law firms in the United States have responded to the rise of e-discovery, which shifts as the technology develops.

Originally, Jaar says, the U.S. e-discovery market was driven by third-party e-discovery vendors, with which law firms would work  on litigation.

Then as law firms saw how much of their disbursements were going to vendors, he says, law firms felt “there was money to be made.”

So many created their own platforms.

However, the pendulum has swung back to outsourcing.

In the early days, e-discovery was expensive.

He recalls when he was a litigator at Bell Canada being charged $2,000 just to collect data from a single computer.

That was just to collect the information.

“Then the pricing for processing the data was appalling,” he says, adding that companies would charge hundreds of dollars per gigabyte just to process the information. A company being sued could quickly face a tab of $40,000 or more just to get started, he says.

However, as technology has advanced and more e-discovery competitors have entered the market, the price for processing has plunged to around $40 per gigabyte and dropping.

The challenge for a law firm that builds its own platform, however, is keeping up with the investment needed to run an e-discovery operation. KPMG Canada runs an e-discovery managed service that Jaar says many law firms rely on. It provides access to “best-of-breed software technology,” such as Relativity, Nuix and EDT.

He says his firm’s solution can reduce costs associated with processing and hosting data, two of the key charges related to e-discovery.

Whether a law firm chooses to use a managed service provider or build its own e-discovery platform, there are pros and cons to each approach.

Millar feels it’s important for law firms to “have some kind of [e-discovery] centre.”

Osler maintains a software licence that allows the firm to use the software on its own servers.

“Our clients at this juncture want it hard-hosted,” she says.

“Some of our clients really care about that.”

Millar says they want confidence that they can identify the servers hosting their information and know that it’s locked up in a proper environment.

As well, she thinks that lawyers need to oversee the process, but they “shouldn’t be doing the tech piece.”

The challenge of bringing it in-house, she says, is finding talent.

“There’s a glut of law clerks that understand the legal piece but do not understand the tech piece,” she says.

Millar recruits recent computer science graduates to complement the legal experts. Having in-house technology talent that can write script and code is critical. She cites one instance where they were able to write some code for about $1,000 worth of time, which allowed a client to avoid having to spend $50,000 on a human review.

“When I can do that, I get really excited. I feel like we are living what we say,” Millar says.

She adds that an in-house service is also good for highly sensitive matters that might not yet be public.

However, Jaar says, law firms are at a disadvantage when trying to build their own in-house system, as opposed to using an outsource provider. The first is scalability and the second is talent retention. It becomes a challenge for law firms given their smaller scale to retain talent and train them over time.

As well, he notes, it requires continued investment in the technology, which is changing all the time.

He says law firm partners are notorious for agreeing to an initial investment in new technology, but when pushed for more money down the road to reinvest in new hardware and upgrade software and training, partners get cold feet because they have already invested hundreds of thousands of dollars.

Then there are the cybersecurity issues that law firms face.

“Law firms are under attack,” he notes.

Larger managed services vendors can focus on the technological investment needed to fend off hackers.

Jaar says he internalized the discovery process at Bell Canada when he was there, thinking it was a “brilliant” idea.

However, looking back with hindsight, he says, he had “no idea” how complex the e-discovery environment would become.