Litigation Technology Operations at AmLaw 200 Firms
The latter half of 2012 saw the beginning of an evolution in the eDiscovery and litigation support space. Spurred on by a number of considerations such as increasing ESI data volumes, the rapid advancement of technology, growing corporate control of eDiscovery processes, and the maturing competitiveness in the vendor market, law firms are reconsidering how they are delivering litigation technology services. At an executive level, firms are strategically asking themselves, "do we want to be in the business of litigation support and eDiscovery services?" and, "what is the business purpose of this department?"
Law firms are increasingly evaluating their litigation support departments from a business perspective, asking themselves questions such as:
While the triggers and the questions are common across the AmLaw 200, the decisions firms are making are surprisingly varied. Rather than following in lockstep with their peers, executive boards, managing partners, directors of litigation technology, and eDiscovery counsel are coming up with creative solutions for these functions that fit their firm culture, client profile, litigation profile, and outlook on how eDiscovery best fits into the business of law.
The Cowen Group gathered its primary research for this report during our Leadership Breakfasts, held from October 2012 through November 2012. The round table discussions held in six major markets throughout the United States brought together executives and other professionals from the AmLaw 200 and major corporations to discuss the current models and structures used in their organizations or by outside counsel. Data was also gathered through a mini-series held by TCG Events' New New Leaders group. In addition, we conducted one-on-one interviews with managers, directors, and eDiscovery counsel at 30 of the AmLaw 100 firms. Finally, 76 firms responded to our 2012 Salary and Market Landscape Survey, sharing information on the structure, economics, and investments of their departments.
In our round table discussions and interviews, we asked how firms are currently providing eDiscovery and litigation support services. We determined three most common categories of service delivery models—insourcing models, traditional outsourcing models, and managed services/hybrid models. However, our in-depth conversations showed us that each firm approaches each model slightly differently. For instance, one firm who recently invested in a managed services partnership is looking to outsource the infrastructure, hardware, review/processing software, and processing services with one all-in-one provider, while another firm outsources the storage of review databases to one organization and has yet another company install servers within the firm's data centers to handle the processing of discovery data. Likewise, we saw firms take a variety of approaches to an insourcing model. Several firms have established large internal teams, own their own software platforms, and are still supported in an infrastructure capacity by third parties (infrastructure as a service). A few firms are going all in—making heavy investments in hardware, software, services, and people throughout many phases of the EDRM, while more often firms are espousing a hybrid or utility player model selectively choosing which aspects of the EDRM to insource. These decisions are made based on which capabilities and capacities allow the firms to either provide excellent service to their clients, generate revenue for their departments and shareholders, or both. Most firms make the decision to insource/outsource by a capacity- or amount-threshold of data/cases or by specific function (e.g. collection, processing, review hosting), but some more global firms also make this decision geographically. Finally, few firms who follow a traditional outsourcing model relinquish all of their eDiscovery work; they most often host data on internal platforms under a certain GB-threshold or retain project management/case consulting services internally.
In addition to the various approaches for providing eDiscovery services, we still see a split in the structure of litigation support departments throughout the AmLaw firms to which we spoke (although the choices are normalizing between two or three best available options). Of the firms responding to our 2012 Salary and Market Landscape Survey, 44% said litigation support reports up through the CIO, while 33% of departments report up to an attorney or committee of attorneys. Almost 80% of firms have a specifically assigned manager or director leading their internal group, while the rest split leadership of this department among attorneys and C-level executives. Despite some of the press in 2012, most firms litigation support and eDiscovery teams remain internal departments to the organization. Only two firms we spoke with have formed subsidiaries to provide eDiscovery services, and another two are treated as separate businesses, although they are not officially separate entities.
Likewise, firms also differ on the financial decisions involving their departments. Approximately 40% of departments identified themselves as profit centers, while 60% of firms expect litigation support to either break even or be a loss-leader.
Anecdotally, however, many firms which claim to be profitable are generating fairly low margins. Only a handful of firms we spoke with are showing significant profits, while still saving clients money, generating substantial margins in their organizations, and attracting repeat business. These department leaders have figured out how to address some of the most pressing financial questions that litigation support functions face:
One national law firm director said it best: his balancing act is to generate profits that are robust enough (around 10%) to encourage firm leadership to continue investing money in the practice (people, process, and technology), incentivize partners who use the group's services to continue to utilize the internal team, yet still keep prices low enough to remain competitive and cost effective for clients.
Of the thirty AmLaw firms with which we conducted one-on-one interviews, an anecdotal breakdown of planned investments for 2013 can be summarized as follows:
Despite the diversity of eDiscovery solutions that firms are deploying, we saw a remarkable consistency in how organizational leadership is starting to think about these functions in a business sense. There is fairly wide consensus that the current evolution of law firm litigation support models is a product of firms going back to their roots. Department directors and executive leaders should always ask themselves, "what do we want to be when we grow up?" "do we have the capability and appetite to be in the business of technology," and "should litigation support drive a profit or is it just the cost of doing business?"
Organizations who are getting out of the game or relying more heavily on managed services partners note that technology is hard, tedious work. Due to commoditization and vendors capitalizing the market, maintaining competitive prices potentially may not be profitable for every firm. Some of the comments our research participants shared with us during the process are:
The business of the firm is giving legal advice and not processing data. We are investing in pieces that are more consistent with that business model (e.g. case consulting, project management, and ediscovery legalists).
Technology is harder to justify as a core business.
It is difficult to staff a litigation technology department in a law firm. Litigation support people have to accept a certain ceiling here; they can't become a partner as a data analyst. This ceiling doesn't actually exist at a vendor or service provider. On the other hand, firms who are investing heavily in their internal teams, agree a successful venture needs three ingredients: an appetite to invest, an entrepreneurial spirit, and flexibility to allow the group to remain competitive. These firms agree that the goal is not just to make money, but to provide the best service and make enough money to stay competitive and encourage the firm to continue investing in the best technology and people resources, as well as marketing efforts to continue to drive new business and build a viable practice. Still they all caution that this requires a lot of continuous effort and will not be a viable option for every organization. Some of the thoughts shared with us during the research process include:
You need highest level support from managing partner and executive committee in order to encourage adoption by case teams. Its not enough to be a supporter, the highest levels need to believe and understand the business purpose of these changes. These just aren't financial changes; there are many political changes that are very controversial for the firm.
You need continuous investment in people, process, and technology to be successful and you need to generate revenue and profits per partner in order to justify expense.
Acting as national discovery counsel ties in very nicely between the firms business model and the litigation technology practice. We are specializing in the ediscovery space, just like other sub groups are specializing in other practice areas.
Casey Flaherty, Corporate Counsel at Kia Motors America From a client perspective, it is nearly impossible to know without deep investigation whether or not a firm has made a sufficient investments in people, process, and technology to handle a particular project. Senior partners are generally unreliable and uninformed on the subject. Typically, they have no understanding of what their firm can and can't do. Many default to representing that their firm can do anything and everything because, well, it is the firm at which they work and therefore, by definition, the best around. A few default to an almost visceral loathing of "IT" as the despised Other who is the enemy of all that is good and productive. Any inquiry beyond these surface feelings is usually futile. And whether they can get it done remains paramount. How—insourced, outsourced—matters very little to in-house counsel. Though "at what cost?" is absolutely an important consideration.
Caroline Sweeney, Director of Practice Group Technology Services at Dorsey & Whitney The Cowen analysis is spot-on when I compare it to our current evaluation efforts. We are looking at the SaaS model to reduce internal investment in the robust infrastructure required to manage and maintain a state-of-the-art litigation support platform. We are seeking to add value to our firm by offering eDiscovery services to our clients and legal teams, which means experienced staff who can focus on advising the legal team and client regarding collection, processing, and analysis of electronic data. It also means state-of-the-art technology to manage client eDiscovery expense, and proven processes. We believe the SaaS model will allow us to focus on process-driven delivery of these services to our firm and clients.
Duane Lites, Director of Litigation Support at Jackson Walker Litigation support departments in law firms are at a crossroads and it's a territory not unfamiliar to them. Most litigation support professionals have spent most if not all of their career carving their niche and value to the firm. People, process, and technology are three key ingredients to a departments success. The hardship for litigation support departments today and the future lies in staying competitive in each one of these areas. With people, it's becoming harder to stay competitive in salary and to keep existing staff and/or hiring additional staff. With process, most departments are not staffed deep enough to provide resources to develop and maintain best practices that are sorely needed and required to handle the type of insource processing demands. With Technology, this has evolved beyond the reach of traditional firm support. Once, this was a no-brainer for most IT s taffs to take on and handle "on the side"; however this now requires dedicated resources and significant hardware and software investments. So, from a business perspective how important is it to provide this service internally? Because to provide it, firm costs are going to increase significantly in all three areas and the opportunity to recover these costs will continue to decrease.
A challenge for Managed Service Providers is being able to develop and implement processes to accommodate today's electronic discovery demands for law firms. For instance, some of the reasoning law firms brought electronic discovery processing and technology internally was to be able to expedite processes that typically get bogged down using service providers. Law firms have grown to expect same day service from their in-house offerings. The mandate for managed service providers is to processes that can meet this same level of expectations.
Rose J. Hunter Jones, King & Spalding Nearly two decades ago, we recognized the importance of investing heavily in litigation support. Advances in technology and the predominance of ESI have only confirmed the wisdom of this decision. Providing cost-effective, high quality ediscovery services to our clients is key to success in litigation. Our clients want to know and be confident that our people, processes, and technology are reliable as well as cost-effective. Over time, we have learned that flexibility in service delivery models, coupled with repeatable best practices and an understanding of our clients' needs, allows us to provide the most cost-effective service delivery model in matters both large and small. There is no "one size fits all" but we are expected to be able to address our clients' needs of all sizes.
Christopher A. Acosta, Director of Practice Support at Nossaman A business model for litigation support/technology has to adapt to firm economics. An understanding of business intelligence, structure of case teams, and overall practice management should be the drivers of figuring out what model fits in the organization. While profit per partner and revenue numbers speak volumes, the value add to the client is undeniable. As technology and science continues to be a major factor in cases, internal litigation support provides process management and direction that is agnostic of any outside interests, which would come first in an outsourced managed service.
Many of the firms we spoke with are struggling with two common questions:
Through our research efforts we came away with the following takeaways to help answer these questions:
For more information about our 2nd Annual Litigation Support Models & Structures Report, contact Jennifer Schwartz at email@example.com.
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