2nd Annual Litigation Support Models & Structures Report

2nd Annual Litigation Support Models & Structures Report

Lit­i­ga­tion Tech­nol­ogy Op­er­a­tions at AmLaw 200 Firms

Evo­lu­tion in the Mar­ket­place

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:

  • Should lit­i­ga­tion sup­port be a profit cen­ter or a ser­vice cen­ter?
  • How does this func­tion in­crease prof­its per part­ner for our firm?
  • How can we pro­vide the cost pre­dictabil­ity/cost sav­ings clients are de­mand­ing?
  • How can we re­main com­pet­i­tive in this space com­pared to other law firms and ser­vice providers?
  • What is our cur­rent and fu­ture in­vest­ment ap­petite?
  • How do we achieve con­sis­tent and pre­dictable out­put from a process with widely vari­able in­puts?

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.

Method­ol­ogy

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.

Cur­rent Mar­ket Land­scape of Law Firm Ser­vice De­liv­ery Mod­els

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.

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AmLaw 200 firms still di­verge on de­part­ment struc­tures and crit­i­cal fi­nan­cial ques­tions.

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.

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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.

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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:

  • How do we re­duce write offs that at­tor­neys and clients make for eDis­cov­ery ser­vices?
  • How do we cap­ture or man­age more of the firm’s eDis­cov­ery mat­ters for large lit­i­ga­tion through in­ter­nal chan­nels?
  • How do we in­cen­tivize case teams to work with in­ter­nal lit­i­ga­tion sup­port re­sources rather than going solo to an out­side ven­dor?

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.

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What do firms in­source?

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:

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What do firms out­source? Why? How?

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The Evolv­ing Land­scape: What is Chang­ing?

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:

  • Nim­ble­ness and flex­i­bil­ity are the ways to be suc­cess­ful in busi­ness.
  • We need to be able to move quickly (e.g. with al­ter­na­tive firm pric­ing).
  • We also can’t go through three com­mit­tees of man­age­ment for every de­ci­sion.

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.

What do In­dus­try Thought Lead­ers Think of our Re­port?

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 ser­vices.

What We Learned

Many of the firms we spoke with are strug­gling with two com­mon ques­tions:

  1. How do we build con­sen­sus within the firm for whichever model we de­ploy?
  2. How do these changes im­pact my ca­reer and my staff?

Through our re­search ef­forts we came away with the fol­low­ing take­aways to help an­swer these ques­tions:

  • The eco­nomic cli­mate con­tin­ued to turn around in 2012. Across the board, firms saw in­creases in ESI vol­ume and num­ber of cases in­volv­ing eDis­cov­ery. Lat­est gen­er­a­tion tech­nol­ogy is al­low­ing firms to han­dle these in­creased case­loads with­out mak­ing sig­nif­i­cant in­vest­ments in ad­di­tional staff.
  • How­ever, law firm hir­ing is up across the board as well, and firms have fo­cused es­pe­cially on two types of hires: tech­ni­cal re­sources that can sup­port their new tech­nol­ogy (ex­pe­ri­enced ad­min­is­tra­tors and an­a­lysts) while learn­ing pro­ject man­age­ment skills, and higher mar­gin con­sul­tant or ad­vi­sor roles.
  • In­stances of eDis­cov­ery at­tor­neys are also in­creas­ing, with many firms we spoke with ref­er­enc­ing an eDis­cov­ery prac­tice group, or pro­mot­ing a lit­i­ga­tion as­so­ci­ate into a spe­cial­ized eDis­cov­ery role for the firm.
  • Out of the firms we spoke with, the ma­jor­ity of firms still de­ploy a hy­brid model, where they per­form a por­tion of the ser­vices in­ter­nally, and man­age the rest through a tra­di­tional out­sourc­ing model (ei­ther pre­ferred provider or case by case).
  • De­spite this com­mon­al­ity, most of these firms are in tran­si­tion, con­sid­er­ing some in­vest­ment in peo­ple, process, tech­nol­ogy, or part­ner­ship in the next year that will change their tra­di­tional sta­tus quo. Most often, firms are ex­plor­ing ei­ther pur­chas­ing new tech­nol­ogy or con­sid­er­ing their op­tions for out­sourc­ing ei­ther in­fra­struc­ture, soft­ware, ser­vices, or peo­ple under a sub­scrip­tion based man­aged ser­vice con­tract.
  • Most often the firms con­sid­er­ing man­aged ser­vices are look­ing at an in­fra­struc­ture as a ser­vice (IaaS) model or as­sis­tance man­ag­ing, main­tain­ing, and up­grad­ing li­censed tech­nol­ogy. As an add-on to those ser­vices, firms are also ex­plor­ing over­flow sup­port in some of the tech­ni­cal ca­pac­ity, if ESI vol­ume or work­load ex­ceeds in­ter­nal ca­pac­ity and ca­pa­bil­ity. Most firms are look­ing to the same provider part­ner to pack­age these ser­vices to­gether.
  • The most com­mon ser­vice that firms tra­di­tion­ally per­form in­ter­nally that they are look­ing to out­source is pro­cess­ing. Most firms also out­source some piece of col­lec­tion (al­though many firms ad­vise cor­po­rate clients on the col­lec­tion and preser­va­tion of data), and trial ser­vices.
  • Firms who are ex­plor­ing man­aged ser­vices op­tions cite com­mon trig­gers like de­liv­er­ing con­sis­tent out­comes using a process with in­con­sis­tent in­puts, the in­creas­ing cost of tech­nol­ogy and peo­ple re­sources, re­main­ing com­pet­i­tive in the mar­ket space, the re­la­tion­ship be­tween IT and Lit­i­ga­tion Sup­port in law firms (where firms are a peer or sub­or­di­nate, and sup­port or main­te­nance of lit­i­ga­tion tech­nol­ogy takes a back seat to email servers, firm-wide up­grades, or in­fra­struc­ture pro­jects), and the abil­ity to re­duce costs while still main­tain­ing con­trol of the process through using this type of model.
  • Those firms who aren’t in­ter­ested in in­fra­struc­ture as a ser­vice arrange­ments or sub­scrip­tion based out­sourc­ing mod­els cite com­mon rea­sons such as their lit­i­ga­tion or client pro­file wouldn’t sup­port that type of ef­fort, the na­ture of their work re­quires tech­nol­ogy or data be kept be­hind the firms’ fire­walls, they an­tic­i­pate a profit or ben­e­fit to the firm or clients from man­ag­ing and con­trol­ling the data them­selves, not being sure about the ma­tu­rity of the ven­dor mar­ket in being able to pro­vide these types of ser­vice with con­sis­tency or qual­ity, or they are un­sure about how to bill clients through this type of model.

For more in­for­ma­tion about our 2nd An­nual Lit­i­ga­tion Sup­port Mod­els & Struc­tures Re­port, con­tact Jen­nifer Schwartz at jennifer@​cowengroup.​com.