The Digital Advantage has been busy, hence the gap in posts. This week’s post, therefore, will highlight two recent posts/articles from eDiscovery Journal . While we would like to see them drop the “e”, “Discovery Journal” is always a good read, BTW.
Vendors – A Dying Breed? Thoughts from IPRO Innovations
The first post “Vendors – A Dying Breed? Thoughts from IPRO Innovations”, by Greg Buckles, has some interesting observations from the recent IPRO conference just down the street (literally) from The Digital Advantage.
“One interesting statistic from Jim King’s (IPRO CEO) keynote was a 17% decline in the number of IPRO service providers while the actual revenue they generated was up 12%. That’s right, the IPRO channel is shrinking (just like the eDiscovery market) but the volume is still growing. This resonated with the panelist perspectives on the increasing need to find alternatives to volume pricing ($/GB).”A 12% increase in revenue, assuming year over year, is a healthy increase, especially in light of the economy, climate and commodity pricing. With regard to the 17% decrease in the size of the IPRO channel may well support the notion that the market is shrinking. That is certainly one interpretation. Or, might it be IPRO channel partners moving to other products? Could it be products like Viewpoint by Lateral data, Digital Reef and other processing/conversion engines are supplanting IPRO, LAW PreDiscovery and other more traditional simplistic processing engines? Could it be that there is finally a lot less scanning of paper in the world and that part of IPRO’s market is shrinking with those “vendors” shutting down those parts of their business, or in some cases going out of business? The point here is not to beat up on our friends down the street from us at IPRO. They are indeed a fine company with smart people and fine products. It is clear from IPRO’s product road map that they recognize the shift from the need for simple “vendors” and the need for feature rich filtering and reporting functionality. The commodity of “processing” data can be done by anyone on any street corner. You can find a hot dog on any street corner in NYC too. What you do with the hot dog, however, is a different matter all together. Some hot dog stands are better than others.
So, what do we need to do about this perception of high technology costs? Greg hits the nail right on the head:
"Providers need to differentiate their offerings with standardized processes, project expertise, transparent invoicing and metric-rich reporting to survive the transformation from commodity vendor to managed service provider."In our business, what separates a “vendor” from a “service provider” or “trusted advisor” is what you do with that commodity product (processed data). While tool and technology are important – you need the right feature sets, reporting and reliability – how you use that technology is vital. Training, work flow, project management, accountability and the long list of other things one needs when dealing with vast amounts of information all have associated costs. Supporting the technology and making sure that technology is available at all times has a cost and requires expertise. Those services can’t be expected to be provided for free. The churn and burn mentality associated with the commodity of processing data is dangerous in the wrong hands. It is indeed highly competitive market within which we find ourselves and the competition is not shrinking. Although, as has been pointed out, some portions of the market are indeed consolidating. But for every consolidation, someone new seems to come along and on occasion, bringing something new to the table.
In other words, it is more than just about price, which brings us to Mikki’s post.
Are we Pricing Ourselves Out of Business?
As Mikki so astutely observes, the business of collection, processing, filtering, review and producing ESI is not just about technology price. “This is not a ‘push this button and you are done’ environment.” Mistakes can be costly. Entire careers have been flushed down the toilet and reputations lost forever because of a mistake or neglect during the ESI process. Providers or law firms that think they can provide a service for, using Mikki’s example, $75 per GB should raise a significant red flag. In an exchange with a “Vendor Veteran”:
“[H}ow can other vendors possibly compete with that and not sacrifice profit or quality”? My response? They probably can’t. But read the fine print before you panic. As discussed in the many blogs about pricing, the models can be very confusing and as a result it is difficult to compare apples to apples.”Either there are hidden costs that won’t appear until invoice time, or the service being provided is, well, a service you are buying from a “vendor”. Managing ESI is indeed about the cost of people, process and technology. The biggest mistake made today is to get so caught up in technology cost, because that cost is seen first. This in many cases drives a decision to choose the wrong technology, process or people. As Greg Buckles previously observed, we must move away from the GB consumption model. Technology cost should be flat and more in line the broader software licensing market. Well designed managed service models that flatten out the cost and separate the three components Mikki outlines – People, Process and Technology, are emerging and will continue to mature. Technology has in many ways reduced the labor costs at all levels. Processing technology is mature and higher volumes can be processed with fewer people. So, that portion of the labor cost has indeed gone down. We are reviewing fewer documents. Anyone reviewing 100% of everything collected, well, someone had better take a harder look at that process. So, review cost in a sense has gone down. However, as Mikki observes:
“However, the labor expertise required to handle ESI has not decreased. If anything, it has increased. So, while the amount charged by a service provider goes down, the cost of quality employees does not.”Yet, we continue to hear mostly about the cost of that “vendor”. When, in reality, the largest cost, hands down, is not the cost of the technology, or the labor cost associated with processing, hosting or supporting data within an application. The largest single cost in litigation is not the cost of converting a word document to TIFF, branding the TIFF with a “bates” number, creating a load file, placing all that on a disk then shipping off to someone across the country. No, the largest cost during discovery is not even hosting millions of useless records for years because the right decisions were not made to filter out everything that is not absolutely needed to prosecute or defend a specific set of facts. Rather, the largest single costs associated with litigation today are legal fees within largely inefficient filtering and review methodologies. The act of taking 50, 100 or a thousand search terms and throwing them against millions of files and then reviewing the result and calling that an efficient process is at the root of what is driving up cost. Most of the cost of conducting discovery is in managing and using document evidence. Very few cases go to trial and very few documents are actually used during discovery or trial. Far less than 1% of the documents produced during discovery have any value to anyone, except maybe the bottom line for everyone except the ultimate client – the one paying all the bills. So, shouldn’t we be asking the hard questions around the document review part of the cost rather than focusing just on the commodity processing pricing? Shouldn’t it also be a time when the 35 document decision per hour review rate be a thing of the past? Isn’t it high time for us to stop reviewing millions of useless documents when only a few are needed? Greg and Mikki are correct; the days of the $1,000 GB processing charge are long gone.
So, maybe now we can focus on the people and process part of the equation and separate that cost from the cost of technology. Maybe, just maybe, it is time for us to turn our ear back to that “Trusted Advisor” that professional “service provider” that spends every day in the trenches focused on the entire project ROI and not just the cost of technology. After all, like hot dogs in NYC, you can buy technology from any “vendor”.
