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The Hidden Costs
of an In-House
eDiscovery System
A useful guide designed to educate you on
the true costs of building an enterprisegrade eDiscovery system.
Written by The Engineering Team at Logikcull.com, who, combined have
over 50 years experience building eDiscovery systems
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eDiscovery is becoming an essential, but problematic component to litigation
practice. With the ABA reporting that document review is responsible for
anywhere from 58-90% of total litigation costs and that the error rate in
document review can be higher than 50%, it’s no wonder more law firms are
considering building their own in-house eDiscovery systems.
Utilizing affordable, effective eDiscovery capabilities is a way for law firms to position
themselves as an attractive service provider for corporate clients. A proprietary system
can strengthen this position, which makes an in-house eDiscovery system an attractive
alternative to outsourcing eDiscovery services.
Building an in-house eDiscovery system is not, however, an easy decision. It takes
a substantial investment to build and maintain an effective eDiscovery system.
Understanding the hidden costs of an in-house eDiscovery system is an essential
component to a wise investment strategy. Otherwise, an uninformed firm may find
themselves with expensive software they’re not prepared to use.
Understanding the Four Stages of eDiscovery
From start to finish, the eDiscovery process involves four distinct stages:
Data Collection
Processing
Review
Production
While all four stages require counsel oversight and can be seen, from the legal
perspective, as equally important and relevant, the technical perspective views
these stages quite differently. Data collection involves obtaining possibly pertinent
information from the source. From the technical perspective, this stage is only relevant
in the sense that the data to be processed and reviewed is obtained during this stage.
Production involves delivering appropriate documents to the other party. From the
technical perspective, this stage is only relevant because it is the output or purpose
of the previous stages. An eDiscovery system functions at the technical level
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Furthermore, there is a significant cost difference among the four stages of the
eDiscovery process. According to David Degnan in Minnesota Journal of Law, Science &
Technology, collection and production represent only 6% of total review costs, partially
because these processes do not require the dedicated processing power of an eDiscovery
system. The two middle stages represent 94% of eDiscovery costs and require the
support of comprehensive eDiscovery capabilities in order to deliver reliable results.
Processing (Also known as Early Case Assessment or ECA)
According to Matthew Prewitt of Inside Counsel, “Before the term was co-opted by
e-discovery vendors, early case assessment encompassed the full skill set that an
experienced litigator draws upon to seize the initiative from her adversary and develop
a proactive strategy for winning the case.” From the legal perspective, ECA is still about
“analyzing and synthesizing evidence from multiple sources” for strategic purposes.
From the technical perspective, however, ECA is more than the “data management
exercise” Prewitt supposes. ECA is the process by which technology is used to sort
gigabytes of data in order to pull out those documents and data files that actually
require review. The processing capabilities required for this feat are enormous and
represent a very significant expense in any eDiscovery system.
Review
After data files have been processed, those files must be reviewed by first-level
reviewers. From the legal perspective, this raises concerns about qualifications, training,
and appropriate document assessment. Again, the technical perspective is different,
because there are considerable processing requirements involved in managing the
volume of data files reviewers process. Furthermore, the software differences between
processing and reviewing can create conflicts within the database environment, which
leads to the need for separate databases.
The Costs of eDiscovery
Understanding both the legal perspective and the technical perspective is necessary
when building an in-house eDiscovery system. The legal process is, of course, complex,
but so are the technical requirements that facilitate the legal process. Many software
vendors are more than willing to sell vendor products that improve the eDiscovery
workflow; however, they are less willing to discuss the hidden expenses involved in
utilizing their products. This complicates the ability of firms to make an informed
decision prior to committing to in-house eDiscovery development.
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Building In-House eDiscovery Capabilities
An eDiscovery system that can actually support the ECA and Review stages, while
producing consistently reliable results, represents considerable programming and
processing challenges. Technological capabilities certainly reduce the labor costs
involved, but that means shifting the cost burden to the firm’s IT department.
Unfortunately, the average legal technical support professional lacks the knowledge
and expertise building an in-house eDiscovery system requires. This case study will
explore the requirements and their costs in order to create the foundation required for
informed investment decision-making.
Introducing the Case Study
A medium-sized, New York City firm with 75 reviewers on staff creates an inhouse eDiscovery system equipped to handle 5TB of discovered data per year. Two
systems engineers are hired to deploy and maintain the technical environment and
provide the all-hours coverage required to keep the system operating according to
the demands of the legal staff. This firm also follows technical best practices and
creates a comprehensive backup and disaster recovery system to support their new
eDiscovery system.
Processing
System
Review
System
Storage Infrastructure
Other Infrastructure
STAFF
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The following sections detail what is required to create an effective, in-house
eDiscovery system for this firm.
Processing System
The processing system is the biggest cost-center in an in-house eDiscovery system
and, consequentially, is also the most complex. The components required to build the
processing system for this case study include:
•5 large physical servers used for virtualization,
•10 sockets of VMware vSphere Enterprise licenses used for virtualization,
•30 Windows 7 licenses used within the Virtual Machines (VMs), which are the base processing
modes of the processing system,
•30 copies of the selected Processing software,
•30 copies of Microsoft Office, which is used by and configured for the processing software,
•30 copies of Adobe Acrobat, which is used by and configured for the processing software,
• 30 copies of Lotus Notes, which is used by and configured for the processing software,
•30 copies of a selected anti-virus software package, which is used to protect the system from
any malware collected with the data,
•2 large physical servers used for MS-SQL, which is necessary to access the processing software,
•2 copies of Windows Server 2012 Standard for MS-SQL, and
•2 copies of MS SQL x 2012 Enterprise.
The three-year cost of building, maintaining, and using the processing system for this
firm is $1,043,951.20, or an annualized cost of $347,983.73. The largest line-item is
the selected processing software, which accounts for over 90% of the total cost of the
processing system. The other items are required for the functionality of the processing
software. The firm would not be able to use the software for processing without these
additional expenses. It is important to note that additional software packages, like
Office and Acrobat, are subject to independent license arrangements from the supplier,
but they must be configured according to the needs and uses of the processing
software. Using current licenses is not an alternative to purchasing software licenses to
facilitate processing capabilities. Finally, purchasing two database servers is required
in order to set up a High Availability cluster, which maximizes database availability as
required when meeting time-sensitive processing demands.
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Review System
While the review system is less expensive than the processing system, it’s important to
note that this does not include the compensation requirements for review staff. It does,
however, include licenses for each reviewer. The more reviewers the firm keeps on staff, the
more expensive the review system becomes. The components required to build a review
system for 75 reviewers include:
•3 physical Web servers, which create the user-interface used to access the review system,
•2 large physical servers used for MS-SQL, which is necessary to access the review software,
•2 physical servers, similar to Web servers, used for file-serving,
•7 copies of Windows Server 2012 Standard, one for each physical server,
•2 copies of MS SQL Server 2012 Enterprise,
•75 user-licenses for the review software, and
•1 copy of the Productions module for the review software.
The three-year cost of building, maintaining, and using the review system for this firm
is $59,914.62, or an annualized cost of $19,971.54. Though the largest line-item is the
selected review software, the review software is far less expensive than the processing
software. In fact, the combined costs of the seven servers required to achieve review
system functionality costs more than the review software itself. Again, best practices
indicate the use of a High Availability configuration and a database distinct from the one
used for processing to avoid service disruptions and software conflicts.
9
Storage Infrastructure
Simply put the processing and review systems described above are required to process
the data files. A separate storage infrastructure is required to store those files and to
support the virtualization process used by the processing and review systems to access
those files. The following enterprise systems form the foundation of every large, modern IT
infrastructure. In this case, the components include:
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•2 16-port Fibre Channel switches,
•1 100TB Fibre Channel based storage array,
•1 2-drive, 48 slot LT05 tape library,
•400 LT05 tapes, and
•Backup software with appropriate modules to drive backups.
The three-year cost of building, maintaining, and using the storage infrastructure
required by this firm is $338,064.97, or an annualized cost of $112,688.32. In this case,
the largest line-item is the storage array itself. Note also that this is where backup
costs are accounted for, which includes the use of a full tape-backup and off-site
rotation capabilities that are compliant with best practices.
Infrastructure Support
There are two basic options for infrastructure support: in-house housing or external
housing. In order to safeguard the life-time value of the expensive equipment the
eDiscovery system uses, the firm in question would need to renovate their office
building in order to house their new datacenter in-house. Any datacenter requires
specific cooling and power specifications be met to ensure the equipment functions
properly. Most office buildings are not equipped to meet these specifications.
Furthermore, it is important for a datacenter to be compliant with data-handling
standards, like SSAE (formerly SAS 70), which increases the expertise required of IT
staff significantly if managed in-house. So, the firm makes a cost-effective decision
to house their eDiscovery system externally, using a colocation facility such as those
provided by Equinix or Peer1.
These costs include:
•Datacenter rental costs,
•Power Distribution hardware to connect the datacenter’s power to equipment,
•2 Ethernet switches to provide data networking, and
•Internet connection fees.
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The three-year cost of the infrastructure support for this firm is $229,999.98, or an
annualized cost of $76,666.66, which is less than it would cost them to renovate their
office building, ensure data-handling compliance, and hire the full-time engineering
support the datacenter housing requires.
Labor
As discussed previously, the firm hires two system engineers to build and maintain their
eDiscovery system, because their legal IT staff lack the knowledge, training, and expertise
required to manage such a complex technical system. This expense minimizes downtime
and keeps the entire system running efficiently.
The three-year cost of these system engineers is $694,964.40, or an annualized cost of
$231,654.80, which includes compensation costs (e.g., salary and benefits), as well as
legally-required employment costs (e.g., FICA and unemployment insurance). These costs
cannot be excluded from a comprehensive total-cost analysis.
$
Total Cost Analysis
Now that the cost-centers have been explored, it’s time to add these costs together to
create a picture of the total cost of an in-house eDiscovery system. The table bellow
represents the total costs for a three year period, which is the average replacement-cycle
for servers and a reasonable amortization target for an investment of this nature.
Item
Cost
Annualized Cost
$1,043,951.20
$347,983.73
$59,914.62
$19,971.54
Storage Infrastructure Cost
$338,064.97
$112,688.32
Other Infrastructure Cost
$229,999.98
$76,666.66
Labor Cost
$694,964.40
$231,654.80
Total Costs
$2,366,895.17
$788,965.06
Processing System Cost
Review System Cost
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In Summary
An in-house eDiscovery system requires comprehensive hardware and software
solutions to operate effectively and efficiently. The system presented here follows best
practices to ensure the quality of the processing and reviewing capabilities developed
by the firm. Clearly, an investment of this nature is not a cheap solution to an everpresent problem, but it is possible. However, such a system does not guarantee the
quality of the eDiscovery process itself, nor does it necessarily promise a reduction in
review process costs or document review error rates. Careful consideration is required
before buying into the promises of eDiscovery software vendors.
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About Logikcull
Logik is the creator of www.logikcull.com - the leading cloud-based eDiscovery
platform. Logikcull is ideal for corporations and law firms that want an easy-to-use,
affordable, and secure eDiscovery platform without needing to invest in significant
hardwar2e and software costs. Logikcull can be accessed using PCs and Macs as well
as mobile devices including the iPhone and iPad.
To keep customer data secure, Logikcull.com resides behind an enterprise SSAE16 SOC1 Type II certified data center. For added security and customer comfort, Logikcull is not
hosted in a public cloud like Amazon Web Services (AWS). Some use cases for Logikcull
are: eDiscovery & document review, information governance, document archiving,
document collaboration, deal rooms, matter mobility, and internal investigations.
Logik is headquartered in Washington, DC and was founded by Andy Wilson and Sheng
Yang in 2004.
Visit www.logikcull.com
Email [email protected]
Call 1-800-951-5507
Follow us on Twitter @logikcull
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