Corporate legal teams often face significant financial challenges, particularly when preparing for litigation. One of the most pressing issues is the concept of “sunk costs” associated with eDiscovery.
As legal teams rely heavily on external vendors and partners for eDiscovery tasks, these costs can quickly accumulate, creating financial strain and inefficiencies. Understanding the implications of sunk costs and exploring strategies to mitigate them is crucial for corporate legal teams looking to streamline their operations and reduce additional expenses.
Sunk costs refer to expenditures that have already been incurred and cannot be recovered. When it comes to eDiscovery for a corporation all costs can be sunk costs as you are typically looking at costs associated with hiring outside vendors for data collection, data processing/hosting, document review, and other essential tasks during litigation preparation. For corporate legal teams (without in-house eDiscovery resources), these costs become a recurring expense, often leading to budget overruns and resource constraints.
While outsourcing eDiscovery may seem like a straightforward solution, it can lead to a cycle of escalating costs. Each matter often requires significant investment in external services, making it challenging to manage budgets effectively. As the volume of data and complexity of matters grow, so too do the costs associated with eDiscovery – costs that ultimately do not add value to the bottom line.
Below are some strategies on how corporate legal teams can avoid sunk costs with eDiscovery when preparing for trial.
Evaluate the Need for In-House Resources
While many corporate legal teams currently rely on external vendors, it's worth assessing whether investing in in-house eDiscovery expertise could provide long-term savings. This does not necessarily mean hiring an eDiscovery Specialist – though it could – perhaps there are people on your in-house legal team where you can build this expertise. If someone internally can handle routine eDiscovery tasks, this can drastically reduce reliance on external services for every single matter. Examples of such tasks could include coordinating collection requests, setting up coding layouts, running basic searches, and exporting documents. As expertise grows, processing smaller data from Outlook or loose file collections that contain the more standard data types (Word, Excel, PDF) is another example that can help reduce reliance on external services.
By establishing a flexible, scalable, and structured process where internal resources handle basic eDiscovery tasks, specialized external vendors can be engaged on an ad hoc basis for the complex needs, such as collections, processing large data sets, running complex searches, or large-scale document reviews.
Invest in Technology and Training
Utilizing tools can significantly reduce the time and resources required for data management. This could include a tracking system with already built modules or building a board in a product such as Microsoft Teams. Investing in technology can streamlines processes and enable your team to maintain greater control over eDiscovery tasks. Training a designated internal resource to use these tools effectively can minimize the need for external support.
Next, implement clear processes and protocols. Establishing standardized processes for eDiscovery can enhance efficiency and reduce the likelihood of incurring additional costs. Clear protocols for data collection, processing, review, and production ensure that your team knows when to engage external vendors and when they can handle tasks internally. A trusted vendor may even be able to help in consulting the tools and documenting the protocols.
Monitor and Analyze eDiscovery Costs
Regularly reviewing eDiscovery expenses can provide valuable insights into your spending patterns. Request monthly combined reports from your vendor(s) and keep a system to track the spend over time with your vendor(s).
Analyzing these costs helps identify areas where savings can be realized, enabling you to make informed decisions about when to outsource versus handle tasks in-house. As an example, you should receive detailed description of the billable time report and you can look for trends such as layout updates/creations, basic searches, and PDF exports that you may be able to train someone to complete. Reporting out the team’s efficacy to stakeholders is also a way to bolder the credibility of the legal team and potentially gain political capital within the organization.
Conclusion
The sunk costs associated with eDiscovery can pose a significant challenge for corporate legal teams, leading to budgetary constraints and inefficiencies. By evaluating the potential for in-house resources, investing in technology, and implementing clear processes, legal teams can minimize these expenditures and improve their overall operations.
Ultimately, taking proactive steps to mitigate sunk costs not only enhances the efficiency of your eDiscovery process it will also position your legal team for greater success in navigating the complexities of litigation. By fostering a more self-sufficient approach to eDiscovery, corporate legal teams can reduce costs and better serve their clients and stakeholders.
