Logikcull's 2019 eDiscovery Billing and Cost Recovery Survey Shows Where Law Firms Are Struggling to Recoup Discovery Costs

Logikcull's 2019 eDiscovery Billing and Cost Recovery Survey Shows Where Law Firms Are Struggling to Recoup Discovery Costs

How are law firms handling eDiscovery billing? What strategies are they taking to recoup their discovery spend? And what obstacles do they face in the process?

We asked.

Logikcull’s 2019 eDiscovery Billing and Cost Recovery Survey gathers data from over 100 law firms to see how they are reducing write-offs and dealing with client pushback. From cost recovery models to pricing challenges, this report shines a light on an area that is chronically under-examined, yet increasingly consequential.

The survey, released today, compiles must-see benchmarking data on topics such as:

  • What approaches to cost recovery are dominant today
  • The most effective billing models, as reported by legal professionals
  • How much of their discovery costs the typical law firm recovers
  • What causes discovery cost write-offs and client pushback
  • And more.

Download the survey for exclusive benchmarking data on law firm cost recovery, write offs, and more.

Three Highlights from the Survey:

1. Law Firms Have Taken Discovery in House

Percentage of the eDiscovery process handled in house, by billing model

With discovery taking on an increasingly central role in dispute resolution and legal practice more generally, law firms have collectively moved to take on more of the associated work, displacing the vendor-dominant regime in an effort to control costs and provide superior client value. In fact, firms surveyed here perform 79 percent of the discovery process in house, on average.

2. Direct Pass Throughs Are the Most Common Form of Cost Recovery—But They’re Not Without Challenges

Law firm discovery billing models

The direct pass-through of costs is the dominant approach to cost recovery, but perhaps not the most effective one. This model, in which a law firm passes on discovery costs to the client on a one-to-one basis, is used by 86 percent of respondent firms. However, a profit center model, in which a firm turns a profit off discovery services, was rated as the most effective model by respondents, despite being the least-used approach.

Indeed, over 50 percent of respondents using a pass-through model said their billing approach was “only somewhat effective” or “not so effective.” This is likely because even a small write-off rate can quickly add up to six figures or more in lost revenue for firms with a significant number of matters involving discovery. Only 20 percent of respondents said they recovered a full 100 percent of their costs through this approach.

3. Unpredictable Data Size and Hosting Fees Lead to Write-Offs

Primary discovery cost recovery challenges

Unpredictable discovery volume and recurring hosting fees are the two biggest cost recovery challenges facing law firms. As the volume of data involved in discovery continues to increase, it’s not surprising that hosting fees, often charged on a monthly, per-gigabyte basis, lead to both client and law firm frustration. Indeed, client pushback on discovery costs remains common across the board. More than 70 percent of firms experience pushback on discovery costs sometimes, usually, or always.

But not all pushback is created equal. Clients are most likely to object all discovery costs outright or to hosting costs specifically, according to the survey. Associated costs, such as review costs that can make up the bulk of discovery spend, receive less resistance than might be expected, perhaps in part due to clients’ greater willingness to pay for tasks perceived as “legal work.” That pushback leads directly to lost revenue, as pushback was cited as the number one cause of write-offs.

For more insights, benchmarks, and cost-recovery strategies,
download the full survey here.

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