eDiscovery Pricing for the Times: Reducing Costs in a Time of Disruption

eDiscovery Pricing for the Times: Reducing Costs in a Time of Disruption
This is part one of a two-part discussion on the impact of eDiscovery costs during an economic crisis. Read the second installment, on how discovery pricing models punish you during a downturn, here.
If you’re facing increased pressure to cut costs, we understand—and here’s how we can help. For law firms looking to migrate active matters off high-priced platforms, Logikcull is currently waiving some processing fees and offering free migration support. That means that, after your first month, a migrated matter costs only $395 a month, whether you have 10GB or 1,000. Contact us for details.
And if you’re currently facing financial hardship, let us know. We may be able to provide financial assistance to support your usage of our product. Contact us here to discuss.

The economy is hurting and many in the legal industry are hurting as well. There’s no need to go through the recitals here—you’ve seen the stock market, heard of the layoffs, read reports of the unemployment numbers.

If there’s any silver lining to this cloud at all, however, it’s that many people are now re-examining the status quo they once simply accepted. They’re seeking ways to cut costs without cutting quality, managing business disruptions without compromising client service, and reimagining the way work is done.

Necessity, as they say, is the mother of invention. And it’s pushing many in the legal industry to reimagine the way they do discovery, and what they pay for it, in light of increasing business and client pressure.

The Economy and eDiscovery

Just how the expected economic downturn will impact the legal industry is still unknown, but it’s likely that, at a minimum, most law firms will see a slow down in revenue.

First, some firms can expect that litigation and transactional work both will decline, as they have done in past bear markets. Second, as existing matters are delayed and deferred, so too are the billable hours, and resulting revenue, they would have generated. At the same time, firms are likely to see a significant increase in DPO—that’s “days payable outstanding” or how long it takes to get clients to pay their bill—as clients struggle with more immediate needs during a downturn, like keeping their lights on.

“Set against this backdrop, typical eDiscovery approaches seem more untenable than ever.”

While firms face this new reality, they’re also coming up against increased client pressures. There is, first and foremost, the pressure from clients to reduce costs, as businesses tighten their belts and look to eliminate spend. This heightened pressure from clients comes as firms also face competition from in-house legal teams, who, long before coronavirus and shelter in place entered the national lexicon, have been taking more work in house in order to reduce costs and increase control. (See, e.g., Logikcull’s 2020 Corporate In-Housing Survey.)

Finally, firms themselves are facing pressure to reduce costs internally. This is particularly true, in the discovery context, for firms that don’t pass through costs to clients, that can no longer pass through costs given the pressures mentioned above, or that typically write off a significant percentage of their discovery costs. (And that percentage can be considerable even in the best of times. In Logikcull’s 2019 eDiscovery Billing and Cost Recovery Survey, 76% of respondent law firms said they wrote off discovery costs with some regularity.)

Set against this backdrop, in an industry where nickel-and-dime line items or hefty per-GB hosting fees are still the industry standard, typical eDiscovery pricing models seem more untenable than ever.

The Evolution of Discovery Pricing

Of course, these challenges weren’t created by the current health and economic crises. After all, law firms have long faced pressure to reduce costs. Similarly, eDiscovery pricing has been the subject of sustained, fairly unyielding, criticism ever since eDiscovery even became a “thing.” (In 2015, for example, in an interview with this blog, celebrated U.S. Judge John Facciola described the cost of discovery as the greatest challenge to the administration of justice in the country.) And those same costs have led many law firms and corporate legal departments to move away from high-priced software and vendor-driven approaches as easy-to-use, affordable, and scalable cloud-based solutions have become available.

"The writing was on the wall—in the cloud era, the days of high-priced vendors were numbered."

This evolution can be seen in Logikcull’s own history. In 2004, Logikcull began as Logik, a brick and mortar vendor specializing in high-priced data processing for some of the highest-profile disputes. The model was so successful that the company was named 181 on the Inc. 500 list in 2009, marking it as one of the fastest-growing, privately-held companies in the country.

But the writing was on the wall—in the cloud era, the days of high-priced vendors were numbered. Recognizing this, Logik developed Logikcull, the cloud-based discovery platform you know today, and declared “the end of eDiscovery”.

One year ago, Logikcull made another significant jump: we ended hosting fees. Seeing that per-GB, monthly hosting fees, the standard approach to eDiscovery pricing for most software and vendors, were unjustified, unsustainable, and counterintuitive, we got rid of them. (More on that below.) Today, Logikcull has no hosting fees, no line items, no markups. Whether a project has 10 GB of data or a terabyte, the same low, monthly, per-matter rate applies. (For the curious, that rate is a one-time $25 per GB for processing, applied to the uploaded size of data, and a flat $395 monthly matter rate.)

It made sense then, and even more so today.

Per-Matter Pricing Without the Hosting Fees

For firms looking to quickly reduce spend given the current economic climate and to show clients that they understand and are responding to the need to rein in costs, eliminating extraneous fees can be an easy win.

“Under a hosting-fees model, one terabyte of data, at $30 per GB per month, costs $360,000 a year. Think of what you could do with $360,000 right now.”

Take, for example, a 100 GB discovery matter. On a typical platform using a hosting-fees model, the firm (and their client if they pass costs through) might be charged $30 per GB, per month. That means $3,000 just to host the matter, every month. In the grand scheme of litigation, that might not seem like too much, but for a matter where discovery lasts one year, that’s $36,000. Multiply that by dozens of matters, and firms are facing six- and seven-figure costs just for their discovery platforms.

Under this model, one terabyte of data, at $30 per GB per month, costs $360,000 a year.

Think of what you could do with $360,000 right now.

This becomes increasingly urgent as more matters are put on hold. Throughout the country, trials are on pause and courts slowed or shuttered——lengthening the period projects will need to be hosted and, thus, multiplying the impact (and pain) of monthly hosting fees. Many matters are simply stuck in a holding pattern, waiting for things to pick back up at some tentative future date. But those four- and five-figure hosting costs continue to pile up.

Law firms in this position are faced with an unenviable choice: grin and bear it or delete the matter entirely, potentially losing valuable work product once a matter is taken offline.

There is an alternative though. You can switch. With no hosting fees and only a straightforward monthly per-matter rate, costs are predictable, controllable, and manageable.

The urgency of this approach is more apparent now than ever—and it’s fueling a rapid migration from high-priced hosting platforms to a new approach to discovery. Necessity is the mother of invention.

For part two of this discussion on eDiscovery pricing, click here.

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