My Thoughts on Electronic Discovery's Per Gigabyte Pricing Model

I recently read The Demise of Electronic Discovery’s Per-Gigabyte Pricing Model by Ben Kerschberg on Forbes.com September 13th and must say that I am a little disappointed with the topic when compared to many of the strong articles Ben has written on the subject. The article tends to focus on price and technology and the forces driving cost as opposed to the overall issues that must be considered when entering a discovery request.

My concern with a post like this on a widespread publication like Forbes is that it attempts to further commoditize a specialty industry that historically has been built on workflow and solutions and now in the buyers mind appears to be nothing more than technology and a person pushing buttons. By way of background I founded a software company to assist companies in driving down the costs associated with the discovery process. Prior to starting Mindseye Solutions I worked for nearly a decade on the services side consulting clients in how best to manage their ediscovery spend. During my time on the services side I watched several shifts in pricing occur, we went from a per-file and per-page model to a flat per-gigabyte model, then per gigabyte based on expansion of data, then pre-processing and filtering at a lower per GB rate. Today we see offerings of all processing, hosting, and first pass attorney review in one per document or per GB rate.

Through my career I have watched the industry mature and have also lived through the continuing maturation process. Through this process the market has adapted to the more widespread use of electronic data and as data sizes have grown exponentially we have seen more creative processes and consulting built around addressing these issues. Pricing models have adapted to give companies greater transparency around overall cost while also allowing for data reduction and downstream cost management at lower rates.

As the technology has evolved the primary focus has shifted to become less about the creation of solutions to manage this process and much more about the technology being used to get to that end result. Technology is only one piece of the equation; if the technology is not used properly, or if the infrastructure is inadequate and there are not clear cut processes around how the technology will be incorporated any firm is going to be in trouble whether large or small. Technology is simply a tool for delivering results, just because I have a hammer in my hand doesn’t make me a carpenter.

The gigabyte is one of the few known measures when beginning the discovery process. Charging on the gigabyte enables companies to gain a better understanding of what the projected downstream costs will be. Through education and experience companies can leverage the lower cost filtering and analysis components to manage their costs moving downstream while interacting with their data early and often. This process allows companies to continue expanding the review set by applying what is learned through review back into the overall universe of case data to prioritize more data for review. The gigabyte being charged by most service providers accounts for many areas that assist in providing value. When you factor in the overall costs for infrastructure, backups, redundancy, bandwidth, experienced analysts, consultants, IT personnel, hardware, software, space, marketing, sales and the amount of risk that a company is off-setting not only is the company gaining value they are getting a relative steal when you see the going rates for processing in 2011.

One of the major issues with the article is it focuses on commoditizing the companies providing support to organizations related to discovery but it doesn’t focus on what the driving factors are around these perceived cost increases. The article references the doubling of data within companies every 18-24 months and that this correlates to a company doubling their discovery costs as a result. Since 2002, I have seen the cost per-gigabyte of data drop or a pricing model change every 6-12 months, pricing per gigabyte of processing has dropped from $2500 per GB in 2007 to an average of around $100-$250 per GB in 2011. Not only is the price 1/10 of what it was in 2007, there are more creative ways to handle the reduction of data at an even lower cost per gigabyte or sometimes even a flat fee.

So where is the price for handling discovery doubling?

Bottom line, when entering discovery the plan shouldn’t be beating up ten service providers on their per gigabyte cost it should be time spent around evaluating the proposed plans of the providers and developing a solid strategy for managing cost and reducing data to manage downstream costs. This strategy can be around looking for predictability in an all-in model that includes processing hosting and review or other creative pricing options. While evaluating the various options a provider has, look at what steps are in place for reducing data also evaluate whether they provide details around pricing options and data reduction, look for a trusted partner that has well thought out workflow designs and project management that is ultimately going to get you down the path of lowest cost with the least risk. My guidance would be to look for all of the above and when a strong relationship can be forged, stick with it! The transactional nature of this business and lack of commitment make it hard to create a team. Some companies seem to go through service providers like someone goes through socks which can certainly create a lack of consistency. When there is a lack of consistency and a lack of planning discovery costs can skyrocket as mistakes made early can have dangerous implications in terms of cost and risk. While determining the appropriate partner it is also important to note that not all providers are created equal, so although price should always be an issue it should only be one part of your determining factors.

As a solid relationship is forged and a level of commitment between company and service provider is created, the two organizations can begin to grow together with consistency. There will be bumps in the road and issues will occur as this process is not a perfect science but provided each party learns from mistakes and systems are constantly refined to improve efficiency and minimize error the process can be streamlined. Over time the constant improvement of processes, planning, and management will result in a more predictable discovery process helping to reduce costs. As the relationship matures companies will have the ability to evaluate the amount of data being hosted and managed by their service partner as well as the technologies built into their workflow and from there a fixed annual cost can be derived that will assist in sharing risk; but bear in mind whether directly stated or not this fixed cost will in some way involve some unit of measure and that measure will more than likely be the gigabyte.

These are purely my thoughts on the overall process, I would love to hear your thoughts and any welcome comments.