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Historically, law firms were able to generate significant revenue from the time-intensive work their attorneys were required to do throughout the entire discovery process. When lawyers reviewed paper copies of client files, weeding out duplicates and irrelevant documents while flagging the relevant documents, they billed those hours and the firm collected the fees.
The rise of eDiscovery momentarily created even more opportunity for law firm revenue generation, as most firms outsourced the technology-dependent processing of electronically stored information (ESI) and collected a tidy mark-up for their administrative time. But as noted by Anju Khurana, an attorney and Certified Information Privacy Professional, in an article originally published by ACEDS, the bottom dropped out of this lucrative profit center in 2009. When the economy tanked and corporate legal budgets were squeezed, clients went straight to the vendors who were offering cheaper rates than their law firms.
A LexisNexis survey found that nearly 75 percent of law firms considered eDiscovery to be an “important revenue stream.” Now, law firms who are able to successfully process ESI in-house — versus outsourcing it to a third-party vendor — can recapture those discovery revenues.
“Instead of paying a vendor to process data and simply passing those costs along to the client, lawyers and their clients can both win when law firms handle at least some eDiscovery processing,” said Terry Leang, a senior sales solution architect for litigation software at LexisNexis.
During a recent webinar, Leang shared insights into three prominent billing models through which law firms can capture eDiscovery revenues by bringing eDiscovery processing in-house:
- Billable Hours
Just as in the old days of paper document review, your firm can charge for processing by the hour. More than 78 percent of the law firms surveyed by LexisNexis use this tried- and-true business model.
- Charge Per Gigabyte or Page
Service providers generally charge by volume. You can adopt this established fee structure, however experts advise that clients may not perceive the benefit of processing in-house if the charges mirror those of service providers. LexisNexis reports that firms charging per gigabyte are generally charging 30 percent less than an outside vendor.
- Alternative Fee Arrangements
You can offer a flat-rate fee for an entire matter, basing the fee on the volume of material and hours necessary for processing. Charging a flat rate up-front may reduce client resistance.
Of course, some firms choose to include eDiscovery services as a value-add for clients, increasing goodwill and potentially generating additional business. For those firms that currently absorb eDiscovery processing costs as overhead, handling processing yourself will reduce your costs as it eliminates the need to use an outside company.
So what does it take to make this move? While the eDiscovery process can seem like an impenetrable mystery to many lawyers, it need not be anymore. The eDiscovery processing software has become easier to use and the pool of technologically experienced litigation support personnel has grown, so conditions are ripe for law firms to be able to recover their investment quickly by bringing at least some eDiscovery in-house.
“Software tools, such as LAW PreDiscovery and Concordance Desktop, give law firms the ability to handle eDiscovery processing in-house in an efficient and cost-effective manner,” said Leang. “This creates an opportunity for firms to recapture revenues for themselves.”
LAW PreDiscovery is an “eDiscovery engine” that can scan, import and produce all of the potential evidentiary documents needed during eDiscovery – this helps law firms take control of eDiscovery early in case analysis so they can cut millions of documents down to size prior to costly review. Concordance Desktop discovery management software helps law firms take control of the eDiscovery workflow and manage the review process faster and more accurately – right from their desktops.
To download a free white paper regarding how law firms can recapture discovery fees, please click here.
This post is by Daryn Teague, who provides support to the litigation software product line based in the LexisNexis Raleigh Technology Center.