eDiscovery Vendor Consolidation: What Law Firms Can Learn from the Housing Market
Posted On September 25, 2019
In this article, we’ll talk about:
How law firms hiring eDiscovery vendors relate to contractors bidding out work to specialty subcontractors
Brokering the risks of eDiscovery by consolidating the technical or data portion of the process
How a private cloud offering can help you streamline data, process, and technology to consolidate the cost of eDiscovery
The Cost of Homes in California
California is in a housing crisis. Mostly in big cities like San Francisco and Los Angeles, but also in towns like Truckee, Santa Barbara, and Palo Alto. Not only are expensive building costs resulting in a housing shortage, but there’s also an influx of wealthy people moving in, leaving long-time natives with a difficult decision: either downsize, find a way to make more money, or leave. I recently read a New York Times article on the topic that summarized the problem:
Costs have risen so much that it is not possible to build homes where people want to live at the prices and rents they can afford.
To understand why this is the case, consider how houses are actually built: First, a developer secures a piece of land and comes up with a plan. Once the money is in place, they hire a general contractor, who in turn, hires subcontractors, who often hire other, more specialized, subcontractors. Dozens of contractors, each with a specialty–from tile to landscaping–all work together to make it happen.
Sound familiar? It’s this same type of teamwork and division of responsibilities that’s often required by law firms to execute eDiscovery effectively. The client hires a firm, that in turn, hires an eDiscovery vendor, that in turn, subs out work to specialty vendors.
And just like a General Contractor (GC), the law firm is responsible for coordinating all of the “subs” to get things done correctly, in the right order, as efficiently as possible, and within budget.
Guess what? Very few (if any) vendors specialize in all aspects of eDiscovery. So, just like in construction, where subcontractors are hiring other subcontractors, most eDiscovery vendors leverage a network of specialists in areas like forensic collections, data processing, hosting, staffing, etc. They also leverage the expertise of other companies for data centers, software development, and part-time consultants to fill out their offering.
That’s a lot of cooks in the kitchen. And hands in the till.
It’s Not a Vendor Problem, It’s a Supply Chain Problem
Contractors describe this handoff as “brokering risk.” What they mean is that while everyone in the chain has agreed to build a certain piece of the project for a set amount of money and in a given amount of time, none of them are sure they can do so as cheaply or quickly as they’ve promised. They broker that risk by paying someone else to do it for them, minus a small fee.
Contractors can leverage their buying power to decrease the size of the ‘small fees’ through negotiating better rates but the fees don’t go away. Even if a contractor gets great individual rates with all of their subs, the overall supply chain is not optimized for low-cost. Resulting in a situation where “it is not possible to build homes where people want to live at the prices and rents they can afford.”
Similarly, the vendor selection process for eDiscovery is usually designed to optimize the price that each contractor pays to their subcontractor. The overall supply chain, however, is not optimized because, in exchange for the expertise they offer, each vendor extracts a small fee–and these small fees add up.
Homebuilders have a new idea: They’re building prefabricated houses in giant warehouses, shipping them to the job site, and assembling them on-premises. They’re also consolidating all sub-contractors under one roof to deliver the most efficient and effective process for building the home. The result? Houses are built at fractions of the cost, and since everyone works directly for the contractor, they’re all rowing in the same direction.
The goal of prefabricated building companies is to turn this model on its head. Instead of offloading risk, the contractor assumes all of it. Instead of sending jobs to subcontractors, they hire their own factory workers. “The general contractor says, ‘Oh my God, construction is scary, let me broker all that risk,’…I’m saying, ‘Oh my God, construction is scary, let me plan and control it.‘
This idea of ‘brokering risk’ is particularly applicable in our industry. The firm, like a general contractor, assumes a certain amount of risk when they take on the responsibility of electronic discovery. They broker risk on behalf of their client, specifically: financial risk (controlling costs), data security (cyber threats), performance (deadlines), and quality (defensibility), just to name a few.
So, the question is, what does a ‘prefabricated house in a giant warehouse’ look like in our world? Is there something firms can do to streamline their eDiscovery operation without taking on too much risk?
How Do You Provide Cheap eDiscovery?
The opportunity for consolidation in our space is with the “technical” or “data” portion of electronic discovery, and not necessarily the “services” or “support” side.
We believe that firms should put their data in a virtual warehouse–a private cloud–and thereby consolidate their data center operations, software licenses, technical infrastructure, IT/Support, and security teams. Having data spread out across multiple vendors, in multiple software platforms, in multiple data centers increases risk, decreases efficiency, and drives up costs.
A private cloud environment (like the one offered by Oasis) is furnished with a robust software toolkit and serves the same function as the metaphorical warehouse: a central location where all the data, technology, and process can be streamlined for maximum efficiency. This gives firms tremendous buying power where it counts–the commoditized services like processing and hosting–and flexibility where it’s most needed–in choosing service providers based on their ability to provide excellent service, even if they don’t have top-tier data centers.
To finish the metaphor, we feel that law firms should still use subcontractors. Dramatically consolidating service providers (such as “Managed Services” agreements with a single vendor) is rarely the best strategy in our industry. This, for the same reason that it’s not realistic to find a single company that does great carpentry and great landscaping–they’re two different things, and very few, if any, service providers are good across the entire spectrum of eDiscovery.
Consolidate the technology aspects of eDiscovery to streamline operations and leverage buying power. But stay flexible with service: keep a short roster of trusted specialty vendors to provide expertise when they’re needed.