Perhaps the most perplexing area in eDiscovery is pricing. Not only have the pricing models changed dramatically in the last decade, but vendors use different models and define terms differently, making it hard to compare bids. To make matters worse, with per unit fees, an upfront bid is rarely what a project costs in the end.
The result? Legal departments have to play detective to find the hidden language that will make an eDiscovery project more expensive than it appears at first glance. There is little predictability or transparency. Clients and vendors are protecting their own interests, with misaligned goals. As an example, advanced machine learning solutions tend not to be included or governed in some fashion and can add significantly to the cost of a “so called” predictive pricing model.
If we were to start from scratch with eDiscovery pricing, how should it be structured? How do we design a fair pricing model that balances a legal department’s need for cost predictability with a vendor’s need for margins that lead to a sustainable business?
Flat Fee Pricing: A Misunderstood Concept
Flat fee pricing is that enlightened model we are searching for in eDiscovery. In fact, I have seen it work firsthand. But, take heed. Like all the other confusing pricing terms, there are various definitions of a flat fee, and many vendors claim to offer such models already. However, a true flat fee eDiscovery pricing model is not mainstream.
The model I am talking about structures one price for all a company’s discovery needs for a full year. A vendor that is fully embracing this pricing model agrees to take on all eDiscovery matters for the negotiated price set at the outset. There is no data overage fee if the company receives a big, unexpected case requiring more eDiscovery work than anticipated. Alternatively, the client sends all its discovery work to the vendor – big matters, small matters, and everything in between. Forging a new standard for eDiscovery service delivery, the vendor takes the risk of fixed pricing against variable costs, and the client takes the risk of committing to a single vendor.
The fixed fee price is not calculated based on volume, such as a flat gigabyte fee on incoming data or per custodian fee. Instead, the annual price is formed by looking at the anticipated eDiscovery workload from a company and is derived from the type of data likely to be received, the anticipated number of matters, the type of matters most common, and other factors. A legal department may estimate some of these metrics in the first year of the agreement, but trends will emerge and the flat fee improves for both the client and vendor year over year.
Partnership through a Shared Commitment to Quality and Value
Let’s face it, taking price out of the daily picture drives new behaviors between a client and its eDiscovery vendor. For both organizations, a fixed fee model amplifies efforts, improves the quality of discovery, and expands the capacity for improvement and change.
First, efficiency becomes the incentive for both the vendor and the client. With a fixed fee model, successful eDiscovery is a team effort — hinging on a shared ability to collect, transfer, process, and present data to outside counsel as needed and when needed. Because both organizations are driving toward a common goal across multiple projects, technology and process improvements can be rapidly introduced, implemented, and improved when needed. Lessons learned on the last project can be immediately injected on the very next project. In addition, the vendor intimately learns the company’s data and practices so customizations specific to that organization can be implemented, and the effort to launch a new project or on-board new outside counsel can be reduced.
Further, when one vendor handles a company’s entire eDiscovery portfolio, phenomenal new insights emerge when it comes to solving larger-than-life business challenges. For example, a better understanding of a company’s data results in improved keyword search term analysis for purposes of purposes of negotiating scope and prioritizing document review. Additionally, the legal team is able to track historical pricing and data volume trends, allowing it to be more informed when arguing proportionality with an opponent or demonstrating burden to a judge. All of this benchmarking is possible because the legal team is getting consistent information from a centralized eDiscovery vendor. A comprehensive view like this is more difficult if the legal team is coordinating feedback loops across three or more eDiscovery vendors with different processes and reporting methods.
Similarly, a flat pricing model encourages the company to consolidate its data volumes, vendors, and budgets. The client can stop paying fees to a multitude of eDiscovery vendors and law firms to keep “luke warm” discovery databases active. This model emboldens the legal department to streamline the number of outside counsel firms employed since eDiscovery will be centralized. Plus, one price for all eDiscovery requires the legal department to manage its budget in a new way. Legal teams cannot measure their importance (or success) by the size of their budget or how many direct reports they have. Instead, legal professionals look at how much they save on eDiscovery year over year. How many dollars they can reallocate back into the business? Success now looks like taking on more and more data year over year, but spending less and less year over year.
But perhaps the most significant benefits stem from the commitment the two organizations charter. Both organizations are incentivized to work towards common goals and resolve issues expeditiously.
Pricing Change Agents of the Future
This industry needs a value based pricing transformation more than ever. We need to create better ways of handling eDiscovery costs.
At ProSearch, we don’t just dream about ideal pricing models, we take action. Our objective is to price eDiscovery in a way that benefits us and benefits our clients. Our “one price for a year of eDiscovery” is different than anyone else in the industry, and it’s the model that makes the most sense for the future of our industry.[activecampaign form=1]