Law Technology Today From the ABA Legal Technology Resource Center
Related Articles
Technology is in a constant state of evolution. Less than 20 years ago, phones still flipped, “Google” wasn’t yet a verb and you couldn’t use your landline and the internet at the same time. Now, according to Statista, more than three billion people are walking around with computers in their pockets, instantly accessing virtual assistants or browsing the internet with a swipe and a tap (even clicking is becoming passé).
Naturally, the continual updates and improvements to technology have affected most—if not all—businesses. Jobs that were once manually laborious are more time- and cost-efficient, from the farmer who now waters his crops with an automatic irrigation system to the surgeon who controls a robotic arm from across the world.
In e-discovery, technological advancements have changed the way we operate, all the way down to our ever-evolving pricing structures. Just a few years ago, most e-discovery providers billed most everything as individual line items, but pricing models have been advancing along with the technology.
Fortunately for customers, the change is good. Let’s face it; comparing e-discovery vendors’ pricing can be an apples to aspirin analysis (take two and keep filling in the spreadsheet!). Now, many e-discovery providers are starting to offer flat-rate pricing, where clients pay a set contracted price monthly for a bundle of technology and professional services.
I agree with those who predict that in a few years, flat-rate pricing is all we’ll see. Some providers are just starting to include data processing and hosting in a flat per-month fee, but the logical evolution will be to incorporate more and more of the EDRM into those flat-rate pricing plans.
The evolution of the pricing model
Because the e-discovery industry is still somewhat new and always changing, the market hasn’t yet settled a standard pricing model that all service providers use. And while we’ve offered flat-fee pricing for years, it wasn’t until recently that the model really caught on, leaving most clients to deal with transactional, piecemeal services sliced and diced a number of different ways by each vendor. And that has made it historically difficult to compare apples to apples pricing between vendors.
While there can be a multitude of differences in individual pricing models, the models that have dominated the industry the most include the following:
- Line item pricing: Under this type of model, each step of the discovery process is charged individually.
- The “In-Out” model: This model is typically reserved for larger data sets, where the vendor will charge a small amount per gigabyte to ingest the raw data into a processing and analytics engine. Next, the vendor charges a deployment fee per gigabyte for the export of the culled and searched data to then be loaded into the review tool for review by counsel and others.
- All-in (aka flat-rate) pricing: This typically covers a good portion of e-discovery (from collection through review, for example), including the necessary technologies, project management, and other services, depending on the agreement. There are three primary kinds of all-in pricing:
- Per-gigabyte: In this model, the charge is based on the amount of data received. For example, if a client has 100 gigabytes of data, the vendor would charge a flat cost per gigabyte each month for a list of included technologies and services.
- Per-document: This is essentially the same as the per-gigabyte model, except that the unit of measure is based on the number of documents collected or reviewed. Unlike the per-gigabyte option where the cost is known early on, with the per-document model, the costs are not known until at least the initial data processing is complete.
- Bundled services: This model is also similar to the per-gigabyte model, but it usually involves a minimum quantity commitment, which is incurred whether or not that minimum is met. Like with other industries, the minimum commitment usually comes with special pricing, as it allows everyone to more accurately predict the overall costs. These plans, like cell phone and data plans, usually also include a schedule of additional costs should the actual usage exceed the minimum targets.
While line item pricing used to be the most common pricing model, it is cumbersome, can be difficult to fully comprehend and makes it nearly impossible to accurately predict the total cost of any given project. Because everything is presented a la carte and is billed as the costs are incurred, the total costs are often not known until the matter concludes. Additionally, variations in data sizes over the original estimates could further make those costs swing unexpectedly and widely.
As the industry has matured, shrewd e-discovery clients have begun to request more all-in pricing. Not only is this arrangement typically more cost-efficient than paying for everything piecemeal, but it’s also just simpler.
Of the three all-in pricing models, the per-gigabyte option has become the most frequently used (even the bundled services option is really just a per-gigabyte plan with guaranteed minimums). It’s similar to the way data services outside the legal industry have been handled for years prior, and it makes it easy to understand total costs even from the outset of a new matter. The flat-rate models ensure that costs are more predictable and removes the need for attorneys to spend time dissecting invoices, so they can focus more on what they do best and not on accounting tasks.
But note, that doesn’t mean that all flat-rate pricing plans are magically easy to compare now, as various vendor packages are often structured differently. Here are three of the most important elements of such plans to which you should pay close attention before signing any such contract.
1. Pricing framework
Every e-discovery provider’s flat-rate likely will include different services, so don’t assume that because your last vendor offered a certain service in their flat-rate packages, another one will, too. Usually, flat-rate pricing covers at least the processing and hosting of data in a review tool, but it can also include at least some bundled professional services, like a set number of hours of consulting and technical and project management services.
The best packages will include a truly comprehensive solution, bundling not just processing and hosting, but other technology and services to cover legal hold requirements, custodian communications, data collections, document review services, and even advanced technology such as data analytics engines and predictive coding systems, which together cover all areas of the EDRM in one seamless solution.
Flat-rate models are also usually tiered, decreasing in price as the quantity of data increases. As a final note on the pricing of these plans, it’s important to pay close attention to the costs of any overage or optional services too, as you don’t want unpleasant surprises later. And if in doing that review you find a service that you think you’ll routinely need that’s not included, most experienced vendors will work with you to include those additional services in the base plans.
2. Length of the contract
Cases can take years to reach a court judgment, settlement, or other final disposition (the Guinness World Record for the longest-running court case began in 1972 and was still going in 2006). And while most cases take substantially less time, it’s still something to consider when contracting for e-discovery services on flat-rate terms. Most of the work and costs are incurred by the vendor in the initial stages early on in the litigation, and over time, those costs will lessen. Thus, especially in those contracts that involve a single matter or set of matters that you expect to last a significant time, you should consider negotiating a reduction in costs over time.
For master-services type, long-term contracts (usually with corporations but also sometimes with law firms) that are designed to centralize and cover all of a client’s e-discovery and related needs across all their active litigations, investigations, and regulatory matters, the period covered by the contract generally translates into lower overall pricing, too. Simply put, the longer a vendor can count on a given client’s business, the longer it can spread out certain costs, lowering month-to-month costs, which usually translates directly into savings that can be passed onto its clients. Like with cellphone and other data plans, thus, the longer the commitment period, the lower the monthly costs should be.
3. Availability of flat-rate plans
While some service providers have not yet adopted flat-rate pricing, don’t hesitate to ask your preferred vendors if they would (or do) offer such plans. Even if they don’t normally, many companies will work with you to develop such a pricing structure. Just remember that the goal is to find the right balance between saving money and ensuring the service you receive is quality-controlled, accurate and secure.
The most important thing is that you trust the person handling your data—don’t hand sensitive information over to someone who offers flat rates merely to get the (seemingly) better deal. Instead, approach the vendor you want to work with and even if they don’t outwardly offer a flat rate program, they should be able to create one that will fit your needs if they are experienced in this industry.
Advancements in technology are changing the scope of e-discovery. Services that were once only available to corporations and large law firms because of high price points are now more affordable and accessible to small businesses and firms as well. The flat-rate pricing model is one of the ways e-discovery is becoming more financially accessible and predictable, benefitting vendors and clients alike—and it’s why I believe the e-discovery horizon is flat.
