The eDiscovery services business is gearing up for a sea change in market pricing. Or it’s not, and everyone is about to get a lot less excited about the quality of service they experience from their providers.
The eDiscovery business is an interesting one. It is a service business, carefully propped up by a menagerie of data-based activities, each separately billed based on that oh-so-important unit, the gigabyte. The trouble with this model is that with rapidly accelerating technology and the introduction of lower cost cloud-based infrastructure solutions, the value of the gigabyte is diminishing rapidly while the demands on experienced and sophisticated service professionals grow. It is true that so-called “mega cases” are getting bigger, allowing large volumes to provide a windfall for those lucky winners, but the medium-sized matters in a service provider’s portfolio are not. At the end of the day, there are only so many emails and spreadsheets a custodian can generate in a year! This puts service providers in a very precarious position as they must increasingly rely on their handful of mega cases, which can evaporate at a moment’s notice.
So what does all of this mean? Well, I suspect that in 5 years, paying for “data processing” will be as laughable as paying long distance fees for calling out of state. Hosted review platforms will be capable of ingesting a PST with the same gentle ease and speed as a load file, and 1 terabyte of data, complete with near duplicate identification and mail threading, will be something you load over lunch.
As for “data hosting” fees? There will still be some nominal monthly charge, but post the “Relativity Hosting Wars”, as Greg Buckles describes it in a recent blog post, these rates will likely dissemble to a variety of flat rate fees, overage charges, and seat licenses to more closely reflect our cloud-based future.
So, with the well run dry on the value of a gigabyte and the cost of infrastructure securely under control, how will providers be able to afford the experienced and sophisticated service professionals that their clients demand?
Some customers will likely move to managed eDiscovery solutions and bring those experienced and sophisticated service professionals in-house. Their reliance on providers will be more akin to traditional technical support than the consultative support they receive from them today.
For everyone else? The re-emergence of the billable hour! Yes folks, we have come full circle. The ride to the bottom of the price per gigabyte slide was a fun one, but all good things must come to an end.
Through stiff competition over the years, eDiscovery providers have whittled away at hourly “tech time” and project management charges, reducing them to a very small bucket of custom and specialized requests that their clients will find palatable. To fill the void left over from the desiccated shell of the gigabyte, providers will need to slowly begin the shift towards a consultancy model, which begins with gluing back activities to their list of billable hourly charges to help supplement the decreasing economies of supporting small and medium-sized engagements. The painful alternative is to de-value the quality, sophistication, and/or availability of the human capital required to provide high-end consultative support in this service-focused business, and this is something that no one can afford.
Now for the hard part: making hourly rates palatable once again.