Cost Cutting and Shifting Paradigms

We all know the economy is in the doldrums, but I thought it would be helpful to drill down a little bit to focus more on the legal sector and how it really impacts all of us -- and show why our company is positioned at the fulcrum of the coming change.

Here in Atlanta, we began to see a change beginning in May 2008. It began slowly with a change in complexion of some large projects, mainly with some of our law firm clients who were seeing less transactional work; some of the work our attorneys would normally handle was being handled by their associates. That was soon followed by an increased interest from several large, corporate clients to discuss ways COC could help them to bring their legal costs down. This reached a fever pitch in the late fall as the pressures of budgeting season came to bear. So, much has been made in the last six months – specifically over law firms merging, collapsing, or falling on hard times -- in reality the process truly began filtering down at least a year ago.

We have also seen these budgeting pressures reflected in the number of articles appearing in legal publications that discuss money saving alternatives. One of the most popular is coverage of the use of LPOs (legal process outsourcing) in India. There are pros and cons, and the coverage has been pretty balanced. There have also been articles discussing the wave of smaller firms that are holding rates at 2008 levels or, in some instances, cutting them. And finally, there is no shortage of articles that talk specifically about what law firms are doing to address the current economic climate both internally and for their clients.

It is safe to say that the emphasis on cost containment/reduction will continue for some time, and I think we have reached the tipping point our industry has been waiting for. It's hard to see it now, but this is going to be very good for our profession; I have been incredibly impressed with how many of our law firm clients are truly trying to make changes to meet the needs of their clients, especially concerning costs. As law firms jump on board -- and more opportunities emerge to work collaboratively -- the work product will be better and the client will be happier.

Unfortunately, many of these changes will come too late. The pressures being placed on legal departments by CEOs, CFOs and shareholders -- and sadly in some cases the bankruptcy court -- will be too much, too fast, to accept a change in direction. But ultimately, a multitude of changes will occur in the next several years over how legal services are delivered. We all must accept that these changes are coming and do everything we can to make sure the changes that are implemented by our clients are well-considered and strategic.
 

There's Value In Listening To Your Clients

The economy has unquestionably put a hit on the legal profession. That being said, there is an ever-widening disconnect between large law firms and their clients. Case in point:

  • Roughly 75% of corporate general counsel say that their law departments are facing budget cuts next year, with an average cut of 11.5%, according to a survey by legal industry consultant Altman Weil.
  • However, while most corporate in-house counsel are struggling to cut their legal costs, the online ABA Journal Weekly reports that more than 70% of large law firms are increasing their billing rates again this year (by an average of 4.3%).

Certainly these are some of the reasons that 65% of corporate counsel say that they plan to bring more legal work in-house in 2009. Now more than ever before, if you’re not discovering ways to save your clients money, there’s been a serious breakdown in communication.
 

A Moment for Some Inward Focus

It’s hard not to notice all the negative news hitting from all angles lately. Roiling markets, bailouts, rising unemployment and declining 401(k) balances. It’s easy to get caught up in it, and to find yourself in an all-out panic. Or at least a funk. A New York Times article a few weeks ago that touted the benefits of making a big, life-affirming purchase -- despite the troubled economy -- has really stuck with me.

The article really made me think smaller, actually – easy, inexpensive, or life-organizing things that we can do for ourselves that can make a big difference in our moods, getting us through the day, the week, or maybe even this whole lousy market cycle. I realize there are a lot of people working especially insane hours this time of year, but that’s all the more reason to carve out a little time to focus on some more personal issues:

Check in with yourself. Even though we often lose sight of it, each of us knows what works best to relieve stress – whether it’s meditation, yoga, playing or listening to music, handy work, cooking, reading, or exercising, make sure to budget some time for the healthy activities you love best. Or give up an unhealthy habit: A friend recently quit drinking Diet Coke after decades of being addicted, and is feeling great; another quit monitoring market gyrations during the day, and finds he’s way calmer and more upbeat.

Stay close to home. Consider scaling back on outside activities and catch up on rest, home projects and time with your family. Explore a neighborhood park or gallery. Organize a touch football or softball game. Invite friends over for a game-watching party, or holiday-movie-watching party. Clean out a closet, or reorganize your kitchen or garage. After years of thinking we didn’t have the time or energy for a dog, we recently adopted a shelter puppy. It’s brought us together as a family (and certainly provided lots of opportunities for exercise). 

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Early Case Assessment + Content Analytics = True Savings

We often hear about the most important factor in creating a cost-effective e-discovery review: the review rate of the attorneys. Without question, the use of a content analytic review tool has greatly enhanced the ability to increase review rates for attorneys who know how to use these tools -- by 3 to 10 times versus a linear tool.

This improved productivity goes directly to the bottom line and dramatically reduces the largest component of the e-discovery cost structure: the attorney reviewer expense. Content analytic tools also greatly reduce the manpower and duration required for review.

Here’s where people often get stuck: The upfront cost of using a content analytic tool is (usually) significantly higher than that of a linear review tool. But as many have discovered, those upfront costs are typically recouped many times over by the end of a case because of the efficiencies that are gained in using a content analytic tool. The additional good news is that there’s a way to decrease the upfront costs by culling the amount of data needed for the review. These early case assessment tools are equally, if not more important, to the bottom line.

Early case assessment software platforms (such as Clearwell, Metalincs, and Autonomy’s Aungate Investigator & ECA, among others) enable corporations and law firms to dramatically and intelligently reduce the amount of data that needs to be reviewed. These programs offer a sneak peak at the data at a fraction of the cost of loading for review with a typical content analytic tool. In addition to standard culling methods like de-duplication and file-type extractions, early case assessment tools provide a means to develop legally defensible keyword searches, identify key players in the litigation (or more importantly identify non-players), and allow for bulk coding of clearly non-relevant materials or potentially privileged documents prior to loading into the review platform.

A quick example: A company's initial collection totals 300,000 documents for review. Using an early assessment tool, that number is dramatically reduced through de-duplication (20%), excluding privileged documents eliminates (another 10%), performing a multi-phrase keyword search (25%) and identifying the responsive data set (70%). The final number of documents to be loaded into the content analytic tool: 48,600 (or just 16% of the original collected documents).

Common volume reduction achieved through an early case assessment tool is 70-80% (the companies mentioned above have case studies on their respective websites that detail even greater reductions). The point is clear: reducing the volume of data, combined with the increased speed in which it can be reviewed via a content analytic tool, is a winning combination for corporations and law firms seeking to better manage e-discovery matters.

It’s always fun to be part of a meeting in which the realization sinks in that not only will the work product be better, but it will save hundreds of thousands (if not millions) of dollars.