Going it alone

A number of commentators have reported on recent developments in the insourcing/outsourcing arena. The latest report concerns Chicago based Drinker Biddle & Reath which has set up its own subsidiary which seeks to recover income lost to outside discovery/review attorneys and third party vendors.

It so happens that I had had a whiff of this development when it was mentioned to me by a couple of the Drinker Biddle partners with whom I was in touch a few weeks ago. I had assumed then that this was confidential but am delighted now to have the opportunity to comment on the development following the comments on Twitter and Google+ by Jonathan Maas and Chris Dale respectively and the article in Law Technology News by Gina Passarella:  Drinker Biddle Forms an E-Discovery Subsidiary [LTN, 28th September, 2012].

Every so often, our industry becomes fixated with a particular issue. Recently it has been the increasing prevalence of predictive coding but a year or so ago it was the relative merits of outsourcing, so Gina’s article is interesting not just because it contains comments on the decision by a major law firm to insource their e-discovery and attorney review function but also because it suggests that whether to bring the e-discovery function and attorney review in house is an issue which now confronts a wider range of law firms.

In the UK we have hardly started to get our collective heads round the idea of Alternative Business Structures so it is interesting to observe what is happening in other jurisdictions. Just because something happens overseas does not of course mean it will happen here but the debate over outsourcing has clearly not run its course.

Gina’s article ends with what is for me the most telling remark. She quotes Leonard Deutchman, General Counsel of LDiscovery Solutions as saying:

“Law firms can certainly do more than nothing, but whether they can replicate what a good vendor can do” is another issue…. Creating an e-discovery vendor model requires a large investment of time and expertise.”

This quote goes straight to the heart of the matter. Firstly, can a law firm replicate what a good vendor can deliver and secondly and equally importantly it requires a considerable amount of time and expertise to deliver the service.

I would add a third point: it is definitely going to cost a lot of money in buying/licensing software and in training up former staff or employing new staff to deliver the service. Drinker Biddle’s Michael J Boland and partner Thomas A Lidbury, head of the firm’s data management and discovery group, admit the firm has spent “millions of dollars” acquiring technology, software and staff to enable the subsidiary to deliver the service.

I am not, of course, saying it cannot be done. Far from it, and there are plenty of examples of firms which run profitable and successful enterprises of this type. Gina mentions a number in her article including the likes of Morgan Lewis, K&L Gates, Reed Smith and Littler Mendelson. Success, however, comes at a price.

Another telling comment in Gina’s article is Lidbury’s view that this whole process may end up being driven not so much by the desire of the law firm to recapture revenue they perceive they have lost to third parties but by the clients themselves. Personally, I have always believed that clients, with or without general counsel, will ultimately set the pace in this area and will not blindly follow the advice of their external lawyers about e-discovery particularly if those lawyers are clearly not keeping up with the pace of technological change. Our own rule changes due in April 2013 will play their part in sorting out those firms who can be trusted to run an e-disclosure exercise properly and those who cannot and it would be absurd to believe that clients will not at least think that they could do the job better in house themselves.

There is no doubt that while incomes in law firms have been under pressure they will look for ways to address the shortfall. However, I have serious doubts whether insourcing e-disclosure/discovery services is the right way forward for the majority of firms. Conversely, for the right firm prepared and equipped to spend the time effort and money to deliver the service to the client this may well prove to be a game changer. For the vast majority of firms, however, and certainly those without the financial muscle of some of the world’s larger law firms, they will be better off having a close and long term relationship with a third party provider who can deliver the services they need to their clients at a cost which is proportionate to the matters in hand and at the same time using the latest equipment and technology on the market.

Purchasing the technology and the software and all relevant updates, employing trained staff and acquiring and maintaining premises is not for everyone.

In truth, going it alone is really only for the bravest and for those with deep pockets.

Illustration:  A Very Gallant Gentleman (1913) by John Charles Dollman.