The Cost of eDiscovery

What is eDiscovery?

Before, all businesses store data and information in paper documents. But with breakthroughs made in Information Technology over the past two decades, businesses have switched to using computers as a major device in storing and managing information. A large fraction of these electronic data contain legally sensitive information that may be used as evidence in a civil or criminal legal case. With this, the process known as eDiscovery has become popular in acquiring evidences to be used in lawsuits. Electronic discovery or commonly referred to as E-discovery is a process wherein electronic data in the form of text, images, databases, spreadsheets, audio files, etc. are being used as evidence in civil or criminal legal litigations.

Electronic Data vs Paper Documents

Electronic data is easy to store, manage, share, and search compared to hard copy data. These characteristics have made electronic data suitable in investigations. Another feature of electronic data which cannot be found in paper documents is the metadata or metainformation that usually go together with electronic data. Metadata is the data about the data, with it more information such as the author and the date the file was created becomes available.

Impact on Business Organizations

As business organizations continue their day to day routine, the amount of Electronically Stored Information (ESI) that needs to be managed also increases. With tightening regulations that have to be put into consideration and the increasing litigations companies have been forced to confront, more and more have become aware of the legal risks involved in managing Electronically Stored Information. This has led companies to invest in information risk management systems and document retention policies.

eDiscovery is a costly process for businesses. Millions of dollars have been spent in eDiscovery. Since the 2006 amendments to the federal procedures for e-discovery, companies have been taking eDiscovery seriously. DuPont spent approximately $12M reviewing documents in eDiscovery, only to find out that those documents should have been destroyed long ago according to according to existing document retention policies. UBS Warburg and Merck were fined $29.2M and $253M respectively in litigation that required eDiscovery of files. The Prudential Insurance Company of America was fined more than $1M for not preserving certain records that proved to be crucial by the courts.

Business organizations have always been left overexposed to documented-related risks. According to The Tower Group, there are about 7.5 million Microsoft Office documents created every year. About 35% of all corporate documents contain legally sensitive information (Cohasset Survey 2005). 25% of corporate documents are subject to regulatory compliance (Vanson Bourne Consultancy) and only about 30% of businesses have implemented technology to facilitate the retention and disposal of documents across the enterprise.

These documented-related risks can come from many directions, some of the primary risk forces as identified by NextPage.com include:

Your Enterprise. On the average 80% of the Office documents that companies create are stored in hard drives and scattered shared drives. Combined with the continuing problem of user adoption of new tools, they becomes exposed to information risks.

Employees. High-risk documents on employees' computers and the neglect in complying to document retention policies becomes a dangerous combination for businesses.

Clients. The inability to meet with contractual obligations can create obvious and unacceptable liabilities for businesses.

Regulatory. Most businesses have been required by government regulations to have written document retention policies in place and effectively execute these polices. In too many cases, uncontrolled documents on the desktop lead directly to non-compliance with these regulations.

Legal Departments.
Business leaders must manage the effects of legal issues to business productivity.

Reactive vs Proactive eDiscovery

A good article from IT Today by Ursula Talley explains the difference between reactive and proactive eDiscovery. Reactive eDiscovery means taking actions after receiving a discovery request. Proactive eDiscovery on the other hand is the other way around, organizing and managing information in advance, thus giving companies a better response to future discovery requests.

With the concept being relatively new and the tedious tasks involved in managing electronically stored information, most business organizations are still reacting to eDiscovery requests. But as time goes by, more and more companies are switching to proactive eDiscovery given the obvious advantages of having it over reactive eDiscovery.