A Posse List blog post earlier this year, Computer-aided document review has arrived (12 January 2010), comments on a thought-provoking e-discovery study described in an academic journal article.  The premise of the underlying study, which compares computer classification of documents with manual review, is that automated systems are capable of categorizing documents at least as well as teams of human reviewers in an
e-discovery setting. While it raises interesting points, I am not convinced that the evidence supports the authors’ conclusion that computer-aided review has arrived quite yet. It is still a stretch to suggest that human document reviewers face an imminent risk of being supplanted by artificial intelligence-based processes.

The underlying study by a trio of recognized experts in cognitive science, information management, and e-discovery, Herb Roitblat, Anne Kershaw, and Patrick Oot, is described in detail in their journal article, Document Categorization in Legal Electronic Discovery: Computer Classification vs. Manual Review, published in the January 2010 issue of the Journal of the American Society for Information Science and Technology (link is to PDF at the Wiley Online Library).

There is no question that software can detect ever-more sophisticated language patterns in documents and classify them by theme. Whether this translates readily into a persuasive argument that legal document review will be more fully automated in the near future, or even that such a development is inevitable, is a different question. And I don’t think the study provides conclusive support for the proposition that computer classification could reasonably substitute for human review.

Before turning to my reservations about the study, I want to raise a potentially bigger issue. Irrespective of advances in technology and compelling statistics, we need to ask whether courts and litigators will accept a discovery process that is ever more reliant on technology in pursuit of efficiency. I think the likely answer is, ‘only to a point.’

Right now, e-discovery professionals use many tools to filter large collections to focus lawyers’ attention on a subset likely to be most relevant. Are we missing another step? Is there a way to emulate or even exceed human review to cull the relevant from the extraneous? If so, how do we determine the “reasonableness” and “completeness” of the process? That is the multi-million-dollar question.

Courts now often accept concept clustering and searching in aid of review, but not all the time nor in all settings. For many lawyers, the key argument for using these tools is the ability to reassure courts that these tools focus or prioritize review on the most promising “clusters” of data but do not wholly eliminate review of apparently “unimportant” clusters. I disagree with my colleagues who cite clustering technology as a harbinger of full automation of review. In my experience, it is just a tool that helps humans to make decisions that are more consistent and coordinated.

I think most practicing lawyers would agree with the study’s central premise  that lawyers should use technology to reduce cost. That said, often senior lawyers who ultimately decide on how to conduct a document review neither understand the latest technology nor are they – or their clients – likely to accept the challenge of having to defend an entirely new approach to discovery. And that is why I think the answer to the question, ‘will lawyers and courts accept an expanding role of technology in order to reduce discovery costs’ is, ‘only to a point.’ If that is indeed the case, how does the study advance us toward that critical point?

It raises – and partially answers – the important question whether we are approaching a breakthrough in terms of the capability of automated review tools to render ‘consistent’ and ‘correct’ decisions, as measured against an existing standard, while classifying documents in a legal discovery context. The study pitted two teams of contract attorneys against two commercial electronic discovery applications to review a limited set – 5,000 documents – culled from a collection of 1.6 million documents. The larger collection had been reviewed two years earlier by attorney teams in connection with a Second Request relating to Verizon’s acquisition of MCI. The authors’ hypothesis was that “the rate of agreement between two independent [teams of] reviewers of the same documents will be equal to or less than the agreement between a computer-aided system and the original review.”

The study set out to test whether an automated review tool would show similar levels of agreement with classifications made by the original reviewers as did the two contract teams. The two re-review teams agreed with the original review on about 75% of document classification decisions; the commercial automated applications fared slightly better. By this measure, my initial read would be that the two approaches were proven equally unreliable and inconsistent. But I concede that the study demonstrated that automated applications can match or exceed the performance of two human teams working under certain and arguably limited conditions. The question is, whether the study demonstrated more than that?

The study is properly understood as a demonstration of capability, rather than as a controlled study, which by definition, operates under controlled conditions with a constrained set of variables.  Several factors could have affected the study outcome:

• The sample set was extremely small. While 5,000 documents out of 1.6 million may be statistically significant for certain purposes, it is not a big sample for a document review. Empirically, we know that a review team gains proficiency and confidence in stages during a review project, eventually reaching a ‘steady state,’ where their decisions are likely more consistently correct on first pass. The two contract teams who were pitted against computers in a test of which alternative more closely mirrored the decisions made by the original review team did not have the benefit of a warm-up, which the original review team likely did have. In addition, we do not know whether the original review team was more senior or experienced than members of the review teams in the study.
• The study write-up does not make clear whether instructions given to the original review team were provided in identical form to the two review teams in the study. In essence, what we ask review teams to accomplish is to approximate, as closely and consistently as possible, decisions that would have been made by the supervising attorney (or client’s lead counsel) had that attorney personally reviewed each and every document. (In TREC terminology, this is the topic authority.) A key to running a successful review and delivering clean and correct work product is first ensuring that counsel provides clear and complete instructions to the team at the outset and resolves questions raised in the course of review.
• We also do not know what standards of quality control were applied for any of the review processes. A well-designed and executed regime of quality control enhances the consistency of review results. Much more on this theme, below.

Although I would not hang my proverbial hat on the results of the study, it does open the door for follow-on work. We may yet see a convincing demonstration that automated systems render more consistent decisions than human review teams. The issue will remain whether any amount of proof would persuade the bar to accept use of automated review as a substitute for attorney review in the context of discovery.

A more immediate question is how can we make good use of what appear to be very capable software engines? Can we integrate automated applications to assist human review and make it more consistent? Indeed, making review more consistent has been the aim of quality control and validation processes all along.

A well-designed quality control regime makes use of intelligently-designed searches to identify likely errors and inconsistencies in a set of reviewed documents, and directs “suspect” documents to a team of more experienced reviewers for a focused re-review. This continuously re-focuses QC review toward outliers and other documents that may warrant a second look.

My reservations notwithstanding, I think there is a good amount of value in the study, which sets a stage for further comparisons of automated and human review. The best purpose, in my view, however, might not be to aim toward replacing human reviewers on a first pass review.

One possibly feasible and very attractive target is to develop a process in which we can fully leverage automation to reduce the effort (number of attorneys) required for first pass review. With the right process, fewer, more senior reviewers may need to review only a set of representative documents in a collection, while technology acts as a ‘force multiplier’ to speed review and ensure consistent coding.

Indeed, there are applications in development and commercially available which have demonstrated an ability to “crawl” a large collection of documents to identify documents with substantially similar content. If we can properly leverage that technology, in tandem with a small elite team of attorneys, we have a hybrid workflow that benefits from both human intellect and machine power. I would like to see a study proving the capabilities of such a hybrid model.

A potential hybrid model would have senior attorneys review representative sets of documents and the tool analyze features of the reviewed documents to identify and auto-tag “like” documents in the larger collection. As the review proceeded, the tool would ‘percolate’ to the review team’s attention subsets of documents from the collection dissimilar from those already reviewed. Based on the reviewers’ decisions as to these documents, the tool continues to apply tags to more of the collection.

The attraction of this approach is two-fold: human attorneys are still making initial determinations but the application magnifies the effect of their determinations by propagating decisions to similar documents throughout the larger collection. It has been suggested that, in the proper context, this approach would permit a single attorney to “review” a vast collection of documents in several hours. A test of that claim is warranted and, if the premise were proved, it would be impressive and could directly influence the increased use of automation in review, even if, for all the reasons stated above, wide adoption of such processes would take a while.

An alternate model – one more readily proven in a single study – and one that I believe holds promise as an immediate aid in improving the quality and consistency of document review as a process, would be to fully integrate available automated searching and categorization applications into existing quality control processes. So I would very much like to see a well-designed test of an automated-classification tool in that context, one that demonstrates how the model outperforms quality control processes using a series of term searches to identify sets of documents for targeted QC.

Early Case Assessment (ECA) is the e-discovery solution most in demand, according to the 2009 Socha-Gelbmann Electronic Discovery Report. In my blog post, E-Discovery Takeaways, I discussed the various methods clients are using to reduce the cost of handling e-discovery such as by in-sourcing and moving data to the cloud. Many corporations and law firms are also pinning their hopes on ECA. This hope, however, is often misplaced; effective ECA requires detailed process know-how and avoiding undue faith in a single application touted as an ECA panacea.

The report describes industry wide confusion between perceived and true functionality offered by ECA applications:

“ECA has been a hot topic for the past two years. We believe a major factor for this level of popularity is that it is being portrayed by many as a silver bullet for constraining runaway costs. A concise, generally accepted definition of ECA does not exist. Consequently, defining ECA depends on who you ask. Some purveyors of products are working at rebranding old tools as ECA adding to the confusion.” [emphasis added]

The survey results also indicate that “overselling” by software providers is one of the biggest problems in e-discovery related to ECA. Hand-in-hand with this problem is the need for ESI-specific lawyer education and mentoring.

From Silver Bullet to Gold Rush

Consumers of e-discovery services and software should take note of the Socha-Gelbmann report’s warning. It is always wise to be wary of applications that promise to “do it all”. Most applications do one or two things well and the rest poorly. Recently, it seems that developers slap “Now with ECA!” stickers on products that could potentially be used for ECA (often with an enormous amount of effort) but which don’t actually include any new functionality specifically designed for this purpose.

The confusion surrounding ECA recently prompted George Socha and Tom Gelbmann to author an article on the subject, Don’t Box ECA (Law Technology News, June 2010). They point out that, while ECA can intersect with the discovery process, it actually goes beyond it. For the purpose of this blog post though, I’ll focus on how ECA does apply to discovery.

The Truth about ECA

At Integreon, because we consult with organizations at every stage of the EDRM framework, we have been beating the ECA drum for a long time. There is no replacement for old-fashion know-how, preparation and organization. True ECA is a managed process where the litigation team creates and reviews data maps, conducts and reviews potential custodian interviews, and looks at sample data. There are tools that can make some of this process easier but nothing really replaces this litigation-research.

It is nice there are tools that help litigation teams get a whiff of the data without having to fully process significant numbers of PSTs (a common type of mailbox archive file) or restore stacks of backup tapes. Integreon uses tools such as Index Engines (i.e. Advanced Tape Discovery) and Clearwell (i.e. First Line Analysis), but these are only the tools deployed as part of a comprehensive, documented ECA process.

Simply put, discovery related ECA is all about scope. The goal of this “assessment” or “analysis” is to make an educated prediction as to how much data should be preserved, collected and processed; how much the full discovery effort might cost; and benefits and risks to the client in a variety of discovery scenarios. If the ECA effort is effective, the litigation team will be able to put a relative value on the litigation, prepare for the meet and confer or settlement conference, and correctly target its collection efforts to the truly, potentially responsive custodians and data stores.

Based on a review of interview memoranda and data maps, attorneys should also work with in-house specialists or outside consultants to analyze representative samples of data to understand and document data types, thread topics, participant interaction, timelines, etc. The team can run searches on this data to attempt to extrapolate the amount of information which may be potentially responsive and that will eventually need to be sent into review.

After this phase, which is aided by e-discovery applications but is certainly not a “magic” turn-key process, the team should be able to formulate an initial strategy. If formal discovery is called for, they should be able to make an informed decision as to what to collect. Helpful ECA should allow the team to collect less data overall, and produce more responsively.

Again, ECA is a human process. One hundred custodians dumped into an ECA tool will not miraculously percolate a case strategy, and could be an even bigger waste if the case might be won by collecting only twenty custodians. If the litigation team hasn’t done its homework, then no ECA tool in the world will be helpful. It will be like that All-in-One power tool that just collects dust in the basement, or that blender that is supposed to delicately crush ice but instead makes margarita soup.

Perhaps the persistent underlying distaste for e-discovery is part of the reason that some attorneys look for a magic ECA tool to make all their troubles go away. The Socha-Gelbmann survey had an interesting comment on this:

“As one survey participant put it, ‘electronic discovery is viewed as something you have to do, rather than something that is vital to learning about the case.’ Fortunately, some organizations understand this imperative and have been developing technologies and techniques to help electronic discovery practitioners craft and tell a persuasive tale.”

I reiterate that true early case assessment isn’t primarily about e-discovery. It’s about litigation tasks such as interviewing potential custodians and witnesses. I often hear attorneys complain that document review and production management “aren’t why I went to law school”, and yet I hear almost as often that many of these same attorneys don’t bother to draft or review interview memoranda. I have also experienced litigation teams that don’t even want to look at evidence until it’s been pared down by review and production.

Perhaps the mountain of electronically stored information (ESI) is so daunting that attorneys don’t think they can tackle it early in the process. I believe that litigators will not regain their confident management of the entire discovery process until they are extensively schooled in e-discovery management. The 2009 Socha-Gelbmann survey results do show that education is the weakest link in the e-discovery industry today.

A Need for ESI Professionals

If litigators are beginning to agree that e-discovery is really just part of discovery, then all litigators will have to have some level of comfort with e-discovery management — from Information Management at the far left of the EDRM framework through Presentation. No litigator, or even an attorney in another practice area, should be truly free from the responsibility of attaining basic competence in this area. However, this does not mean that the industry doesn’t need specialists. I may be a real home DIY-er but I still hire a plumber or electrician to do the professional work.

Effective participation in the management and processing of ESI requires a similar level of specialization. The Socha-Gelbmann survey respondents decried the lack of good project managers and litigators who are able to participate fully in cases that involve ESI.

“[M]any participants estimated that no more than 100 to 200 lawyers in the entire country [USA] really get electronic discovery.”

This is especially problematic for law firms and corporate legal departments that are seeking to recruit members to an e-discovery team or practice group. As mentioned previously, corporations are hiring full-time ESI and litigation support personnel.  According to the survey, law firms are doing likewise:

“Law firms, for whom the move in‐house means taking on activities previously delegated to providers, hope to retain relevance. Increasingly they feel the need to replace [the] dwindling volume of large case review projects with new electronic discovery revenue streams.”

To meet the demand, new ESI professionals will need to be “created” by the e-discovery community. Early and on-going ESI education — in law schools, firms and corporate legal departments for attorneys, paralegals and litigation support professionals — should be a priority for 2010 and 2011. The curricula should include case law, technology, and project management training. A recent positive sign is that law schools are indeed beginning to offer classes in ESI; note Ralph Losey’s law school lectures available via his blog.

Industry organizations are also stepping in with certification and training programs. For example, the Organization of Legal Professionals (OLP) and the Association of Certified E-Discovery Specialists (ACEDS) are both offering online training courses.

However ESI program creation cannot be limited to education and mentoring. ESI competency needs to be a prerequisite for advancement. Conversely, don’t sideline ESI attorneys as “nerds” and push them off of the partner track — a fear I’ve heard articulated more than once from junior associates. Another issue is the time training can take away from reaching billable quotas. Associates should be rewarded for updating their skills, not penalized.

Fernando M. Pinguelo, Esq., of Norris McLaughlin & Marcus, P.A. told me, recently, that his e-discovery class at Seton Hall Law School is one of about a dozen or so such courses dedicated solely to e-discovery taught in US law schools. His class members maintain a blog, www.eLLblog.com, as part of their course work which seems like a great way for law students to encourage their peers to sharpen their skills.

If only 100-200 litigators in the USA “get it,” then more attorneys should be availing themselves of the services of a qualified ESI consultant. It is no sin to admit you’re not a techie; rather it’s a sign of foresight to bring in the right kind of technical assistance. Ralph Losey’s blog post from January 12th makes the case that hiring a consultant can in fact be a sign of competence, rather than weakness. Similarly, a recent report of recommendations for changing how e-discovery is handled in New York State Courts states that:

“Court rules should be amended to require that counsel appearing at the PC possess sufficient knowledge about client technology systems to competently discuss them with the court and opposing counsel; counsel may, as appropriate, associate themselves with and bring client representatives or outside experts with knowledge of the issues.”

Clearly, there is much credence to supporting e-discovery educational opportunities and bringing in ESI professionals in order to ensure that an efficient, accurate, and defensible process is conducted.

In the third and final post of this e-discovery blog series, I will next discuss another trend reported in the 2009 Socha-Gelbmann survey: Data Analytics.

The EDRM 2010 Spring kick-off meeting this week in St. Paul Minnesota had nearly 100 attendees turnout, which may show that the electronically stored information (ESI) community is regaining some of its former optimism.

The work of EDRM (The Electronic Discovery Reference Model) is done by a series of project teams and committees. Each reported on progress over the last twelve months and goals for the next year and I share some highlights here.

Data Set Project

One of the big challenges in e-discovery (EDD) is creating a large, freely available data set, against which lawyers and vendors can test software or develop new semantic or text handling algorithms. The Data Set project has soared past their initial goal of 100 GBs of unencumbered data and is currently offering three different sets of helpful test data.

As reported last year, they are reaching out to other organizations to work for the betterment of the ESI community. Their very productive interaction with NIST (National Institute of Standards and Technology) has even resulted in receiving a copy of NIST’s source code used to run Hash values. (A hash is a mathematically generated ’signature’ for any digital file. Each is a limited and fairly small number of characters, irrespective of file size. Hashes are used to identify and compare files.)

Data Set is supporting the TREC Project, the Text Retrieval Conference, run by NIST. EDRM Data Set is helping to create an improved set of sample data for this year’s TREC legal track. The goal is to create an enhanced, canonical set of public Enron data that accurately represents Enron’s email environment. This year’s TREC sample will grow from 104 to 150 Custodians.

The Data Set project group sees their work as very practical, even though it sounds very techie on the surface. They are dedicated to lowering the cost of ESI processing. Their current goal is to answer the question, “What if there was a way to probabilistically determine if any file was user-generated or not?” They believe that non user-generated files could be automatically stripped out during pre-processing for most cases. With this in mind, they are working on creating the grandly named, Probabilistic Hash Data Set (“PHDS”). Success would mean reducing the cost of processing and reviewing ESI by eliminating irrelevant files early in the process.

Evergreen Project

The Evergreen Project is the group responsible for keeping the original content of EDRM, the information that matches the Model, or Framework itself, up to date. Evergreen is roaring out of the gate, having spent a year dedicated to completing and updating all EDRM Framework content.

Julie Brown must be lauded for her dedication to this work. She co-chaired the project and spent an enormous amount of time and energy shepherding the various nodes toward the goal of complete content. Julie is remaining with Evergreen, thank goodness, but is handing over her co-chair responsibilities to Therese Carey. I am staying on as the other co-chair and Therese and I are very excited about the progress made last year and the plans for the next twelve months.

Evergreen will be accomplishing the following enhancements to the website and its content by May 2010: A “Pack and Play” download for each phase of the EDRM framework containing a Standards document, supported by tools such as check lists and templates, case studies and an introductory, educational PowerPoint presentation. Evergreen is so fired up that you may see some of this material in Podcasts, Vcasts and live presentations.

Information Management Reference Model

IMRM or Information Management Reference Model project is still a new addition to EDRM and has already created useful content. They envision themselves as an “entirely new reference model – separate counterpart to EDRM.” Look for their helpful graphic on their page http://edrm.net/activities/projects/imrm

Model Code of Conduct

MCOC, led by Eric Mandel, is determined to have final content available for public comment by May 2011. It may seem like the code is taking a long time but the project is tackling very complex issues and they don’t want to give short shrift to the various points of view and factors related to these spiny issues.

Public Relations

The PR Committee has broadened its mandate to include entertainment. They put together a sneak-peak of a game show they are working on for LegalTech. They will be soliciting additional questions and answers from the ESI community.

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Once again, St. Paul, was lovely in the Springtime and the residents were welcoming and helpful. I managed to make it to the Minnesota Science Museum for a very quick look at the Dead Sea Scrolls exhibit, before the reception Tuesday evening. I doubt the work of EDRM will last 2000 years but at least we don’t have to produce TIFFs on papyrus.

The full version of the 2009 Socha-Gelbmann Electronic Discovery Report was finally published in December 2009 after exhaustive work by George Socha and Tom Gelbmann. It is the largest ever Socha-Gelbmann report; a compendium of trends, charts, and results spanning over 600 pages. The findings are fascinating and worth discussing, but so far surprisingly few in the industry have really given it much comment.

Once again George and Tom provide the 35,000 foot view of the industry and a detailed market analysis.  The hotly contested vendor rankings have now been replaced by 250 pages of additional content.

2008-2009 Market – In-source / Out-source / Right-source

Overall, the e-discovery market, like everything else in 2008, shrunk quickly and significantly.

This is not surprising given that many law firms and corporations did cut back on their spending levels due to the recession. However, Socha-Gelbmann survey respondents felt the industry may be starting its recovery.

“Despite the market slowdown in 2008, consumers and providers continue to tell us they expect this market to expand by … about 25% in 2010.”

While the market as a whole did shrink, the report shows that larger providers actually gained market share (Tier 1 up 16%) vs. the mid-size providers (Tier 2 down 14%) and smaller providers (no growth for Tier 3). There was also growth shown in the DIY segment, comprised of those corporations and law firms that like to manage their own internal efforts.

In-sourcing

The Survey reports that client control of the e-discovery process is finally reaching its long awaited tipping point:

“Who Buys; who should control – After years of disparity with law firms favoring law firms, companies favoring companies on this question, I am seeing agreement with the consensus showing 60/40 in favor of the client.”

“Moving Electronic Discovery In‐House – Companies, law firms, and providers all report new or expanded efforts to move electronic discovery activities in‐house, with a strong emphasis on legal hold, litigation preparedness and compliance.”

I am heartened by the survey’s positive outlook for the industry, but I am skeptical that corporations’ in-sourcing of ESI management will be the primary factor in dampening the impact of growing volumes of ESI. I believe that proactive creation of and adherence to document retention policies will have the most profound effect on the volume of ESI that makes it out of the email, file or document management system and into a collection.

I believe that the more expertise clients bring in house, by recruiting experts or through closer relationships with vendors, the more they will understand the rather arcane and mysterious process of processing and producing ESI. And the more they will see that the ultimate cost savings is in efficiently storing only what is necessary for business record keeping and compliance.

The combination of storing less unnecessary information and in-house ESI management should lower the cost of managing ESI from collection through review  more significantly so than the mere reduction in processing unit costs, data culling, or lower rates for offshore attorney review.

We must remember, however, that there are significant risks for organizations who bring ESI management in-house (recall In re Fannie Mae Securities Litigation, in which the Office of Federal Housing Enterprise Oversight hired 50 contract attorneys and spent $6 million, or 9 percent of its annual budget, only to be held by the court in contempt for failing to meet its e-discovery deadline). Many corporations and law firms prefer having an outside vender act as a buffer between them and potential concerns about production of data.

The report mentions that not everything can be moved in-house and that for those types of activities, “companies and law firms alike are expressing a growing desire to be able to work with a single provider.”

Out-sourcing

In the 2009 report, we see just as many clients are outsourcing ESI work. Hosted review is one of the solutions in highest demand of all services and software. Two other solutions cited as highest in demand are data analytics and early case assessment, which are important trends that I will cover in a later Integreon blog post.

Outsourced attorney review receives its first analysis in this year’s report. This probably reflects a growing acceptance and trust in legal process outsourcing (LPO) services, as well as demand for contract attorney and staffing services too.

Software-as-a-Service (SaaS) rounds out the new out-trends that are profiled in this year’s report. The cloud computing debate around SaaS is just getting started as it populates the blogosphere and Twitter-verse. It is still much too early to determine the ultimate ramifications to privacy and discovery due to porting applications and data to a third party.

SaaS, outsourced attorney review, and hosted review are all identified in the report as the three fastest growing services in e-discovery, which illustrates that many organizations do see outsourcing as a very compelling method for lowering discovery costs and risks.

Right-sourcing

Keeping ESI close-to-home by in-sourcing may offer tighter risk management and cost control, however the findings from Socha-Gelbmann suggest that in-house departments and applications may be strained by large or exotic data sets. The report made a point of warning readers about recent marketing of some applications as “silver bullet” solutions. It may be tempting to bring an application in house that processes, analyses, produces and even convection grills in order to eliminate the need for vendors. However, there will always come a time when the software or hardware platform cannot keep up with the data volume or unusual data types or even unique production requirements. Simply put, it is always risky to have only one tool in the tool box.

Relationships with vendors should be put in place, even if only as a fall-back position, so that the vendor is prepped with knowledge about the client’s information architecture, data types and litigation requirements. Pre-existing rate agreements and communication protocols can make the client’s life much easier when having to find a vendor to handle an avalanche of data or technical issues at the eleventh hour. Careful consideration must be made to right-source the best elements for a comprehensive and defensible discovery process that will include the most effective in-sourced and out-sourced components.

I read with interest Matt Sullivan’s blog post, LPO Industry Consolidation Underway? He offers a useful summary and analysis of recent deal-making among legal process outsourcing (LPO) providers.

Sullivan rightly concludes that legal cost control still looms large for many corporate law departments. We hear this in many conversations we have with both in-house and outside counsel. We also agree that Pillsbury’s publicly announcing an alliance called PEARL (press release, PEARL overview) that includes LPOs is significant. In the UK, that law firms publicize working with an LPO is almost old news; the same cannot be said for the US.

We expect more US law firms to discuss LPO – and many other new ways of doing business – in 2010. The 2008-9 crisis has ended. The end does not mean a return to pre-bust levels of activities. Rather, it means that most firms have taken the necessary emergency measures to cut costs. In our view, that’s the easy part, as painful as those cuts were. Now comes the hard part – prospering in the new normal.

Pre-bust, firms moved in lockstep. I don’t mean just how they compensated associates; few large firms considered any strategy or action not already widespread. Now, just as compensation models are changing, so too are firm strategies and actions. We see some firms hunker down with no clear plan to change. Others, however, such as Pillsbury, are taking active steps to offer clients more value.

My colleague Ron Friedmann wrote last November (at the Integreon blog) that Law Firms Differentiate in a New Era. The Pillsbury announcement is an example of firms differentiating. Not all firms will “do LPO” or form innovative alliances with other legal market players. We think that firms that don’t change both their client value proposition and operational model in significant ways are likely to lag behind their competitors who do innovate.

Our investors, as well as the investors in our competitors, understand this. The smart investors understood this pre-crash. Post-crash, it’s obvious of course. Outside capital will continue to flow to organizations that improve legal outcomes and reduce legal costs. In the UK, with The Legal Services Act, capital will likely soon flow directly to law firms. The combination of client demands, law firms themselves recognizing the need to change, and the availability of outside capital to support better ways of doing legal work will continue to alter the legal landscape.

Craig Ball, Tom Morrissey and I recently discussed The Challenge of Preserving and Collecting Evidence in a Cloud for a CLE webinar hosted at Virtual LegalTech. For those not familiar with Virtual Legaltech, it is ALM’s online version of the well known LegalTech New York and LegalTech West Coast events. One key difference though is that Virtual LegalTech is free to attend for qualified registrants.

Cloud Computing and its eDiscovery Implications is a Hot Topic

Our cloud computing webinar was the best-attended session of the day with nearly 300 “live” attendees. Subsequently, another 100 viewed the replay. The strong attendance relative to most in-person or webinar eDiscovery topics highlights that cloud computing, and social networking too, are a hot topic these days. Certainly over the past several months, the news media has been overflowing with reports on the subject, including recent decisions for the adoption of Google’s cloud-based services by the cities of Los Angeles and Orlando, and by Rentokil, a company with operations in 46 countries.

During the webinar, we asked three survey questions to see how the legal community views cloud computing. All were presented during our “live” session. The approximate 50 percent response rate – high in our experience with other webinars – is another indicator of the strong interest in both the legal and compliance implications of cloud computing.

Cloud Computing Survey Results:

1. How familiar are you with cloud computing technology and techniques?

Total Responses Received = 122

This question establishes a kind of base line for our audience. Almost 4 in 10 respondents admitted to no familiarity with cloud computing. The rest of our responding audience at least knew a little about it, with 1 in 10 actually claiming stronger familiarity. Given all the recent news coverage and buzz about cloud computing, I was somewhat surprised that so many are ‘Not at all’ familiar. I suspect they had actually read something about it, and know it is a topic about which they should be familiar, and so attended this webinar to learn more.

Total Responses Received = 144

Here we see that 6 in 10 respondents say their organizations do use some form cloud computing; the most prominent usage being Software as a Service (SaaS) applications, such as Salesforce.com as an example.

Integreon has experience with its own hosted application called eView, used for legal document review during electronic discovery, along with experience involving a number of other ‘best-of-breed’ hosted applications we support. We see strong and growing client demand for hosted applications, which follows with a global trend we’ve seen toward greater adoption of outsourcing solutions in general, including cloud computing. See my colleague Debra Rozier’s recent blog post, E-Discovery: A Look at Insourcing vs. Outsourcing, for an intriguing perspective on IT outsourcing trends at law firms.

3. What is your main concern with considering adoption of cloud computing?

Total Responses Received = 125

The top concerns about cloud computing are control, security, confidentiality, and privacy. Keep in mind that these concerns are from an institutional perspective rather than an individual one, which might have resulted in privacy being top of mind. Interestingly though, availability of applications and IT governance were low concerns, which likely reflects more people in the legal market focusing on the legal and compliance implications for data that resides in the cloud. From reading published articles in IT and other news media, my sense is that outside of the legal market, the issue of availability (i.e. reliable access to the service) is a much greater concern.

Learning More about Cloud Computing and E-Discovery

To learn more about the eDiscovery implications of cloud computing, you can register to watch the recorded replay (free for qualified registrants) of the webinar. Once you register, you can also visit the conference anytime (24×7×365) to view other presentations, virtual booths, and blogs, and to engage in online networking and chatting with other attendees. Other webinar sessions feature experts and pundits such as Chris Dale, George Rudoy, and Monica Bay.

The next “live” day of Virtual LegalTech will be March 18, 2010. Maybe we’ll “bump” into each other and strike up a conversation (“chat”) at Integreon’s booth in the virtual exhibit hall or in the general lounge area.

If you’d like to meet with me in person, I will also be at LegalTech New York in early February 2010. You can stop by Integreon’s booth (#324) or reach out to me in advance on Twitter (where I regularly tweet about cloud computing, ediscovery, and computer forensics). My complete contact information (via vCard) is available on Virtual LegalTech too.

I would also be happy to hear your thoughts on the polling results reported here, or about Virtual Legaltech in general, so I encourage you to share your comments below.