Risks Associated With In-Sourcing of E-Discovery Software

By Chad Riley, esq., Sr. Case Consultant


For small firms thinking of purchasing e-discovery review software, the first-pass considerations seem enticing. You make an initial investment with the technology, train your staff to operate and use the software, and then sit back and reap the long-term cost savings. Further inquiry, however, has driven even large international firms to outsource all e-discovery services. This paper will examine some of the risks associated with in-sourcing e-discovery review software, especially in the context of high-profile litigation boutiques.

The Investment

The primary factor motivating firms to in-source review software is typically long-term cost savings. However, firms need to understand that the financial investment does not end once the product is purchased and installed.

Purchasing or licensing a high-caliber review software such as Relativity is a steep cost by itself. But to house and run such software, the proper IT infrastructure and hardware must be in place. For smaller firms, this will inevitably require purchasing additional servers and related hardware, and ensuring the availability of adequate space within the firm to house this equipment. Thus, a boutique must have adequate hardware and an IT staff dedicated to operating and maintaining the system prior to taking the in-sourcing plunge. If no in-house IT staff exists, firms will need to hire one and train them on the technology.  

The costs do not end with set-up, however. The old adage that computers are outdated the minute you purchase them holds true for the e-discovery world as well. A few years ago predictive coding was not the focal point of review technology like it is today. Even now, while many vendors invest in and develop predictive coding technology, other developments are lurking in the wings to antiquate it. For example, some commentators see even more sophisticated computer algorithms on the horizon that will allow most work attorneys perform in the review process to be automated. More imminently, however, “there are endless changes coming to improve software user interfaces, enhance data security, and to search and cull records faster and more efficiently,” says industry veteran and Director of E-Discovery for TLS Chicago, Mark Morgan, who has been tapped by various software providers to beta-test their updates and new releases.  

What this means for the operator of e-discovery software is continual investment in endless program updates and subsequent versions of the software. Such ongoing investment applies also to the IT infrastructure on which the software is housed and the training for the IT staff on all the software updates. Thus, boutiques must be flexible and adaptable enough to account for the constantly evolving technological landscape.

Risk & Liability Considerations

When a firm brings e-discovery in-house, various risks and liabilities accompany the decision. Non-legal e-discovery is a complex process rife with potential pitfalls and landmines. For example, if errors occur that require a time consuming corrective process, it would be difficult for the firm to pass these costs onto its clients. A vendor, on the other hand, would ideally eat such costs and keep the associated headache and time consumption away from the firm’s core competency—the practice of law.

Insurance considerations also come into play. The E&O policies firms typically have in-place cover attorney malpractice, but they likely do not cover non-legal e-discovery services. If this is the case, firms would need to consider additional insurance coverage.

Workflow Considerations

Boutiques must also consider that, even after investing the money, time and effort into bringing e-discovery review software in-house, they will still require vendor services. Typically, the software used to review ESI lacks the capability to first process it. Thus, boutiques will still incur costs associated with processing their data.

This dynamic would also create a more time consuming workflow. Firms would need to transfer the data to the vendor for processing. Once complete, the vendor would need to transfer the data back to the client for review. Of course, the larger the data set the more time these data transfers will take.

Benefits to Outsourcing

Outsourcing e-discovery software allows boutiques to use and pay for review software and state-of-the-art IT infrastructure only when they need it. Data that needs to retained at the conclusion of a matter can be left with the vendor in “cold storage” for minimal cost or be transferred back to the client. This way a boutique can let its vendor stay abreast of cutting-edge technology and the associated best practices, while the firm focuses on representing its clients.

Prior to making any purchasing decisions,  firms should first explore the potential cost savings from entering a negotiated master services agreement with a vendor. Leveraging their buying power, firms can negotiate significant savings for themselves and all their clients.

If a firm opts not to outsource e-discovery and experiences a lull in e-discovery related issues, the firm would still incur all the costs associated with the review platform. As previously mentioned, however, a vendor can put any data that needs to be retained after the conclusion of a matter into dormant storage for a negligible fee.

TLS – The Outsourcing Solution

If after an extensive cost-benefit analysis you determine that outsourcing is the right path for your firm, TLS is uniquely equipped to serve as your virtual litigation support department.

Not only do we license and own the latest and most efficient technologies, but we have highly-credentialed industry veterans at the helm. Our e-discovery team consists of attorneys and former paralegals with big firm experience on complex matters. Our forensic staff have served as expert consultants and witnesses for Federal and state matters, and performed sophisticated collections all over the world.

With expert-level capabilities at every phase of the discovery lifecycle sharing a roof with global court reporting and language services, the utilization of outsourced services is made more efficient and hassle-free. There are no data-handoffs between vendors, invoices can be consolidated, and there is continuity throughout all phases of the discovery lifecycle. In other words, all your firm’s needs can be handled efficiently under one roof with significant cost savings.


The decision to purchase e-discovery review software is one that requires full consideration of the associated risks in addition to the potential benefits. The decision should be fully informed with comparisons to firms of similar size and resources that have been successful with their in-sourcing efforts. Such a thorough review process will ensure the best possible result for your firm, both in terms of long-term costs and effectiveness.