According to a recent management consulting firm survey, "cost control" is now the biggest concern of Chief Legal Officers (CLOs), beating out "compliance" by more than two to one. To curb costs, nearly half of all CLOs participating in the survey say they plan to expand their in-house legal departments in the next year. Furthering the insourcing movement, more than a quarter of them also plan to decrease their use of outside counsel.
Is this a sign of the downward economy or simply symptomatic of a much larger trend? Perhaps it's a little of both.
Litigation has always held a reputation for being one of the most unpredictable and costly line items on the budget. So, what's changed now to accelerate this movement? While certainly not acting in isolation, the increase in discovery requests and the corresponding volume of electronic data loom large as the primary culprits behind rising litigation costs.
According to the Federal Judiciary, pre-trial discovery expenses alone now represent 50 percent of litigation costs in an average case. In situations where discovery is actively used, it could represent as much as 90 percent of litigation costs, approaching and perhaps exceeding $1 million on a single case.
Finding the balance between in-house and outsourced resources
As the aforementioned survey suggests, legal departments are on a mission to lower costs. Given the cost of discovery, a logical place for many companies to start is by bringing pieces of the e-discovery process in-house, since this often demonstrates a substantial ROI along two vectors.
First, during the past several years, CLOs have begun to scrutinize and monitor e-discovery processing fees charged by outsourced third-party experts and service providers. In most instances, these relatively new line items have doubled and tripled year by year, as average data volumes have migrated upward from gigabytes to terabytes. By taking portions of the e-discovery process in-house, CLOs have successfully started lowering these external processing fees.