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Is America’s slowest-changing industry really changing?

When I graduated from law school in the early 1990’s the economy was rotten. Law firms were laying off associates. Summer programs were cancelled. Clerkships and permanent offers were hard to come by. Déjà vu 2011? You bet.

However, the legal industry has also evolved in a way that cannot be reversed. I am happy to say that DiscoverReady saw the evolution coming. This gave us a strategic advantage in growing our business, frequently at the expense of a traditional model that involved armies of associates plowing through mountains of data.

Dissecting an Outdated Business Model

In March of this year, I blogged tongue-in-cheek that e-discovery had finally arrived in response to the cover story in The New York Times entitled “Armies of Expensive Lawyers, Replaced by Cheaper Software.” Since then, The Times has continued to provide substantial coverage of the legal industry and the outsourcing trends, running two articles in the last two weeks, “Legal Outsourcing Firms Creating Jobs for American Lawyers,” and “At Well-Paying Law Firms, a Low-Paid Corner.”

The gist of all of these stories is that the traditional law firm model—the pyramid structure with a large base of junior associates and a peak of senior partners garnering the rewards of their rainmaking—is largely an illusion.1 Many of today’s clients see little value in having junior associates with minimal experience or expertise performing substantive legal work on their behalf. But when it comes to the discovery process, these clients are even more hardline. Here’s why:

  • The volume of data for a typical discovery matter now far exceeds that which can be reviewed by the case team. Just to illustrate, my first project as an associate was a “massive” document review of hundreds of bankers boxes of documents in a warehouse. Today, a similar review would generate thousands of bankers boxes if rendered to paper.
  • Managing large-scale discovery is simply no place for the inexperienced. Today’s discovery is electronic, complex and highly technical, which makes it much more difficult for junior associates with little to no experience in discovery to design and oversee discovery projects. Occasionally it happens, but the results are predictable and painful.
  • A client can no longer accept the incremental cost of having a team of associates review documents, which can amount to hundreds of thousands, if not millions, of dollars. Hourly rates for review attorneys are a fraction of the cost of junior associates, and most large corporations see no value in having a pool of unassigned junior associates plow through large volumes of data that likely will have no impact on their case. Does the corporate client want the real estate associate with no other work to review data in an antitrust matter? Not anymore.
  • Outsourced managed review is a proven and viable solution, both in terms of value and quality. When we formed DiscoverReady, we spent years explaining what outsourced / managed review meant. Today, clients have validated and bought in to this model.

Joining the Evolution through Reinvention

Every fundamental shift has its trailblazers. Over a decade ago, firms like Orrick and Preston Gates had the vision to develop lower cost service models (Orrick through its near-shore facility in West Virginia and Preston Gates through its DATG group and its incubation of the industry-changing Attenex platform). In 2005, DiscoverReady introduced a better way to conduct document review and discovery by integrating technology; creating a repeatable, continuously improving process and providing our clients with a rational cost structure.

The good news is that the industry is reinventing itself as a response to the need for change. Today, it seems that every other week another law firm announces the creation of its “ground breaking” discovery practice group. Will it make real investments in technology and innovation? Will it buy in to the need for process and project management? Will it adopt rational cost and billing models?

Only time and, of course, The New York Times can tell…

1For a great article on the topic, take a look at Stanford Law Review, Vol. 60, 2008, The Elastic Tournament: The Second Transformation of the Big Law Firm, by Marc S. Galanter, University of Wisconsin Law School, William D. Henderson, Indiana University School of Law.

Maureen O'Neill