Are Small Law Firms the “Long Tail” of eDiscovery?

Most people have heard the term Long Tail, a statistics model adapted to the business strategy “of selling many unique items with relatively small quantities sold of each (the long tail)—usually in addition to selling fewer popular items in large quantities (the head).”  So, are small law firms the “long tail” of eDiscovery?  Let’s take a look.

In basic terms, the idea is to ignore the most popular aspect of a market and focus on capturing all the rest. Book publishing was an early example of this theory. The books on the best seller list are a small percentage of all the books published in a given year. The large publishing houses try to focus on capturing the best sellers, but smaller independent publishers may capture large swaths of a particular niche market, where sales of individual books might be small, but taken in aggregate, they equal quite a take. Coupled with technological advances in on-demand publishing and digital distribution, and the Long Tail effect created a new market.

So, what does this have to do with eDiscovery?

There’s no doubt that the legal technology industry is at some sort of a turning point. There has been immense growth in the industry in the last 10 years, with many new startups coming on the scene, more investment firms getting involved, and a growing number of mergers and acquisitions. There are also a growing number of technological advancements with Artificial Intelligence and analytics, which make handling large datasets easier and more efficient.

But most of this activity seems to be focused on large civil suits and the corporate legal teams and large law firms involved with them. This segment would be the “head” in front of the “long tail.” So, what does that leave? Small law firms as the long tail of eDiscovery.

In fact, in the 2019 State of U.S. Small Law Firms Report published by Thomson Reuters, only 19% of smaller law firms were investing in eDiscovery technology and only 2% planned to do so in 2020. And with many firms holding off on large spending and investment during the uncertain times of the pandemic, it’s safe to say, that number probably hasn’t grown. Which means that 80% of small law firms aren’t investing in eDiscovery.

It’s likely these firms aren’t looking for the latest high powered eDiscovery software with all the bells and whistles available (and it’s likely they don’t have the budget for those applications). But even in the most basic of civil cases, such as divorce and bankruptcy, there is still a discovery phase and most of what is discoverable will be electronically stored information (ESI). Emails, electronic documents in PDF, even chat and social media data could come into play. And yet, you hear time and again of small law firms receiving these documents electronically, usually by email from their clients, and then those electronic documents will be printed out, put into binders, and run through the same manual processes that have been around for decades.

These small law firms need straightforward technology and workflows to intake, manage, review, and produce these documents electronically, without breaking the bank. That’s an approach I’ve heard Brad Blickstein of Blickstein Group call, “Good enough eDiscovery.”

This isn’t to say there aren’t options currently on the market, but most of these are stripped down versions of enterprise software, or legacy systems that are still using technology circa 2011. The key here is ROI – return on investment – and with 80% of the market still not investing in eDiscovery, my guess is that’s the issue.

I can’t help but think of when barcode scanners first hit the supermarkets and big box stores and electronic inventory management changed their way of doing business, while at the same time, small shops still did inventory by hand and rang up sales on paper receipts with carbon copies stuck on a nail. At some point, technology became affordable and applicable for those small markets to make the switch.

I see small law firm eDiscovery as a long tail opportunity in this market and the solution as something created with the small firm in mind (not legacy or enterprise software trying to fill the gap). Small firms have unique needs, but they aren’t unfamiliar. Data still must be collected, processed, reviewed, redacted, and produced. There are also matter and case management challenges, as well as timekeeping.

It may not be as high profile as the corporate and AmLaw 200 markets, but for the smaller law firms who have adapted technology and updated workflows, they have found great success with the ability to take on larger cases without adding headcount while passing on cost savings to clients. I only see this growing in the next 5-10 years, particularly with the shift in how business is done post-pandemic.

So, what do you think? Is there an opportunity for someone to grab onto the small law firm long tail of eDiscovery?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

6 comments

  1. You write: [It’s likely these firms aren’t looking for the latest high powered eDiscovery software with all the bells and whistles available (and it’s likely they don’t have the budget for those applications)…These small law firms need straightforward technology and workflows to intake, manage, review, and produce these documents electronically, without breaking the bank. That’s an approach I’ve heard Brad Blickstein of Blickstein Group call, “Good enough eDiscovery.”]

    I am familiar with this line of reasoning. That “good enough is good enough” or “high powered software is too expensive”, etc. And something about it doesn’t completely make sense to me. I must be missing something. So walk with me through the thought process if you would.

    When talking about discovery, one has to assess the entire cost of the discovery, correct? The entire cost is how much you pay for the software/hosting/etc. plus how much you pay to have it reviewed.

    So what are those costs? I’m going to throw around some hand-wavy numbers just to make this more concrete. Substitute your own numbers in, if you don’t like mine — I don’t think the essence of the thought experiment will change. But let’s suppose that the software (hosting, processing, etc.) is (say) $15/GB per month. And while every case is different, there are on average about 3000 docs per GB. Suppose that the case lasts 6 months.. that’s a total of $90/GB over that half year period, correct? So your software cost is about $0.03 (three cents) per document for that entire half year period.

    On the other hand, what are your review costs? Those are about $1/document, correct? Maybe a little more if you have to do additional QC if you’ve hired reviewers who aren’t making the correct coding calls. But let’s estimate it on the low end and just say $1/doc.

    So let’s say that there are (for the sake of argument, after keyword culling) 300,000 documents in the case. Total software cost would be $9,000, correct? (300k docs, $15/GB, 3000 docs per GB, for six months).

    Now suppose that you use software that is “good enough”, i.e. no fancy bells and whistles. So you’re doing a linear review. At $1/doc to review, that’s going to cost you $300,000. So $9,000 for the software, $300,000 for the review.

    Now, let’s suppose that you instead pick eDiscovery software that is better than “good enough”. I.e that it has one bell and one whistle. Which bell and whistle allows you to chop the review in half. So that you only have to review 150,000 documents instead of 300,000 documents. If that bell or whistle has just allowed you to save $150,000, then rationally, how much should you be willing to pay for that bell or whistle? Assuming I’ve done my math correctly, you should be willing to pay an _additional_ $250 per GB for the software, should you not? I.e. rationally, your breakeven point between the “good enough” and the “bell+whistle” software is when you’re paying $265/GB for the software.

    Of course that’s an outrageous price. I am not suggesting that anyone charge, or anyone pay, $265/GB. I am only pointing out that the difference between $265 and $15 is the value that the bell+whistle software is giving you. So even if you pay $30/GB or $45/GB or $60/GB rather than $15/GB, you are still saving way more money than if you used the $15/GB “good enough” software. Because your TOTAL cost will still be less.

    What if an even fancier piece of software allow you to only have to review 100,000 documents, instead of 150,000 or 300,000. The fancier piece of software has two bells and two whistles, rather than one bell and one whistle. In that case, you’re saving an additional 50,000 documents. Which is worth an additional $50,000 in saved review costs. So if the amount of money that you’re paying for the software component is less than the $50,000 of additional value that the second bell and whistle brings, then rationally, you should pay for it. Right?

    The whole point of eDiscovery software is that it is (or should be!) designed to save you money. As long as it is saving you more money than you are paying for it, you are still saving money. Good enough is not good enough, if better is better.

    A bell or whistle is only useless if it doesn’t actually save you more money than it costs you. As long as it does save more money than it costs you, you should be willing to buy that bell or whistle. Shouldn’t the focus, therefore, be on whether this or that bell or whistle actually works? Shouldn’t the question be: What are you, the buyer, doing to determine whether or not a particular bell or whistle actually has value?

  2. Thanks for the comments, Dr. J. I’ll ping Jim to see if he can weigh in as well, but I think demonstrating ROI is one of the biggest challenges that eDiscovery software providers, especially to a group of people who tend to be technophobic. The problem is that the buyer not only isn’t doing anything to determine whether a bell or whistle has value, they’re often not even inclined to do so. This is usually either because they aren’t motivated to understand the technology and change their processes or (sometimes) because they’re concerned that technology will actually cost them money in reduced billable hours. I once asked an attorney why they didn’t want to get someone technical involved in a case involving collection of emails and he said “If we get into the technical staff, I’m afraid our client may start thinking they need a bigger firm.” There are lawyers and legal professionals out there that still think that way.

    Years ago a few years apart, Craig Ball wrote about a couple of “EDna” challenges (get it?) where he laid out parameters for a small firm and challenged eDiscovery software providers to offer a solution within that budget. Tom O’Connor and Ernie Swenson (Ernie the attorney) did the same thing with their “Ernie” challenge. In both cases, several providers were able to offer full-featured solutions within those budgets. In this industry, our problem is not a “Field of Dreams” problem — we’ve built it (many times over by different providers). Getting them to come is the hard part. Yes, the question should be what is the buyer doing to determine whether or not a particular bell or whistle actually has value, but the reality is that they’re often not motivated to try to find that out.

  3. Oh for sure, completely agree with everything you said, Doug. So then that turns the question back to Jim: If the economic portrait that we’ve both painted is true, there is no long tail. There is instead a bell or whistle for all seasons.

  4. Jeremy: First, let me apologize for the delayed response. I tried last week and for whatever reason my comment didn’t stick, so I’ll try again today.

    I agree with your numbers — they’re the industry standards I’ve seen for the last several years. But they’re the numbers that make sense for large firms and corporate teams. For them, these numbers aren’t a big cost and usually pay for themselves after one case. But for small firms, these numbers, along with platforms that require significant training, are still obstacles.

    When I wrote this, I was thinking of a few use cases of firms I’ve worked with: one was a very small firm with two attorneys and two paralegals, and they instituted affordable evidence management and trial software and were able to increase their workload by almost 4 times. Another use case was a mid-size firm who had a basic review platform with basic search and culling capabilities – no AI, no concept clustering, etc – but they still outsourced processing. So they added a processing engine to their review platform, brought in some eDiscovery paralegals, are were able to take on larger and larger cases, including some Fortune 100 clients.

    I think these represent two versions of what I’m talking about. One is a very small shop who deals with electronic evidence but has stayed with manual / paper processes because of cost and ease of use obstacles. The other is a mid size firm that maybe isn’t ready for a full blown eDiscovery system, but simply needs to bring more of the standard process in-house for 90% of their caseload, and then can utilize ALSPs for those cases that are outside their capabilities.

    The other thing I’d mention is that vendors often use the same language, same marketing, same sales scripts when talking to smaller potential clients as they use for their large clients. And there’s a disconnect. The small firms aren’t ready for the big leap, and as Doug said, end up backing away. Which is why I suggest something with a focus on these smaller firms.

    To take it outside the industry, a good parallel is the graphic design space: Adobe is the top of the line and still dominates. But it’s pricey and takes an enormous amount of training to master. For many small agencies and small businesses, this is an obstacle. But there are now platforms like Canva Pro, which gives a great deal of flexibility and capability for a professional, but still has a very accessible price point and ease of use that is perfect for the smaller shop. I’m simply saying the long tail of eDiscovery is something like that. Right now, we have a bunch of different versions of Adobe. We need more options for small shops to get their feet wet and start adapting technology.

Leave a Reply