eDiscovery Vendor Viability: Comparisons Beyond Technology and Talent

Vendor Viability:  Comparisons Beyond Technology and Talent

Definition: Viable – capable of success or continuing effectiveness. (The Free Dictionary)

eDiscovery is rife with risk.  Multiple parties, multiple jurisdictions, multiple ESI formats, multiple technologies and multiple vendors are all elements that can contribute to potential risk in an eDiscovery matter.  With the inherent risk of eDiscovery influenced by these elements, it is important that organizational eDiscovery decision makers both understand the risk of these elements and seek to mitigate as much risk as possible as early as possible.

One of the areas that has the potential to impact the risk of an eDiscovery matter is an organization’s selection of an eDiscovery provider.  There are many providers with many technologies and many ways in which they deliver their people, processes and products to clients.   In considering vendor selection, much is often shared about the specific capability and cost of technology and people to solve client challenges.  This sharing on specific capability and pricing is usually presented in a manner that:

  1. Speaks to the capability of a vendor’s technology and people to perform specific tasks as needed by the client.
  2. Specifies the pricing for the delivery of the technology and talent to support the client’s stated need.

This focus on the technology and talent elements of a vendor’s capability is certainly warranted as these elements ultimately provide the cutting edge for the knife of eDiscovery task execution.  However, just as there is much more to the utility of a knife than its edge (especially if you want to use it more than once), there are additional areas worthy of consideration in vendor selection if one is considering the long term strategic utility and viability of a vendor.

Beyond Technology and Talent:  Strategically Comparing Vendors

In an effort to help eDiscovery decision makers evaluate and compare both the immediate and long term success potential of electronic discovery vendors, the following considerations, shared in a formulaic manner to allow for objective comparison of subjective evaluation criteria, are provided for your review.  The author is well aware that there are many considerations required to truly evaluate electronic discovery vendors and the following  considerations represent one view of how one can evaluate/compare vendors beyond just the “feature and function and pricing” of services and products.

Baseline Definitions and Rating Criteria:

  • Technology = Demonstrated ability of product/service offering’s technical contribution to solving specific electronic discovery challenges. Simplistically rated in this model as below market expectations = 0, at market expectations = 2, or exceeding market expectations = 4.
  • Domain Knowledge = Demonstrated ability of an organization to utilize technology to solve specific electronic discovery challenges. Simplistically rated in this model as below market expectations = 0, at market expectations = 2, or exceeding market expectations = 4.
  • Awareness = An organization’s mindshare in the eyes of the customer in relation to other organizations seeking to solve similar electronic discovery challenges. Simplistically rated in this model as awareness not prevalent = 0, awareness among majority of legal and corporate law professionals on a regional level = 1, or awareness among majority of legal and corporate law professionals on a national level = 2.
  • Reputation = The confidence level customers have in the actual or perceived ability of an organization to solve electronic discovery challenges viewed in relation to other organizations. Simplistically rated in this model as having a reputation for not satisfactorily meeting electronic discovery challenges = 0, having a reputation for sometimes satisfactorily meeting electronic discovery challenges = 2, or having a reputation for satisfactorily accomplishing electronic discovery challenges a majority of the time = 4.
  • Free Cash Flow = Net Income + Depreciation/Amortization – Changes In Working Capital – Capital Expenditure. Simplistically rated in this model as negative free cash flow = (-2), as no free cash flow = 0, and as positive free cash flow = 2.
  • Customers = The number of active entities that have paid for electronic discovery products/services in the current calendar year. Simplistically rated in this model as having less than 20 customers = (-4), having between 20 and 100 customers = 0, and having greater than 100 customers = 4.
  • Motive = The stimulus causing an organization to determine product/service strategies and tactics. Simplistically rated in this model as continuing to provide products/services based on purely financial reasons = (-1), continuing to provide products/services based purely on senior leadership interest in solving electronic discovery challenges = 0, or continuing to provide products/services based on combination of financial reasons and senior leadership interest in solving electronic discovery challenges = 1
  • Sincerity = Congruence or lack thereof between an organization’s stated market desires and actual leadership actions. Simplistically rated in this model as a lack of agreement between internal messaging to senior leadership and messaging to market = (-1) or an agreement between internal messaging to senior leadership and messaging to market = 1.
  • Employee Turnover = The rate at which an organization gains or loses staff. Simplistically rated in this model as a turnover rate higher than 50% annually = (-1), and turnover rate between 25% and 49% annually = 0, or a turnover rate less than 25% annually = 1.

Combined Ratings From Baseline Definitions:

  • Total Success Predictor Rating (TSPR):  The rating of a vendor’s potential for long term viability.  (TSPR = SPR1 + SPR2 + SP3) This can be used to compare a vendor’s potential for long term viability.
  • Success Predictor Rating (SPR):  The rating of a vendor’s capability, communication, commerce and authenticity for a specific time frame.  (SPR = C1 + C2 + C3) This can be used to compare a vendor’s performance (past or current) or potential performance (future) for a specified annual period.
  • Capability Rating (C1): The rating of a vendor’s capability based on technology and domain knowledge.   (C1 = Technology Rating + Domain Knowledge Rating)  This can be used to compare a vendor’s technology and domain expertise in relation to market expectations.
  • Communication Rating (C2): The rating of a vendor’s capability based on communication, awareness and reputation. (C2 = Awareness Rating + Reputation Rating)  This can be used to compare a vendor’s ability to share its capability with others and to fulfill on the promise of such sharing.
  • Commerce Rating (C3): The rating of a vendor’s financial stability based on free cash flow and customer activity.   (C3 = Free Cash Flow Rating + Customers Rating)  This can be used to compare a vendor’s financial stability through the lens of cash flow and customer base.
  • Authenticity Rating (A1):  The rating of a vendor’s authenticity based on motive, sincerity and employee turnover.  (A1 = Motive Rating + Sincerity Rating + Employee Turnover Rating)  This can be used to compare the alignment of a vendor’s vision with its internal and external actions.

Comparison Formula Quick Look

  • TSPR + SPR1 + SPR2 + SPR3
  • SPR1 = (C1 + C2 + C3 + A1) Past Calendar Year
  • SPR2 = (C1 + C2 + C3 + A1) Current Calendar Year
  • SPR3 = (C1 + C2 + C3 + A1) Next Calendar Year (Forecast)
  • C1 = Capability = Technology + Domain Knowledge
  • C2 = Communication = Awareness + Reputation
  • C3 = Commerce = Free Cash Flow + Customers
  • A1 = Authenticity = Motive + Sincerity + Employee Turnover

Comparison In Action:  Practical Comparison

This example represents an application of the aforementioned comparison formulas and any similarity to specific electronic discovery vendors are purely coincidental.  Context for this specific evaluation/comparison is a client’s need to select a viable vendor for the completion of a time limited immediate electronic discovery task.

Vendor #1 Description: A Top National Electronic Discovery Vendor is being compared with other electronic discovery vendors for the execution of a time limited immediate task. This vendor has technology and domain knowledge that meets market expectations, has strong national awareness and a reputation for sometimes satisfactorily meeting electronic discovery challenges, has a negative free cash flow with more than 100 customers. Vendor’s motive is continuing to provide products/services purely for financial reasons and vendor does not have congruence between stated market desires and actual leadership actions. Additionally, this vendor has an employee turnover rate between 25% and 49% annually.

Vendor #1 Success Predictor Rating:

  • Time Limited Immediate Task = SPR2
  • Equation Choice: SPR2 = (C1 + C2 + C3 + A1) Current Calendar Year
  • Equation Components: Technology = 2 Domain Knowledge = 2 Awareness = 2 Reputation = 4 Free Cash Flow = (-2) Customers = 4 Motive (-1) Sincerity (-1) Employee Turnover = 0
  • SPR2 Rating: (2+2) + (2+4) + (-2+4 ) + (-1 + -1 + 0) = 10

Vendor #2 Description: A Leading Regional Vendor is also being compared with other electronic discovery vendors for the execution of a time limited immediate task. This vendor has technology and domain knowledge that meets market expectations, has a regional awareness and a reputation for satisfactorily accomplishing electronic discovery challenges a majority of the time, has a positive free cash flow with more than 20 and less than 100 customers. Vendor’s motive is to provide products/services based on combination of financial reasons and senior leadership interest in solving electronic discovery challenges and vendor has congruence between stated market desires and actual leadership actions. Additionally, this vendor has an employee turnover rate of less than 25%.

Vendor #2 Success Predictor Rating:

  • Time Limited Immediate Task = SPR2
  • Equation Choice: SPR2 = (C1 + C2 + C3 + A1) Current Calendar Year
  • Equation Components: Technology = 2 Domain Knowledge = 2 Awareness = 1 Reputation = 2 Free Cash Flow = 2 Customers = 2 Motive = 1 Sincerity = 1 Employee Turnover = 1
  • SPR2 Rating: (2+2) + (1+2) + (2+2) + (1 + 1 + 1) = 14

Assessment:

Vendor #2 in comparison to Vendor #1 appears to have the capability to execute the task however does not have quite as good a reputation or the quantity of customers as Vendor #1 . This reputation characteristic however may be offset by the stability of Vendor #2 based on its commerce and authenticity ratings. As Vendor #2 has over 20 customers and Vendor #1 has less than 100 customers, it may be assumed that customer volume differential between Vendor #2 and Vendor #1 may be inconsequential.

Recommended Choice:

For the execution of a time limited immediate task = Vendor #2. If the desire was to compare vendors for potential partnerships/long term tasks, one would need to work though the Total Success Predictor Rating formula (Success Predictor Ratings For Past, Present, and Future (Forecast)) to determine ratings for comparison/decision.

Additional Considerations

The aforementioned formulaic approach for objectively comparing subjective elements should be viewed as one of many tools available to help determine appropriate choices in eDiscovery vendor selection.  Within this approach, specific areas can be broken down into further sub-components (i.e. technology broken down into collections, analytics, processing, review, managed review, etc.) and weighted appropriately to provide further detail in vendor comparisons/evaluations.

 

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