Crystal Ball for Predicting eDiscovery Success
Crystal Ball and eDiscovery

Strategically Considering Vendors?

In an effort to quickly yet effectively evaluate and predict both the immediate and long term success of electronic discovery vendors, the following considerations shared in a formulaic manner may help legal professionals as they compare, contrast, and evaluate electronic discovery vendors.


Beyond Capability:  A Simplistic Approach to Strategically Considering eDiscovery Vendors

In an effort to quickly yet effectively evaluate and predict both the immediate and long term success of electronic discovery vendors, the following considerations shared in a formulaic manner are provided for your review.

These thoughts/considerations represent a desire to balance subjective and objective methodologies in evaluating a segment of the market (electronic discovery) that appears to be in the early majority phase of market acceptance. The author is well aware that there are many considerations required to truly evaluate electronic discovery vendors, however the following strategic considerations represent one view of how one can evaluate/compare vendors beyond just the “feature and function” of services and products.

Definitions For Consideration:

  • SPR = Success Predictor Rating
  • TSPR = Total Success Predictor Rating
  • C1 = Capability Rating = Technology Rating + Domain Knowledge Rating
  • C2 = Communication Rating = Awareness Rating + Reputation Rating
  • C3 = Commerce Rating = Free Cash Flow Rating + Customers Rating
  • A1 = Authenticity Rating = Motive Rating + Sincerity Rating + Employee Turnover Rating
  • 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.

Formulas For Consideration

  • TSPR + SPR1 + SPR2 + SPR3
  • SPR1 = (C1 + C2 + C3 + A1) Calendar Year 2011 (Past)
  • SPR2 = (C1 + C2 + C3 + A1) Calendar Year 2012 (Current)
  • SPR3 = (C1 + C2 + C3 + A1) Calendar Year 2013 (Forecasted)
  • C1 = Capability = Technology + Domain Knowledge
  • C2 = Communication = Awareness + Reputation
  • C3 = Commerce = Free Cash Flow + Customers
  • A1 = Authenticity = Motive + Sincerity + Employee Turnover

Formula Usage:

  • SPR2 May Be Used To Evaluate Vendors For The Completion Of Time Limited Immediate Tasks.
  • TSPR May Be Used To Evaluate Vendors For Potential Partnerships And/Or The Completion Of Ongoing Tasks.
  • Evaluation Considerations: Evaluations can be completed for individual electronic discovery functions at the task level to include identification, preservation, collection, processing, review, analysis, and production or at the solution level (which may comprise of all electronic discovery tasks).

Practical Evaluation:

This example represents an application of the aforementioned evaluation formulas and any similarity to a specific electronic discovery vendor is purely coincidental.  Context for this specific evaluation/comparison is the selection of a 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) Calendar Year 2012 (Current)
  • 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) Calendar Year 2012 (Current)
  • 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, it may be assumed that customer volume differential between Vendor 2 and Vendor 1 should 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 (2011), Present (2012), and Future (Forecast 2013) to determine ratings for comparison/decision.

Additional Considerations:

This model is provided for planning/comparisons/evaluations and should be viewed as one of many tools available to determine choices in strategically selecting electronic discovery vendors. Each of the equation components can be broken down into further sub-components and weighted appropriately to provide further detail in vendor comparisons/evaluations.

References:

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