Objectifying the Subjective: Evaluating eDiscovery Vendor Viability

This updated article highlights one approach to evaluating the selection of eDiscovery vendors that may help decision makers by providing an objective framework useful for the competitive comparison and contrasting of subjective evaluation elements. While the components and ratings used in the approach may be adjusted and weighted based on the experiences and preference of evaluators, the framework is beneficial for ensuring a holistic evaluation process for determining vendor viability.

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

eDiscovery is rife with risk. Multiple parties, many jurisdictions, numerous ESI formats, various technologies, and competing 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 essential 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 area 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 undoubtedly 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.

Strategically Comparing Vendors

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 comprehensively evaluate electronic discovery vendors and the following considerations represent only one view of how one can evaluate and compare vendors beyond just the “feature, function and pricing” of services and products.

Baseline Definitions and Rating Criteria:

Capability 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.
  • Security = Demonstrated historical and continuing commitment to security and privacy based audits, investigations, certifications, and attestations. 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.

Communication Criteria

  • 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.
  • Integrity: Demonstrated honest interaction and market messaging based on topical due diligence of organizational leadership, leadership assertions, and market messaging based on searches of business and legal databases for incongruencies between representation and reality. Simplistically rated in this model as representations do not represent reality = (-2), no real evidence congruency representations and reality = 0,  or representations are congruent with reality = 2.
  • 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 the majority of legal and corporate law professionals on a regional level = 1, or awareness among the majority of legal and corporate law professionals on a national level = 2.

Commerce Criteria

  • 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.
  • 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.

Authenticity Criteria

  • 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, security, and domain knowledge.   (C1 = Technology Rating + Security + Domain Knowledge Rating) This can be used to compare a vendor’s technology, security, and domain expertise in relation to market expectations.
  • Communication Rating (C2): The rating of a vendor’s capability based on reputation, integrity, and awareness. (C2 = Reputation Rating + Integrity Rating + Awareness 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 customer activity and free cash flow.  (C3 = Customer Rating + Free Cash Flow 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 + Security + Domain Knowledge
  • C2 = Communication = Reputation + Integrity + Awareness
  • C3 = Commerce = Customers + Free Cash Flow
  • 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 the technology, security, and domain knowledge that meets market expectations, has strong national awareness and a reputation for satisfactorily meeting electronic discovery challenges, and vendor messaging appears to be in align with actual capabilities. The vendor has more than 100 customers but is experiencing negative cash flow. Vendor’s motive is continuing to provide products and services purely for financial reasons, and the 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, Security = 2, Domain Knowledge = 2, Reputation = 4, Integrity = 0, Awareness = 2, Customers = 4, Free Cash Flow = (-2), Motive (-1), Sincerity (-1), Employee Turnover = 0
  • SPR2 Rating: (2+2+2) + (4+0+2) + (4 + -2) + (-1 + -1 + 0) = 12

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 the technology, security, and domain knowledge that meets market expectations and has a regional awareness and a reputation for satisfactorily accomplishing electronic discovery challenges a majority of the time. However, some past assertions on service features by a key senior leader may be questionable. The vendor has positive free cash flow with more than 20 and less than 100 customers. Vendor’s motive is to provide products and services based on a combination of financial reasons and senior leadership interest in solving electronic discovery challenges, and the 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, Security = 2, Domain Knowledge = 2, Reputation = 2, Integrity -1, Awareness = 1, Customers = 2, Free Cash Flow = 2, Motive = 1 Sincerity = 1 Employee Turnover = 1
  • SPR2 Rating: (2+2+2) + (2+-1+1) + (2+2) + (1 + 1 + 1) = 15

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, integrity, or the quantity of customers rating as Vendor #1. This reputation and integrity 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 and long term tasks, one would need to work through 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 can be broken down into collections, analytics, processing, review, managed review, etc.) and weighted appropriately to provide further detail in vendor comparisons/evaluations.

References

  • “Viability”. Thefreedictionary.Com, https://www.thefreedictionary.com/viability. Accessed 20 Apr 2019.
  • “Free Cash Flow”. En.Wikipedia.Org, https://en.wikipedia.org/wiki/Free_cash_flow. Accessed 21 Apr 2019.
  • “EDRM”. Edrm.Net, https://www.edrm.net/. Accessed 21 Apr 2019.

Additional Reading

Source: ComplexDiscovery