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TECHNOLOGY

You’re Being Sued. Do You Know Where Your Data Is?

Once upon a time, you simply handed over the contents of your file cabinets to the lawyers. In the digital age, the task is much more complicatedâ€"and expensive.

Flickr/Velo Steve

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Imagine your business is being sued. Suddenly, you're required by law to unearth and deliver to a competitor or investigator massive amounts of electronic data—those emails sent by salespeople, your receptionist's instant messages, CAD files edited by your engineers, and more—with every bit of it including metadata that reveals exactly when it was created, saved, or transmitted.

Are you prepared for that?

What we're talking about here is e-Discovery. This is the process of collecting, analyzing, and exchanging electronic data during litigation or as part of an investigation by government agencies.

And it's not just a concern for the Apples and the Samsungs of the world that are well-armed to take on the task. Even the smallest companies are legally on the hook for doing their own data discovery.

While you can certainly try to do it on you're own, it's far more common to outsource it.

"E-Discovery is a complicated, messy process," says Andrew Sieja, founder and CEO of Chicago-based kCura, a company that makes software called Relativity that manages the review, analysis, and production of data. "The collection phase involves the snatching of data from, say, the laptops of 50 different people. It requires experts to really understand where to pull data from the network." And then there's the task of reviewing it. That's when companies rack up about 70 percent of the costs, says Barry Murphy, principal analyst with eDJ Group, an Austin, Texas-based research firm that specializes in e-Discovery.

Because of the expertise needed to pull off good e-Discovery, Sieja says there's a whole cottage industry—a multi-billion dollar industry, in fact—built around providing consulting services for it. Research firm Gartner says the e-Discovery market is growing at a compounded annual growth rate of 14 percent and is estimated to reach $1.7 billion by 2014, but eDJ's Murphy says that number could be much higher when you account for proactive information management—things like software for records management, e-mail archiving, and legal hold management tools. "I would say it's upwards of $5 billion when you add in all the services and tools."

The highly litigious and regulated companies in the high tech, finance, and oil and gas sectors were among the first to respond, but now smaller mid-market companies are seeking e-Discovery tools and services. As more companies go through the process, e-Discovery is getting broader exposure. Plus, "the legal community has gotten smarter about how to do it and they realize they can now go after companies of any size, not just the big game any longer," Murphy says.

So that means your small business needs to be ready and able to react to lawsuits and procure your own electronic information, if needed. "All it takes is one bad situation and it can bring down a small business," Murphy says.

Here are four questions every business owner needs to ask:

  • If I use a cloud storage vendor, what kinds of retention policies are in place?
  • What kind of access to data am I going to have?
  • If I need to hire a service provider to help with e-Discovery, what technologies are they using?
  • How much are they going to charge me to process and review that data?

Murphy says it's important that any company planning to outsource an e-Discovery project resist the urge to panic and pick the first consultancy or vendor that shows up in a Google search.

One good tool Murphy points to is a free online matrix his research company provides that outlines the features included in more than 200 various e-Discovery software products. The eDJ Tech Matrix helps companies decide which applications and platforms are the best fit for their business.

What you’re going to pay

Fortunately for small business owners, pricing for e-Discovery services has come down significantly in the last few years. "Businesses are now in the driver's seat in terms of negotiating price," Murphy says.

That's not to say it's cheap, however.

Service providers charge for processing data depending on how much of it they handle. Murphy says the cost runs roughly $150/GB on the low end to $1,000/GB on the high side.

"Companies can reduce the size of an actual collection that needs to go out for that processing probably down to less than 100GB if they apply any element of smarts to it," he says, approximating that, in general, cases for SMBs are going to range from around 20GB to 500GB. "The chances of a small business running into a multi-terabyte collection are fairly slim because their lawyers can figure out ways to sort of reduce the burden with just a little bit of research."

Want more information about e-Discovery? Check out www.edrm.net. It's a nonprofit site offering a wealth of information on the subject.

Last updated: Nov 7, 2011

CHRISTINA DESMARAIS is an Inc.com contributor who writes about the tech startup community, covering innovative ideas, news, and trends. Have a tip? Email her at christinadesmarais (at) live (dot) com.
@salubriousdish




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