eDiscovery: Budgeting for the Inevitable

I was always told that there are two inevitabilities in life: death and taxes. But in business, it’s a little different. The two inevitabilities here are regulations and lawsuits. Federal laws such as Sarbanes-Oxley, HIPAA, Graham Leach Bliley, as well as state and local regulations, are making the need for eDiscovery a near certainty.

Most companies are taking this new reality seriously.  Companies are committing necessary resources to develop compliance and risk management policies in order to respond to and manage the cost of litigation.  These legal actions impact operational costs while taking up corporate time, energy, and resources that are better used for selling, marketing, research and development, employee retention, or other business driven priorities.

Confronting this spike in legal work is driving up budgets for eDiscovery as it has become a critical part of every company’s response to litigation. This is forcing companies to address the challenge of identifying, collecting, preserving and processing their electronically stored information (ESI) regardless of where it resides on their corporate network by automating some or all of their in-house eDiscovery processes.

However, as companies are coming to find out, conducting a corporate eDiscovery fire drill every time they need to respond to legal inquiry is costly and impractical. Companies no longer have the staff or budgets to dedicate to meet the growing number of legal requests they receive from the courts for their electronically stored information. Equally problematic, courts no longer give companies open-ended time frames in which to produce this information.

This is forcing companies to adopt a more proactive stance and deploy eDiscovery solutions before they receive the legal discovery request. So as companies start to bring in-house eDiscovery and compliance solutions like Kazeon Systems’ Information Server, companies can know ahead of time where their data resides, categorize and classify document and email content and then only produce the information that the is required for the 26(a) initial disclosures or 26(f) meet and confer, instead of delivering a week’s or month’s worth of backup data.

But as companies become more proactive, they are running into an unexpected problem: how to pay for eDiscovery. Historically budgeting for eDiscovery has come out of some sort of emergency funds.  It may come from the external law firm budget or it may come from the IT budget, but this is a zero sum game. So now what companies are finding out is that as they go through a more formal process to procure and deploy a proactive eDiscovery solution, they find out they have not properly budgeted for this expense.

IT and corporate general counsel both play a role in eDiscovery but have budgets that they manage separately.  As a result, current line items in their budgets do not neatly map into eDiscovery solutions. Line items like archiving, compliance and security tend to appear in IT budgets while a line item for external law firms shows up on the General Counsel’s budget. So who must pay for the eDiscovery solution since technically it is applicable to both?

eDiscovery is as much a part of the new business reality as new federal and state regulations. So while companies have already started to put in place processes to reduce the risk associated with eDiscoveries, they must include a new line item in their budgets to pay for the up-front expenditures needed to minimize downstream costs and risks. A proactive approach to controlling the risks associated with eDiscovery provides recognition to the importance of protecting your company’s assets and reputation as well as your bottom line. This starts by creating a line item in your budget for eDiscovery which ultimately prevents your company from failing to fund an event that is, in all likelihood, inevitable. 

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