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eDiscovery: The Cost of Being Unprepared

It's certainly not a new issue but the challenge remains the same when it comes to the cost (both financial and time) of eDiscovery. In fact, it's only getting more prohibitively expensive as data storage gets cheaper and easier to set up and companies have to comb through an ever-increasing amount of information.

An article from InsideCounsel lays out the unfortunate landscape for organizations when it comes to eDiscovery.

The paragraph below really got me thinking as I have personally experienced this pain in the past as a defendant:

Given the nearly unlimited storage reality that the cloud is promulgating, the question shouldn’t be, “What does it cost to keep data indefinitely?” Instead, the more germane question is, “How much will it cost to search through endless terabytes/petabytes of data when there’s a governmental inquiry, e-discovery event or internal investigation?”

On average, to conduct an eDiscovery alone, with the amount of electronic data most companies have these days, will cost ~$3 million USD, notwithstanding any other legal representation fees.

With most IT departments typically focusing the IT purchase around ROI or ability to perform disaster recovery, the hidden cost of not having a well thought through plan to manage a litigation event can be a costly, or worse, a terminal error.

The biggest disconnect most companies have with litigation is how quickly any legal event drains operating cash away from a company’s reserve because they are not familiar with how the US legal system works. Even before you ever step a foot into a courthouse, the defendant has a burden of proof to gather, review, and produce relevant records to the lawsuit in a timely (often short turnaround) manner as dictated by the court. Just imagine spending $3M in 90 days, with no guarantee of the outcome. What does that mean to your company operation and bottom line?

Most SMBs don’t have enough cash reserve to sit through an entire litigation, or even just the eDiscovery phase. Hence, for the most part, you will see that most cases are settled out of court whether the defendant is guilty or not of the accusation against them.

There are immoral entities such as companies using patents as an offensive weapon to either take out or acquire its competition or patent trolls that understand this concept extremely well and have made a business model out of this burden of proof.

If there is someone out there making a living out of your IT shortcoming, shouldn’t you be more prepared?

By Nelson Chiu

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