Are we Pricing Ourselves Out of Business?

Migrated from eDJGroupInc.com. Author: Mikki Tomlinson. Published: 2012-04-24 05:00:51Format, images and links may no longer function correctly. “Are we Pricing Ourselves Out of Business?” That was the first thing I heard when I answered an early morning phone call last week. An industry veteran and long-time friend was on the other end of the line. We went on to have a very interesting conversation that I think is important to open up to the general eDiscovery public. (For purposes of this blog, I will maintain my friend’s anonymity and hereinafter refer to him as “Vendor Veteran”.)

This is not the first time we have blogged about pricing on the eDiscovery Journal. Most recently Jason Velasco and Sarah Hankins published blogs on the topic, both drawing comments from readers. Cost and pricing models have been a hot topic since Jason’s early “glory days” of provider collection and processing. Pricing clearly remains a relevant topic in eDiscovery.

As Jason, Sarah and many others have pointed out, the cost of collecting/processing/producing data has dramatically decreased since the early part of the century. At the same time, efficiency has dramatically increased. Both of these developments are good for the eDiscovery industry and the consumer. As this trend continues, consumers are, as they should be, constantly playing the “how low can you go?” game and the vendors are answering.

The question I ask, however, is have the vendors in this highly competitive arena gone so low that they are losing profit or, in worse cases, their businesses? The question from the service provider perspective is: “how low can you go and still provide quality service and profit?” If they are not eating away at their profit, are they sacrificing quality in order to be the lowest price?

One might argue that because of the advances in technology, the vendors are in a better position to continue to lower their prices, yet maintain their ability to provide quality services and profit. Perhaps that is so. However, I still feel a little uneasy. Let’s break it down. What does it take to manage a collection/processing/production project? People. Process. Technology.

People: This is not a “push this button and you are done” environment. Those involved in the collection/processing/production pieces need to have good, solid knowledge of what they are doing and why. Granted, labor loads are lightened by technology improvements that decrease the time needed for processing, loading, conversion, and production activities. However, the labor expertise required to handle ESI has not decreased. If anything, it has increased. So, while the amount charged by a service provider goes down, the cost of quality employees does not.

Process: Developing solid and efficient processes is key in eDiscovery. These process are oftentimes the advantage that one service provider has over another. You can’t afford to not have good process. Again, while the amount charged by the service provider goes down, the efforts in developing and carrying out solid and efficient processes does not.

Technology: This is where we perhaps have the most impact on pricing. As stated above, technology has certainly evolved in ways that make the entire process move faster. But has the service provider’s cost of technology really gone down enough to bring the prices down to $75 per GB from collection to review?

Yes, that’s what I said, $75 per GB from collection to review. This brings me back to Vendor Veteran. An announcement of $75 per GB from collection to review caught his eye and started our conversation. His immediate concerns were “how can other vendors possibly compete with that and not sacrifice profit or quality”?

My response? They probably can’t. But read the fine print before you panic. As discussed in the many blogs about pricing, the models can be very confusing and as a result it is difficult to compare apples to apples.

I would give the same advice to consumers that are going for the “lowest price” offering. Look under the hood before you buy the car. There are probably other charges that make up for low per unit fees, such as hosting, project minimums, database set up fees, and project management fees. For the record, I am not claiming this to be the case with the company that made the announcement to which Vendor Veteran was referring as I have not spoken to them. What I am saying is, simply, do your homework. Don’t stop at the large print, the surprises are all in the fine print.