Gigabyte Expansion in E-Discovery Hosting: You Get What You Pay for; You Pay for What You Get

Catalyst_Blog_Gigabyte_ExpansionAn old friend called me recently to talk about a beef he had with his e-discovery provider. “What’s up?” I asked when I realized who it was. He told me he thought he had done everything right in setting up his last e-discovery project. He sent out an RFP to several vendors, asked all the right questions and then picked the bidder with the lowest per-gigabyte price to host the documents. Everything seemed like it was on track.

“So what’s wrong with that,” I asked. “You went for the low bidder and locked them in with an ironclad contract. Getting hosting for that kind of per-gigabyte price seems like a steal.”

My friend sighed in response. “What happened was that I didn’t read the fine print.”

“What do you mean?” I asked.

“Well,” he continued, “I sent 250 gigabytes of data to the vendor for hosting and all seemed well for the first few weeks. We got the case going, review started and it seemed like we were on track to make our deadline.”

“That sounds great,” I replied. “So what was the problem?”

My friend continued with a sad lament. “It was all fine until I got my hosting bill. Instead of 250 gigs, the bill was for three times that amount, nearly 750 gigs!”

“How did they get you?” I asked, suspecting I already knew the answer.

“I guess I didn’t read the fine print,” he answered. “It turned out I was paying by the gigabyte at a low price but was paying for a lot more gigabytes than I ever imagined.”

“You see,” he added, “I not only got charged for the size of the native files but they also charged me for the size of the TIFF images used for viewing. And then for the text files being hosted for search and then for the size of the database they were using. Not stopping there, they charged me for the audit log size as well. Then I had to pay user fees to boot. It just didn’t seem to stop.”

“I am sorry but I am not surprised,” I offered in response. “I have heard that a number of vendors charge that way. They add in all kinds of charges to make up for that low per-gigabyte rate. They hook you in with the low entry fee but then come all the add-ons.”

Gigabyte Inflation

User fees, audit logs, database fees and multiple copies of documents can turn what seems like a low price into something a lot less palatable, I explained to him. We call that gigabyte inflation in our industry and some vendors really push it to the limit.

“This won’t make you feel any better,” I suggested, “but when I was practicing law we had an old joke about billable hours that just seems to fit this discussion. Even back then (25 years ago), we had buyers of legal services who went for the low bid every time. They were the insurance companies that were determined to push hourly rates as low as possible no matter who represented them. When most clients were paying $200 an hour, the insurance companies were paying $80 an hour. And, of course, they hired lots of lawyers at that rate, many of them friends of mine.”

“But,” I continued, “the joke persisted, whether or not it was true.”

“What joke?” my friend asked.

When we were talking about how much work we had to do, I explained, we always capped off the discussion like this:

Unless you’re an insurance defense lawyer, there are only 24 hours in a day!

Now before I get a lot of fiery responses from my friends in the insurance defense bar, nobody really believed it was true. Rather the joke was apocryphal and created just to make a point that the lowest price isn’t always the lowest price.

In the construction industry, they talk in much the same way about the proverbial low bidder. The price might be the cheapest but that doesn’t mean your costs are the lowest. Nobody can stay in business for long if they don’t cover their costs and make a fair return for their efforts.

So what about e-discovery? A lot of people are focused on gigabyte pricing but they aren’t looking at the big picture. That low gigabyte price might sound great until you factor in all the other charges, from user fees to the expanding gigabytes on your site. When you add them up that low price site can turn into a high-cost undertaking.   

My friend didn’t get the message at first. How many hours in a day? How many gigs on my site? What’s the point?

I answered simply: “In the final analysis, you may not always get what you pay for, but you pay for what you get. And sometimes what you pay for is more than what you thought you bargained for.”

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About John Tredennick

A nationally known trial lawyer and longtime litigation partner at Holland & Hart, John founded Catalyst in 2000. Over the past four decades he has written or edited eight books and countless articles on legal technology topics, including two American Bar Association best sellers on using computers in litigation technology, a book (supplemented annually) on deposition techniques and several other widely-read books on legal analytics and technology. He served as Chair of the ABA’s Law Practice Section and edited its flagship magazine for six years. John’s legal and technology acumen has earned him numerous awards including being named by the American Lawyer as one of the top six “E-Discovery Trailblazers,” named to the FastCase 50 as a legal visionary and named him one of the “Top 100 Global Technology Leaders” by London Citytech magazine. He has also been named the Ernst & Young Entrepreneur of the Year for Technology in the Rocky Mountain Region, and Top Technology Entrepreneur by the Colorado Software and Internet Association. John regularly speaks on legal technology to audiences across the globe. In his spare time, you will find him competing on the national equestrian show jumping circuit or playing drums and singing in a classic rock jam band.