eDiscovery and the Digital Transformation of Corporate Law

Thoughts about digital transformation and AI for enterprise leaders and their legal & compliance advisors

These posts represent my personal views on enterprise governance, regulatory compliance, and legal or ethical issues that arise in digital transformation projects powered by the cloud and artificial intelligence. Unless otherwise indicated, they do not represent the official views of Microsoft.

We live in a litigious society. As every legal and compliance professional working in a large enterprise knows, litigation on both the receiving and giving ends is a routine occurrence, an inevitable part of doing business. While we can agree that this phenomenon may not be ideal, it would be wrong to take a purely cynical view of it. Litigation arises because modern society and its economic institutions, which have brought us a standard of living unprecedented in human history, are also extraordinarily complex. Millions of pages of laws and contracts surround the billions of transactions that make up the global economy. Those laws and contracts are essential to ensuring the stability and fairness of economic exchanges, but they inevitably give rise to differences of interpretation and disputes that can only be resolved by litigation.

And litigation is expensive! One estimate published a decade ago put the total cost of litigation in the U.S. at one third of corporate profits. Another source estimates that the 500 largest corporations in America spend over $200 billion per year on litigation costs all up, including legal fees, benefits paid to third parties, and administrative costs. One might suspect that legal fees are the main driver of litigation costs, but this seems not to be the case. In recent years, most large enterprises have aggressively negotiated down the fees they pay to law firms.

In reality, ballooning administrative costs are likely the biggest contributor to growth in litigation costs. And the biggest component of administrative costs is the process known as discovery, which plays such a fundamental role in civil litigation. Here is a textbook definition of discovery:

"Discovery is the pre-trial phase in a lawsuit in which each party investigates the facts of a case, through the rules of civil procedure, by obtaining evidence from the opposing party and others by means of discovery devices including requests for answers to interrogatories, requests for production of documents and things, requests for admissions, and depositions. Under the laws of the United States, civil discovery is broadly construed and parties to a civil action can ask for virtually any material which is reasonably calculated to lead to the discovery of admissible evidence."

In the age of computers, discovery mostly means electronic discovery, or simply ediscovery for short. Here we arrive at the heart of the cost issue: in a typical ediscovery case at a large corporation or government agency, the discovery process may have to sort through many millions of documents and terabytes of data to find the items that respond to discovery requests. The documents judged relevant, which still might number in the many thousands or even millions, are then turned over to an outside law firm for a painstaking review process by costly legal professionals. This lengthy pipeline of document processing is what drives the cost of ediscovery, which is variously estimated at 20% to 50% of total litigation costs.

At Microsoft, our legal department faces numerous litigation cases just like any other corporation our size, and we like our peers have grappled with the cost and complexity of ediscovery. But unlike most of our peers, we also happen to be a software company in the business of building solutions to such problems. And that is exactly what we have done with a powerful cloud service called Advanced eDiscovery, which is part of our Microsoft 365 suite of enterprise compliance and cybersecurity tools.

Advanced eDiscovery is more than just a search engine for combing through electronic documents. It is a full-fledged example of digital transformation applied to a critical business process. In a nutshell, Advanced eDiscovery brings automation and intelligence to the entire end-to-end workflow of ediscovery. By digitizing the process and applying AI to narrow the search down to only documents that are genuinely relevant, it slashes the total number of documents that need to undergo review by expensive human lawyers.

Advanced eDiscovery also leverages the efficiency of an all-cloud approach. At firms that have adopted cloud-based email and document management solutions like Office 365—that is to say, at the vast majority of large enterprises—the documents sought by ediscovery all already live in the cloud. So it is much more sensible to keep them in a specially designed cloud repository during ediscovery rather than downloading them to cumbersome on-premises file storage.

Advanced eDiscovery has far too many features for me to review them all here. But at a high level they can be boiled down to the following seven functions:

• Identification - After you identify potential persons of interest in an investigation, you can add them as custodians (also called data custodians, because they may possess information that's relevant to the investigation) to an Advanced eDiscovery case. After that, it's easy to preserve, collect, and review custodian documents.
• Preservation - To preserve and protect data that's relevant to an investigation, Advanced eDiscovery lets you place a legal hold on the data sources associated with the custodians in a case. You can also place non-custodial data on hold. Advanced eDiscovery has a built-in communications workflow so you can send legal hold notifications to custodians and track their acknowledgments.
• Collection - After you identified (and preserved) the data sources relevant to the investigation, you can use the built-in search tool in Advanced eDiscovery to search for and collect live data from the custodial data sources (and non-custodial data sources, if applicable) that may be relevant to the case.
• Processing - After you've collected all data relevant to the case, the next step is process it for further review and analysis. In Advanced eDiscovery, this means the in-place data that you identified in the collection phase is copied to an Azure storage location (called a review set), which provides you with a static view of the case data.
• Review - After data has been added to a review set, you can view specific documents and run additional queries to reduce the data to what is most relevant to the case. Additionally, you can annotate and tag specific documents.
• Analysis - Advanced eDiscovery provides integrated analytics tools that helps you further cull data from the review set that you determine isn't relevant to the investigation. In addition to reducing the volume of relevant data, Advance eDiscovery (Preview) also helps you save legal review costs by letting you organize content to make the review process easier and more efficient.
• Production and Presentation - When you're ready, you can export documents from a review set for legal review. You can export documents in their native format or in a standardized format so they can be imported into third-party review applications.

At Microsoft we find that we are saving millions of dollars annually in discovery costs by automating our discovery workflows in the manner described above. In one typical case (depicted below), we used Advanced eDiscovery to winnow down the total volume of documents ultimately produced by nearly 98%.

If your enterprise is grappling with the challenge of ediscovery, there is an excellent Microsoft white paper that provides you with a very clear overview of how Advanced eDiscovery works in detail: Office 365 meets evolving eDiscovery in a cloud-first world. In the age of digital transformation, going cloud first is what it’s all about.

Microsoft has published a book about how to manage the thorny cybersecurity, privacy, and regulatory compliance issues that can arise in cloud-based Digital Transformation. The book explains key topics in clear language and is full of actionable advice for enterprise leaders. Click here to download a copy. Kindle version available as well here.