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however, one year of litigation could finance three years of internal cost structure with the savings earned from paying outside consultants to do the same work.

Internalizing costs in this manner has some downsides. First, internal resources inherently lack the objectivity that an outside consultant may bring. The internal project coordinator may feel unable to push back sufficiently against management resistance to collection or preservation best practices. It is critical to support the internal resources with a mission statement and written job description defined by a best practices approach to the various tasks that will arise, and for that protocol to have the full support of senior management in advance of the next production crisis. Second, internalizing costs means internalizing accountability. Outside consultants can play an important role in testifying as to the integrity of the collection and production process, and in laying the foundation for evidence kept and produced by company custodians. A company employee will face a greater level of skepticism when providing such testimony, and demonstrated failures in the process may more easily lead to sanctions.

At a minimum, all companies should have an internal team to handle the everyday management of backup data, even if that team merely coordinates with and supervises an outside vendor on large scale projects. Often this team consists of in house counsel and their assistants. Adding technical consulting capability to these internal teams will quickly pay dividends. This slightly expanded internal team will be able to more consistently and efficiently control and preserve data for litigation holds and find, collect and produce data when the need arises. An internal team will have the further advantage of having full knowledge of the company’s network and information systems prior to the onset of litigation. Thus, unlike outside vendors, an internal team will not need to get up to speed each time a data collection or production is needed. Another benefit of an internal team is the ability to maintain control of confidential or sensitive information of the company. This reduces the risk of company information leaking to the wrong hands.

c. Assess Whether Outsourcing or Offshoring Certain Work May Create Efficiencies

In the last section, we discussed insourcing (i.e. shifting work internally) as a possible cost-saving measure. As an alternative approach (or in combination with insourcing), outsourcing and offshoring can, in certain instances, lead to substantial savings.

The term “outsourcing” refers to the practice of paying a third-party vendor to do some aspect of a company’s work. Outsourcing, in the context of electronic discovery, most often means finding contractors to perform basic tasks at less cost. Sophisticated law firms have already developed effective staffing elasticity models that have reduced costs to the client of data collection, review and production. Instead of staffing these projects with dozens of first and second year associates (which the firm must continue to pay or lay off in down cycles), firms have instead hired contract lawyers to perform the same tasks.

“Offshoring,” on the other hand, can refer to one of two things -- establishing an overseas office to conduct some of the company’s work or outsourcing to an overseas third party to do such work. Outsourcing and offshoring have been conducted for years in such industries as apparel, automotive and electronics manufacturing, where foreign skilled labor costs much less

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