Legal departments have decided to bring e-discovery services in-house as a way to cut costs and have better control over their litigation-related data, according to a report published by Exterro on Thursday.

According to "The State of E-Discovery 2020," which compiled data from several different legal reports published in the last year, 50% of legal departments have built-in e-discovery services.

Michael Hamilton, senior managing director of marketing at Exterro in Portland, said over the past couple of years there has been a trend in legal departments insourcing the e-discovery process. He explained that legal departments that have a high frequency of litigation were the first to insource the process and have begun to stop outsourcing the collection and review of data.

Hamilton said that legal departments who insource e-discovery have the ability to learn more about a particular matter much faster than they would if they were "playing phone tag with a service provider."

Catherine Moynihan, executive director at the Association of Corporate Counsel's legal operations arm in Washington, D.C., said that cost-cutting is the main reason companies insource e-discovery.

"The cost of e-discovery has been escalating so fast that this is an area where companies have begun to insource," Moynihan said. "It was not sustainable in the balkanized model."

Moynihan said another area that may be driving the insourcing of e-discovery is the convergence of legal and information governance functions.

"They are doing a lot of the same kinds of activities for data privacy and have to have an efficient way to keep a handle on their data," Moynihan said.

She said over the past five years many companies that have been named ACC champions have insourced e-discovery. Notably, AbbVie Inc., which was named an ACC champion in 2019, brought all of its data collection and data processing in-house. As a result, the e-discovery group now has the company's intellectual property and commercial litigation teams as its main internal clients. The company found a way to host all of its litigation data at a single low fixed rate and found $2 million in savings, according to a case study on the ACC's website.

The challenge to insourcing e-discovery is executive buy-in, according to Moynihan.

"You're adding a skill set that hasn't been a part of the legal department," Moynihan said. "You have to find lawyers who are deeply experienced in e-discovery. You have to add a technologist. That kind of change management is always a challenge."

Another area where corporations are finding savings is by having a smaller panel of outside counsel they work with. According to the report, 64% of legal departments have 10 or fewer law firms on their preferred panels. That is an increase from Exterro's 2019 report, which showed only 47% of corporations having 10 or fewer firms on their panel.

Moynihan said having a preferred panel of firms has been an ongoing trend and legal departments are continuing to cut back on the number of firms they use and reassess where their needs are.