Whitepaper: Best TCO Option for Legal Hold Software


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Best TCO Option for Legal Hold Software is your cheat sheet for making a smart comparison.

Take a look at the advantages and disadvantages of each option, gain confidence on when to expect ROI, and get a feel for what's driving decisions across industries.

This whitepaper, which includes detailed industry trends, analyst insights, and experiences of others in your position, is your resource to develop an accurate checklist of your specific needs, and gain the knowledge to make -- and defend -- your best decision.

Fill out the form on the right to view the 14 pages of facts, insights and graphs to help you make your decision.

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Whitepaper: Best TCO Option for Legal Hold Software

  1. 1. Determining the Best TCO Option for Legal Hold Management Software
  2. 2. The Importance of Comparing Apples to Apples When making a decision to purchase legal hold software, it is important to make an apples to apples TCO (total cost of ownership) comparison of SaaS vs. on-premise vs. custom- built software. Many legal depart- ments only look at the initial deploy- ment cost of on-premise vs. initial creation cost of custom-built vs. ongo- ing subscription fees of SaaS. An accurate analysis, excluding the upgrade cycle, should span three years on average. If ROI is not realized by then, it probably never will be. How SaaS Alters the Apples to Apples TCO Calculation The first step in making a true apples to apples comparison is realizing that 75% of IT budgets are spent just on maintaining and running existing sys- tems and software infrastructure. TCO for many SaaS solutions is as much as 77% lower than on-premise or custom-built solutions. SaaS application software costs are approxi- mately 62% of total solutions costs, compared to approximately 17% of total solution costs for off-the-shelf licensed or custom-built solutions. The 4th Option – Total Cost of Inaction There’s also a 4th option – doing noth- ing. Risks of sticking with the status quo (manual process) include: ineffi- ciency, opportunity costs, unmitigated risk, human error and over-preservation. Concerns Diminishing as Enterprise SaaS Gains Popularity According to the latest research from Gartner, SaaS is widely used within mature markets such as the United States, although nearly three-quarters of respondents (71%) had only been using such services for less than three years. 50% of those Gartner respondents mention lower TCO as the primary fac- tor in their decision. eDiscovery Journal reports that 35% of in-house legal teams are moving to a cloud (SaaS) solution for eDiscovery needs. What to Consider When Making Your Decision • Do you need a solution for which no software currently exists? • Do you need integration options? • Do you have the resources available for the job? • What is the relative complexity and purpose of the project? • What is your timeline for deployment? • Are security needs addressed to satisfaction? Comparing Advantages of SaaS vs. Disadvantages of On- Premise vs. Challenges of Build • SaaS eliminates capital costs and decreases risk • SaaS enables faster deployment and productivity • SaaS streamlines use and management and increases flexibility • SaaS put the responsibility of reliability, performance and efficiency on the vendor Leveraging Economies of Scale The SaaS multi-tenant model allows vendors to amortize infrastructure- related costs for thousands of custom- ers. This yields efficiencies throughout the solution life cycle and substantial economies of scale, lowering the TCO for customers. SaaS is ‘Pro-Customer’ and ‘Pro-Custodian’ Compared to On-Premise and Cus- tom Built solutions, the SaaS model gives the customer and end-user the advantage. Since SaaS drives lower TCO to more attractive levels for both SMB and Enterprise organizations, this model greatly reduces risk. Understanding how to make an “apples to apples” evaluation of solution options is what leads to the best business decision regarding new software. Determining the Best TCO Option for Legal Hold Management Software: SaaS vs. On-Premise vs. Custom-Build Executive Summary
  3. 3. Determining the Best TCO Option for Legal Hold Management Software | 3 The Importance of Comparing Apples to Apples When the need for a software solution arises, decision makers at many organizations often struggle with the following question: “What is the best way for me to make an apples to apples TCO (total cost of ownership) comparison between SaaS (Software- as-a-Service), on-premise (off-the-shelf installed) and custom-built (in-house) software applications?” This is an important question, because many purchasing groups still only compare the initial cost of deploying on-premise software (and accompanying hardware) or building a custom application with an in-house team against the ongoing subscrip- tion fees of SaaS applications. In order to be truly realistic, TCO comparisons must also include ongoing infrastructure and manpower costs for operating and maintaining on-premise systems.1 Forrester Research, in their analysis comparing the ROI of SaaS to on-premise software, calls to attention the importance of accounting for the software lifecycle when making an ROI assessment.2 For legal hold software, the expected economic life span is three to five years, with upgrades typically occurring in year four or five of ownership. An accurate analysis, exclud- ing the upgrade cycle, should span three years on average. In other words, it is recommended to expect ROI from legal hold management software within a maximum of three years. If it doesn’t happen by then, it probably never will. How SaaS Alters the Apples to Apples TCO Calculation Through economies of scale and a shift of costs from capital expenses (CapEx) to operating expenses (OpEx), the SaaS model presents favorable --and more manageable -- apples to apples TCO calculation versus on-premise software. According to Gartner, the annual cost to own and manage packaged or custom-built software applications can be over four times the cost of the initial purchase. As a result, companies end up spending more than 75% of their total IT budget just on maintaining and running existing systems and software infrastructure.2 TCO for many SaaS solutions is as much as 77% lower than on-premise or custom-built solutions. SaaS application software costs are approximately 62% of total solutions costs, compared to approximately 17% of total solution costs for off-the-shelf licensed or custom-built solutions.3
  4. 4. Determining the Best TCO Option for Legal Hold Management Software | 4 The 4th Option – Total Cost of Inaction Often, organizations evaluating software solutions weigh the decision of purchasing any solution against that of simply sticking with the status quo. In the legal hold management software space, status quo commonly equates to sticking with a manual process using email and spreadsheets. For the true apples to apples comparison, we must take into account the total cost of inaction, which includes: Cost of Inefficiency • Opportunity cost • Added risk of sanctions Manual processes are expensive because it consumes far more organizational time than most realize. If you are utilizing a manual process today, you’re likely either skipping critical steps (like sending periodic updates or reminders on a regular basis) or spending an inordinate amount of time tracking down custodian acknowledgements, updating spreadsheets, and generating reports. Cost of Human Error Legal hold actions are complex operations built on simple tasks. Unfortunately, as stress increases so does the risk of human error and resulting spoliation. As custodian populations increase – often the case in high-stakes litigation – such errors accumulate at an even higher rate. Cost of Over-Preservation and Over-Collection Attempts to “collect-to-preserve” (a traditional approach to preservation) quickly become overwhelming as the volume of potentially relevant electronically stored information (ESI) continues to grow. Efforts to mitigate risk by moving all data into “smart repositories” such as email archive and content management systems leads to over-preservation and is very expen- sive. “The costs associated with defending against spoliation accusations can eclipse any actual sanctions. Spending a little time, effort and money early should take this argument away from your opponents.” – John Jablonski, Partner, Goldberg Segalla, LLP
  5. 5. Determining the Best TCO Option for Legal Hold Management Software | 5 Analysts Recognizing Enterprise Shift to SaaS, Concerns Diminishing According to the latest research from Gartner, SaaS is widely used within mature markets such as the United States, although nearly three-quarters of respondents (71%) had only been using such services for less than three years.4 Charles Eschinger, Research Vice President at Gartner explains, “The U.S. and European respondents indicated their stron- gest driver was to replace existing on-premises applications. Markets such as the U.S. and EMEA are mature with existing enterprise systems and are beginning to use SaaS as a replacement for legacy applications.” Roughly 73% of U.S. respondents indicated an intention to spend more on SaaS in coming years. “Initial concerns about security, response time and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread.4 In June 2012, the National Institute of Standards and Technology issued its final recommendations on cloud computing. “Compared with traditional computing and software distribution solutions, SaaS clouds provide scalability and also shift significant burdens from consumers to providers, resulting in a number of opportunities for greater efficiency and, in some cases, performance.”5
  6. 6. Determining the Best TCO Option for Legal Hold Management Software | 6 Reasons for Growing Popularity and Adoption of SaaS in the Enterprise Perceived lower TCO continues to be the dominant reason enterprises are considering SaaS adoption, with 50% of respon- dents in 2012 mentioning this as the primary factor in their decision.6 This disruptive shift over just the last five years is fun- damentally changing the way companies acquire and consume software, with more and more companies using the cloud for basics like email (Google, Office365, etc.) to common applications such as Customer Relationship Management (Salesforce. com, Microsoft CRM), Enterprise Resource Planning (SAP, NetSuite) and Business Process Management (Appian, Lombardi) to specialized solutions for eDiscovery. In fact, according to a Nov. 2011 survey from analysts at eDiscovery Journal, 35% of in-house legal teams surveyed were moving to a cloud solution for e-discovery needs.7 Forbes: “Enterprises and their need to compete with greater accuracy and speed are driving the cannibalization of on-premise applications faster than many anticipated.” 2012 2011 2010 Primary Reasons Driving Saas Adoption, 2010-2012 Perceived lower TCO than on-premises solution Considered to be easier and/or faster to deploy than on-premises solution Best alternative for new regional deployment Limited capital expense Perceived higher use acceptance than on-premises solution Lack of IT resources to implement an on-premises solution Not enough data center capacity Temporary solution to solve a temporary business need 0 10 20 30 40 50 60 Percentage of Respondents Source: Gartner (October 2012)
  7. 7. Determining the Best TCO Option for Legal Hold Management Software | 7 What to Consider When Making Your Decision Work through your build vs. buy vs. on-premise decision by taking an honest assessment of your needs and answering the following questions: 1. Do you need a solution for which no software currently exists? 
 If you need a solution for a very specific business or organizational function for which you are sure no software has been created, the obvious option is to build, or customize to a great extent. No precedent has been set, and building enables a distinct competitive advantage. 2. Do you need integration options? If you need your solution to integrate with other business software, buying a solution that has either already addressed that issue, or provides tools such as APIs that make it an easier puzzle to solve can save a lot of headaches. 3. Do you have the resources available for the job? 
 Sometimes it all comes down to the amount of resources that you can dedicate to the task at hand. Knowledge, vision, and skills are only worth something if they can realistically be spared to tackle a project like building contextual soft- ware. 
Keep in mind that building in-house will most likely take key talent away from important projects directly tied to revenue. 4. What is the relative complexity and purpose of the project? 
 In that same vein, resources are usually routed to the highest priority projects first and foremost. With a more complex but relatively low priority project, you could be left well short of what you need to effectively build a solution. 5. What is your timeline for deployment? 
If your solution is one that needs to be defined and implemented on a very short timeline, buying is the answer. With the support to deploy quickly, your purchased solution is not just in your users hands in less time, but will come ready with complete documentation allowing them to learn the software quickly. 6. Security: SaaS provides better protection than On-Premise by blocking threats in the cloud, away from your network. SaaS eliminates the risk of having a single point of failure, and shifts the risk from the client to the vendor, with SLAs that guarantee uptime. Trusted cloud providers leveraging economies of scale (such as Amazon Web Services) invest more in security certifications, services and data privacy than any single client company would or should.
  8. 8. Determining the Best TCO Option for Legal Hold Management Software | 8 How Different Models Compare Inherent Features and Benefits of SaaS vs. Challenges and Disadvantages of ‘Build’ It’s important to note that each of these advantages for SaaS in each of these key areas also present as disadvantages for on-premise solutions, as they do not posses these same benefits. The difficulties of building and implementing custom applications are magnified because of complex computing environ- ments. Because of this, IT executives choose to buy when budget and speed of rollout are top priorities. Cost SaaS eliminates capital costs and decreases risk Usage and adoption of a particular solution within any particular enterprise is difficult to predict, making managing capacity difficult. The tradeoffs are poor performance on one hand or underutilized infrastructure on the other. Because of the multi- tenant model of SaaS, this is more easily managed when compared to an on-premise application. • Easy to try before buying
 • Reduces business and financial risk
 • Users access solutions through a web browser
 • Users pay a monthly or annual per-user subscription fee • Vendor pays for shared multi-tenant infrastructure Expensive and time consuming to build in-house Labor costs dominate the expenses of custom coding projects. In-house development can be surprisingly expensive because your developers’ time is already paid for. Hidden costs are everywhere; including time spent training your team, testing code, and missed opportunities. To avoid problems related to expense, evaluate buy options, especially when no competitive advantage can be gained by building. “The rule is to buy applications to the maximum extent possible to cut costs — freeing up resources for whatever really needs to be built in-house.” 5 - Mark Lutchen, PricewaterhouseCoopers Building through an outside development firm is risky, and often the scene is rarely set for a smooth, lasting relationship between your organization and the hired firm. Once your solution is built, you can find yourself essentially held hostage and taxed heavily whenever upgrades or fixes are required. Building in-house effectively requires lots of scope and planning throughout the project. In-house projects have long learn- ing curves and slow deployment schedules. “Cost isn’t the only measure we use to evaluate SaaS. Another important consideration is provisioning—that is, how quickly we can get the application into our users’ hands. SaaS has
a clear advantage over on-premise applications in this regard. Fact is, our users can start using a SaaS application within hours. By contrast, having to build out and deploy an
on- premise application can take weeks or months” 5 – Dr. Timothy Chou, Author, The End of Software
  9. 9. Determining the Best TCO Option for Legal Hold Management Software | 9 As a result of the amount of scope and planning required, in-house software projects have long learning curves and slow deployment schedules. This also leads to further problems with maintenance because ad-hoc development doesn’t account for regular maintenance so changes take longer to deploy and are much more expensive. Lack of strategy and the inherent inability for in-house projects to see very far ahead dramatically affects the performance and overall user experience of the solution. Opportunity costs The human resource and capital expenditures required by an in-house implementation come at the expense of other projects or could possibly delay the roll-out of new products and services, both of which have a direct impact on the company’s bottom line.2 These cost variables add up to deter- mine your true software TCO. By understanding all key cost variables as they differ for each software model, organizations can gain an accurate view of each available option and how the features of SaaS solutions directly result in TCO cost driver benefits. Faster deployment and productivity Under the SaaS model, the IT burden shifts from the customer to the solution vendor. SaaS vendors take responsibility for deploying and managing the infrastructure (servers, operating system software, databases, data center space, network access, power and cooling, etc.) and processes (infrastructure patches/upgrades, application patches/upgrades, backups, etc.) required to run and manage the full solution. Other SaaS advantages include: • IT resources not required from customer/end user
 • Applications accessible from anywhere, anytime through web browser
 • Access to real-time information can be disseminated immediately throughout an organization Budget Allocation Breakdown – SaaS vs. On-Premise2 SaaS On-Premise Software 75% 25% Hardware 16% 37% Services 9% 38% Geoffrey Moore’s core vs. context grid Core Software applications that create differentiation that wins customers Mission Critical Key dependency on these applications to deliver the differentate value to the company Non-Mission Critical All software applications Context All other software applications Traditional Software Saas
  10. 10. Determining the Best TCO Option for Legal Hold Management Software | 10 Scalability SaaS enables Improved, consistent scalability vs. in-house builds When building software, ensuring your solution is scalable requires business vision and architecture designed with scalabil- ity in mind from the start. The strategy must be scalable at every level of every feature and function of the software. Even if the strategy is scalable, the design process must be lengthened to adopt flexible methodologies at the architecture level. Any good SaaS solution will have scalability built in, because the vendor has a vested interest in supporting a large number of users on the same platform. Scalability issues are such that you can’t go back and solve them later without encountering more problems. Scalability requires the ability to separate out specific functions to be distributed over additional systems, which means more hard- ware is necessary. If software isn’t developed to provide for such divisions from the start, then rapidly responding to growth needs is a problem. Separating one feature of the software to be run on a new, additional server after the code is already developed will nearly always require scores of man hours of intense work, breaking and putting back together other parts of the solution. Since ad-hoc development generally does not provide a blueprint for defining which parts of the millions of characters of code affect other parts of the code, the result is a never- ending quagmire of searching for additional bugs and breaks that have been created as the result of the “scalability fix.” Configurable SaaS solutions intended for use over innumerable environments present a much better foundation from which to accomplish scalability. Maintenance, Upgrades and Support SaaS streamlines use and management and increases flexibility vs. in-house builds Maintaining software built in-house is an expensive proposition, costing an average of 20% per year of the original price tag. What happens when your developers move on to other projects or leave your company altogether? The complex and time intensive nature of custom in-house development can leave important elements neglected or rel- egated to an afterthought. Organizations that choose the build route often find themselves scrambling to put together accu- rate documentation for functions, architecture, support materials, and a roadmap for future development. All of these necessities are prime examples of expenses and complexities that result in 70% of software costs occurring after implementation, according to Lutchen.5 Advantages of SaaS software solutions include: • No software to maintain and upgrade
 • Customers can expand or contract services as needs change
 • Vendor manages and updates infrastructure
 • Vendor delivers regular upgrades to improve applications and functionality • IT can focus on projects and initiatives to advance their mission SaaS improves customer service • Direct customer-vendor connection to resolve problems
 • Vendor incentive for high customer satisfaction and retention • Proactive support and management
  11. 11. Determining the Best TCO Option for Legal Hold Management Software | 11 SaaS Improves reliability, performance and efficiency Downtime and unreliable access mean lost employee time and business opportunities, and may require repeat efforts to persuade users to retry the technology with increasing resistance. It’s always a good idea to know what SLA the SaaS vendor offers and how they compare to the internal SLA your IT organization offers. SaaS vendors are able to offer: • Affordable enterprise-class IT infrastructure
 • Uptime typically exceeds what internal IT can guarantee for on-premise applications • Includes data backup services
 • Reduces power consumption and data center space8 In-house projects can be sabotaged by lack of support resources Even in build-centric IT cultures, improved support is a key factor that pushes organizations toward buying, even when dealing with applications that touch the core areas of their business. SaaS solutions provide top-tier support through service-level agreements (SLA) for response times and other key support features that are just not possible for most orga- nizations choosing to build internally. Overall, a purchased solution delivers the necessary functionality with lower lifecycle costs than a solution
built in-house. Keeping current on best practices and documentation Best practices and supporting documentation are two aspects that cannot be addressed by ad-hoc development. This is a major challenge that is difficult for organizations to remain actively engaged with, develop, deploy and use. With a purchased solution, the provider’s customer base is using the software differently to accomplish different things, but they are still all using the same application. This means that best practices have been thoroughly developed and documented. When building in-house, you can’t always rely on project managers to accurately or fully document the build process, or be aware of the best strategy for maintenance and improvements to the software going forward. Integration, Interoperability, Extensibility and Security APIs In today’s enterprise environments, ease of integration with other applications and customization of the application to fit the needs of the organization is imperative. With the explosive growth in popularity and productizing of APIs, this cannot be overlooked as a critical piece of technology and powerful tool. However, unless you’re buying, this is yet another piece you’ll have to build into your in-house solution. Though APIs can connect premise solutions, cloud APIs are required for mobile and social applications, as well as for inno- vative forms of e-commerce that combine web services and contextual information to deliver a compelling user experience. SaaS provides unique security advantages The costs of a security breach can be catastrophic if confidential business information is compromised. How do the secu- rity policies at the SaaS vendor compare to your own internal policies? The majority of SaaS customers interviewed by Forrester revealed that their vendors were doing more to secure their data than their own IT departments could do. One reference said, “Our greatest fear became our biggest confidence.” “SaaS client references reported by Forrester cited the fast implementation and deployment associated with SaaS as a key driver for selection. Beyond initial implementation, ongoing rollout of new functionality and rollout to new groups mean the solution can more quickly align with changing business requirements.”
  12. 12. Determining the Best TCO Option for Legal Hold Management Software | 12 SaaS gives a distinct advantage in regard to enhancement of development processes In-house software tends to fall back onto comfortable methodologies, which don’t usually yield the best solutions. Method- ologies are always changing, and if your development team isn’t well versed in the latest best practices for the specific type of software you are creating, you risk ending up with an underwhelming final product. Even if your processes have evolved over time, they may still not be “best” or even right. Leveraging Economies of Scale “Proven systems are built at a scale because the technology is leveraged across many companies.” ~ David Allen, Global CTO, Visa Since SaaS is architected for a one-to-many, or multi-tenant mode, instead of as an individually installed package or as individual instances for each customer (as in on premise or in-house built solutions), SaaS vendors can amortize infrastruc- ture-related costs over thousands of customers. This yields efficiencies throughout the solution life cycle and substantial economies of scale, lowering the TCO for customers.8 SaaS vendors typically develop multi-tenancy as a core competency, leading to higher-quality offerings at a lower cost. Over time, they become much more efficient and are often able to provide significant cost savings over the traditional soft- ware model. The operating cost for each customer will continue to drop as more customers are added. Organizations benefit in that instead of allocating big chunks of budget to personnel and infrastructure, they gain the advantage of spreading IT budgets across more applications, obtaining significantly greater pure software functionality with the same IT budget.
  13. 13. Determining the Best TCO Option for Legal Hold Management Software | 13 Conclusion: SaaS is the Pro-Customer and Pro-Custodian Choice SaaS solutions represent a true pro-customer paradigm in software delivery and are an attractive alternative to legacy- laden IT landscapes. Built on the principles of multi-tenant efficiency, massive scalability, and metadata-driven configurabil- ity, SaaS offers organizations the best of both worlds - a best fit, state-of-the- art technology platform that is also cost- effective. Also, today’s legal hold end-users -- custodians – demand an exceptional user experience. This includes near-100% uptime, tight service level agreements, and flexible access in a familiar environment. SaaS applications bridge the gap between custodians, legal and IT to create an empowered organization without unnecessary complexity. We can see that, compared to both On-Premise and Custom Built solutions, the SaaS model clearly drives TCO to more attractive levels for both SMB and Enterprise organizations and greatly reduces overall implementation risks. Organizations can make an accurate, apples to apples comparison by understanding the complete TCO implications of a new software solution. This understanding is what leads to the best business decision regarding new software. Commercial off-the-shelf Source: Baselinemag.com Customized COTS Frameworks and Libraries Completely Custom Degree of customization cost of development and deployment suitability of software for customer needs time to deployment Software Customization Continuum9
  14. 14. Determining the Best TCO Option for Legal Hold Management Software | 14 Resources: 1. Daniel Druker, Cloud / SaaS Framework, 2009
 2. Jan Sysmans, et. al., A Comprehensive Look at TCO of Software Applications, 2007 3. Benjamin Tompkins, InformationWeek, May 2010
 4. Nick Kolakowski, Businesses Replacing On-Premises Software with SaaS: Gartner, Slashdot.org, November 2012 5. John Tredennick, Cloud vs. Appliance: Comparing the Total Cost for eDiscovery, LegalITProfessions 6. Louis Columbus, SaaS Adoption Accelerates, Goes Global in the Enterprise, Forbes, October 2012 7. Daniel Lim, 5 Tips for Using the Cloud to Conduct eDiscovery, InsideCounsel, July 2013 8. Sanjeev Aggarwal, TCO Advantages of SaaS, Hurwitz & Associates, 2010 9. Bruce Webster, Buy vs. Build Software Applications: The Eternal Dilemma, Baseline, August 2008 10. R. Ray Wang, Comparing The ROI Of SaaS Versus On-Premise, Sept. 2006 11. Timothy Chou, The End of Software, SAMS Publishing, 2005 12. Polly Traylor, To Build or Buy IT Applications, Infoworld, 2006 13. Steve Hamrick, wekti.com, December 2008
 14. Liz Herbert, Real-World Insights into SaaS, Forrester, May 2010
 15. InfoSys, Getting IT Right With SaaS, April 2010 16. Frederick Chong and Gianpaolo Carraro, Architecture Strategies for Catching the Long Tail, April 2006
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