Whitepaper: Best TCO Option for Legal Hold Software

Determining the
Best TCO Option
for Legal Hold
Management
Software

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

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

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

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

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)

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.

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

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

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

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.”

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.

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

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

Whitepaper: Best TCO Option for Legal Hold Software

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Whitepaper: Best TCO Option for Legal Hold Software