Friday, December 26, 2008

Information storage: debunking the myth that electronic information is cheap to store

As the cost of computer storage continues to decline, many companies believe that they don’t need to dispose of any information. Since information is so cheap to keep, why not just keep it all? Who knows when it may come in handy?

There are very real costs to keeping every scrap of information. Below are just a few:

· Increased costs of searching and retrieving business-critical information
· Reduced performance of storage systems – the more information stored on the system, the worse the performance
· Maintenance costs of legacy systems – it becomes increasingly difficult and expensive to keep old systems running, as parts become more scarce, as well as the technicians to service them. At some point, it becomes necessary to migrate the information onto newer platforms, which may, or may not, be easily accomplished
· Slower response times to requests from regulators, which could lead to the imposition of penalties against the company

One of the most significant areas in which this philosophy can damage the company is in the area of electronic discovery. Once the company is aware that it may be subject to a lawsuit, it is then under the obligation to preserve data relevant to the suit. This may a broadly thrown net, to make sure that deletion of relevant information does not occur. For companies that save everything, there is now a significant actual cost to this policy. All of this information must now be searched and collected. One significant cost, however, is the cost to have an attorney review the information. The Sedona Conference, a think tank which has done a lot of work in the area of e-discovery, estimates that the cost of reviewing 1 gigabyte (70,000-80,000 pages) of data is over $30,000.

How can a company address this problem? The only way in which a company can dispose of information comfortably is by the adoption of a records retention schedule. The schedule demonstrates to a court that a company has made decisions, based on legal requirements and business needs, regarding how long categories of information should be kept. As long as the information is not subject to the duty to preserve, called a “Legal Hold”, the company may legitimately dispose of the information pursuant to its records retention requirements in the ordinary course of business.

Given the many costs of storing electronic information, companies should be more judicious in what they keep and why. The importance of a records retention schedule in legally disposing of information no longer needed for business and legal requirements has never been more important.