Discoveries about discovery

Recent developments in tech have created an automated process to handle "discovery", the process of reviewing materials for a legal case.

One might think that law firms will adopt the technology, as a way to reduce costs. Or one might think that law firms will *not* adopt the tech, believing that they are traditional and unwilling to change. Or perhaps one might think that law firms are risk-averse, and do not want to try new tech that could miss something and cause the loss of a case.

I have a different outlook. I think law firms will avoid the tech of automated discovery, for economic reasons.

Law firms use the time-and-materials business model. They bill by the hour: the more hours, the higher the bill. Law firms have constructed their hourly rate to cover their costs (including labor) and to provide profit. Thus, each billable hour generates profit (not just revenue) for the firm. A reduction in labor (billable hours) equates to a reduction in profit.

Industries that have adopted technology (specifically to reduce labor hours) are industries that sell products with prices fixed by the market. Automobiles, hair dryers, books, computers... these are all sold at the market price. Profit is revenue less the cost of goods and manufacturing. The costs of labor and goods does not drive the price, and a manufacturer must manage costs to live within the market price. A reduction in labor hours equates to an increase in profit.

Thus, we can expect that businesses selling goods (or services) at prices dictated by the market will adopt cost-reducing techniques and technologies. They will computerize accounting systems, automate assembly lines with robots, and outsource software development.

We can also expect that businesses selling services on a time-and-materials basis will *not* adopt technologies that reduce labor hours. (They may adopt techniques that reduce labor costs, replacing highly paid workers with lower-wage workers. But a reduction in billable hours is unlikely.)

What of this can we apply to software development?

The software development industry is a complex one. Some software is created and sold on a time-and-materials basis. Some is sold in the market. Some is given away. Some software that is sold is not sold in a free market; Microsoft enjoys a monopoly position with Windows and Office. (A monopoly that is perhaps less strong now than ten years ago, yet still part of the complexities of the market.)

Companies that build software with the time-and-materials business model have little incentive to reduce the workload in their projects. These projects benefit from high labor efforts, and therefore we can expect them to use little in the way of effort-reducing techniques. Companies that build software for sale on the open market have strong incentives to minimize their costs. Cost reduction methods include:

• outsourcing
• agile development (pair programming, automated tests)
• modern languages (Python, Ruby, Scala, Lua, Haskell)

Companies in the time-and-materials business model do not need such cost-reducing measures. If you're not working with the above techniques, then you're probably on a time-and-materials project. Or you're in a company that will soon be out of business.