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The eDiscovery Paradigm Shift

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Wednesday, September 24, 2008

The Global Financial Crisis of 2008 Will Provide a Windfall to eDiscovery Market

With the global financial crisis of 2008 in full swing, I predict that eDiscovery providers worldwide will see a windfall for years to come.    The very nature of the financial industry will provide billions of pages of paper and exabytes of electronically stored information (ESI) stored all over the world for eDiscovery professionals to uncover, extract, process, analyze and prepare for pre-trial conferences, trials and the inevitable litany of appeals.  With most law firms ill-equipped to deal with the new world of eDiscovery, they will have to rely on the new breed of eDiscovery consultants, technology vendors and electronic data discovery processing professionals to even get an initial understanding of the data involved in any of these matters.

Further, after all of the dust begins to settle, the global financial crisis of 2008 will fuel demand for the next generation of integrated eDiscovery/eCompliance/eGoverance technology to ensure more rigorous and meaningful oversight.  This is, without a doubt, the paradigm shift that we have all been waiting for in the eDiscovery market.

Following are a couple of examples of the legal action that is already underway:

Fannie May and Freddie Mac Bailout
Plaintiffs’ firm Coughlin Stoia Geller Rudman & Robbins hasn’t wasted any time taking action in the wake of the Fannie and Freddie bailout.

Partners Samuel Rudman and David Rosenfeld filed a securities class action in the U.S. District Court in the Southern District of New York yesterday on behalf of those who held publicly traded securities of Fannie Mae between November 16, 2007 and last Friday, before the federal government took over the company.

Defendants in the suit are Stephen Ashley, chairman of Fannie’s board; Daniel Mudd, Fannie’s president and chief executive officer; Stephen Swad, Fannie’s ex-chief financial officer; and Robert Levin, formerly the company’s executive vice president and chief business officer.

The complaint alleges that Fannie’s publicly disclosed financial results misrepresented the financial health of the company, and that the defendants either made false statements or failed to disclose the truth to investors. As a result, says the complaint, the defendants’ “fraudulent scheme” was successful in deceiving the public, artificially inflating the prices of publicly traded Fannie Mae stock, and causing class members to buy Fannie stock at those inflated prices.

Class Action Lawsuit Filed against the Primary Fund by Stull, Stull & Brody
NEW YORK, Sep 23, 2008 (BUSINESS WIRE) -- Notice is hereby given that a class action amended complaint (the "Complaint") was filed September 19, 2008 in the U.S. District Court for the Southern District of New York by the law firm of Stull, Stull & Brody and its co-counsel, on behalf of plaintiff and a proposed class of purchasers of shares of The Reserve Fund's Primary Fund (NASDAQ: RFIXX) (the "Fund") during the period September 28, 2007 through September 16, 2008, inclusive (the "Class Period").
The Complaint alleges that the Fund and the Fund's underwriter, investment adviser, officers and trustees and the other related Defendants, violated Sections 11, 12 and 15 of the Securities Act of 1933 by making false and misleading statements and omissions concerning the lack of true diversification of the Fund's assets, safety of principal, access to liquidity and exposure to at least face value debt of $785 million of the now defunct Lehman Brothers Holdings, Inc., that the Fund's risk profile was not only "marginally higher" than cash, the high vulnerability of the money market fund to suddenly drop below $1 per share to as low as $.95 per share, and the fact that the net asset value of the money market fund ("ANAV") was speculative and inflated. Thus, the Fund's Registration Statement and Prospectus issued September 28, 2007, pursuant to which members of the proposed class purchased or acquired shares of the Fund during the Class Period, was materially false and misleading.
Plaintiff seeks to recover damages on his own behalf and on behalf of the Class and is represented by the law firm of Stull, Stull & Brody and its co-counsel Kantrowitz, Goldhamer & Graifman, P.C., firms with significant experience successfully prosecuting complex securities fraud class actions on behalf of defrauded investors.

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Tuesday, September 23, 2008

Cloud Computing is Coming to eDiscovery

As the litigation industry's biggest advocate of Software-as-a-Service (SaaS) technology, I wanted to continue my discussion of the state of SaaS technology by posting a very informative article on the ZDNet Blog "Between the Lines", that provides an overview of Cloud Computing.   The post is actually a guest post by Barry X Lynn, CEO of 3Tera, in response to a discussion about whether cloud computing is industrial strength. Lynn can be found on the 3Tera blog.

Barry contends that there is an evolutionary process unfolding in Cloud Computing that will eventual rid the world of enterprise data centers.  I contend, for a variety of reasons, both practical and financial, that Cloud Computing should already be the infrastructure of choice for almost any law firm and for most global organizations in regards to eDiscovery, eCompliance and any other applications that require the mass storage and manage of  critical data. 

The full text of Barry's article is as follows: 

There have been multiple white papers and articles written on the topic - Is Cloud Computing Ready for the Enterprise?  The question is asked so many times now - Is Cloud Computing ready for the enterprise?  But there is an equally relevant question:  Is the enterprise ready for Cloud Computing?

The following analogy may appear to imply that people who operate corporate data centers are crazy or stupid or both.  But nothing could be farther from the truth. Enterprise CIOs and IT managers have the most difficult jobs in the corporate universe.  They are the brains and the central nervous systems of large enterprises.  They are also the most taken for granted of all executives.  They represent cost centers and get no credit for their corporations’ profits, while keeping the corporation alive.  If they achieve 99.99% availability of their services, an iota of kudos is given for that 99.99%.  But a mountain of wrath is doled out for the other 0.01%.

If you woke up in the morning and read in the Wall Street Journal that an eCommerce company like had stopped using the USPS, UPS, FedEx, DHL, etc. to deliver their goods and, instead, leased airport hubs all over the world, bought a fleet of jets and bought thousands of trucks and started delivering the stuff themselves, you’d think they were out of their minds.  So, why is it not equally insane for financial services companies, health care institutions, manufacturing companies, bio-tech companies, pharmaceutical giants, etc. to be spending a billion dollars or much more every year on information technology infrastructure?

Of course, CIOs and IT managers are intellectually ready for Cloud Computing. And of course they have the experience and skills to adopt Cloud Computing.  And they have the resources.  Most significantly, they have always risen to the occasion when disruptive technologies have been thrust upon them.

But, practically speaking, though the future holds a world where all enterprises will get computing on demand and only pay for what they consume, we know that this will not happen over night.  It most assuredly though will be very much the norm in the not so distant future, and corporations owning data centers will be the exception to the rule.

So, here’s a kind of Darwinian Theory of the Corporate Data Center’s Evolution.

Cloud Computing is the most disruptive technology that has come along in a very long time.  Respected technology analysts say it will be bigger than e-Business and it’s potentially a quarter of a trillion dollar market.  So, is Cloud Computing a revolution or an evolution?

The answer is a resounding “Both”.

All evolutionary changes start with a revolutionary change.  In Darwin’s “Origin of the Species” evolutionary changes start with a mutation.  Those mutations are the revolutions that result in evolution.  In most cases the mutation comes about as a mechanism to heighten the chance of survival - you know, to make the species more fit.  Subsequent to those revolutions, the evolutionary process gradually occurs as the most fit survive and the mutation becomes the norm - the standard… until the next mutation starts.

Cloud computing is the mutation - the revolution.  Enterprise IT and Corporate CIOs/IT Managers will jump on the opportunity to evolve as they always have when revolutionary technology mutations have occurred.

So, here’s an example of a scenario of how this evolution will happen.

In the very near future two things will occur in the enterprise data center.

First, today, the hardest things to plan for with regard to capacity, performance, etc., are on line applications offered on the web.  Enterprises have no control over who may log on, how many may log on, when they may log on, what they may do once they log on, etc.  So, the natural evolutionary step to mitigate these uncertainties is to run those applications on massively scalable infrastructure that scales up and down dynamically as needed, using resources on demand, always there when needed and only paying for what is consumed.  These infrastructures are what we are now calling Clouds.

For the time being, the mission critical data and systems of records that are the enterprises’ life blood residing in their data centers need to be isolated from these on line applications exposed to every Internet user.  This will be accomplished through the use of secure virtual gateways in the Cloud, connecting, in a loosely coupled manner, rather than a fully integrated manner, to the enterprise data centers, their databases and systems of record.

These gateways will take many forms.  They may be SOA gateways using XML and virtual XML firewalls, virtual messaging systems such as MQ, virtual EAI appliances or customized appliances encapsulating organizations’ proprietary techniques for reliably and securely communicating among systems (and anything new that comes along to supplement or replace these things).

Second, infrastructure/architecture agnostic Cloud platforms (what we at 3tera call Cloud Computing Without Compromise) will be installed in enterprise data centers.  There will be two factors that will drive this.

(1) As more and more applications are offered on line, those same applications will often be used internally by the enterprise employees.  Why incur the cost of having separate experiences for employees and customers who are accessing the same information and functionality?  Also, when connecting the on line applications in the Cloud to the data center and SORs, having them on similar platforms will make it seamless and efficient.

(2) A Cloud infrastructure done right, behind the corporate firewall, enables the enterprise to run their data centers as metered utilities.  It enables them to more efficiently use their hardware resources by provisioning what is needed for each application on demand and releasing those resources when no longer needed for other applications to use.  It enables them to more efficiently use intellectual capital by shifting IT administrators from managing machines to managing applications.  And, most importantly, it greatly decreases time to market because the lengthy provisioning, configuring, etc., of hardware and infrastructure resources is, pardon the pun, virtually eliminated.  So albeit humongously significant, forget all the talk about cost reduction and avoidance.  Cloud Computing in the enterprise has the potential to greatly increase revenue and beat the heck out of competitors implementing like products using traditional data center deployment methods.

OK - so what’s the next step in the evolution of the data center?

While enterprises are growing comfortable with applications in Clouds and realizing the upside of dynamic provisioning and scaling, they will be developing new applications and replacing/changing existing ones.  They will start building the new applications in Clouds and as they change existing applications, will consider migrating them to the Cloud in the process.  This will afford them the advantages of much faster time to market, the ability to run applications on demand in multiple data centers (globally if appropriate) creating their first truly complete disaster recovery abilities and concentrate on their core businesses which may be financial services, health care, manufacturing, etc., but certainly is not data center operations (they will leave that to the companies whose core business IS data center operations).

As a result, enterprises will find themselves with data centers that only contain data.  Finally, a data center will be what its name implies.  All of their functionality - all the non-data tiers of their services, will be in Clouds connected to the data centers’ data.  At that point, evolution will treat the data center as an appendage.  Over time, the corporate data will move to the Cloud just as many smaller businesses without data centers are using storage services in Clouds today.  The corporate data center will be a vestige, and eventually evolution will cause it to disappear.

In short, the corporate data center is not a stupid useless entity.  There have been no alternatives. They have been profound necessities.  But necessity truly is the mother of invention, and the corporate data center, with all of its overhead, has bred Cloud Computing.

And for those who prefer an analogy to Creationism rather than evolution, all you have to do is depict the corporate data center as the eventual dinosaur with a saddle on its back being ridden by a member of the Cloud Computing species.

Monday, September 22, 2008

The Financial Crisis of 2008 and SaaS Based eCompliance

Over the next few weeks, as we all try to digest all of the information and subsequent analysis about the causes of the 2008 financial crisis, I am planning to investigate the various Software-as-a-Service (SaaS) based eCompliance and eGoverance solutions and what impact they can have on diverting future problems in the financial markets.

Is more government oversight and regulation the answer? "After Monday's Wall Street meltdown, businesses are likely to face increasing compliance scrutiny, " stated John Bace, research vice president of Gartner IT Management Group, in a recent keynote address at the Midsize Enterprise Summit in Grapevine, Texas. "The shadow of yesterday [Monday] will be longer than Enron, Sarbanes-Oxley, HIPAA, or any other regulation of modern times," Bace told a crowd of about 300 CIOs.

And can SaaS based solutions with the ability to enable centralized, nearly real time and very granular information management be the right technology at the right time? As an example, would simple SaaS based email archiving technology coupled with a rules based search engine to identify internal discussions about pending insolvencies or short sale tips be valuable in the quest to avert the next crisis? As stated, over the next couple of weeks, I plan to investigate this and report my finding on this Blog.

As such, any input from any of the current SaaS based eCompliance and eGoverance providers would be greatly appreciated.

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