Is the Enterprise Market Eluding the Legacy Litigation Technology Providers?

Gartner foresees that worldwide eDiscovery software revenues will reach $1.2 billion in 2010, an increase of 23% over 2009. Further, according to Gartner, U.S. companies alone will spend $29.8B on GRC activities in 2010, up 3.9% from 2009.  And, just about every analyst in the world is predicting that a large percentage of these revenues will come from the enterprise.   However, I haven’t seen the legacy litigation technology providers taking advantage of this opportunity.  I believe that there are several reasons.

First of all, it wasn’t that long ago that many of these organizations were still trying to  figure out how to move from selling paper processing services to eDiscovery services and the associated technology.  It is possible that it just too soon or too much to ask them to make another paradigm shift to selling into the enterprise.

The second and biggest reason is that these legacy providers do not have sales and marketing organizations that understand how to sell into the legal and IT departments of the corporation.  And, there is a big difference between the sales cycle of selling to paralegals and litigation service groups within law firms and the complex sales cycle of an enterprise.  Where Friday donuts and a few happy hours did the trick for the law firms, the enterprise requires value propositions, ROI analysis, competitive analysis and an understanding of how the procurement process works.

The third reason is the lack of understanding of what actually goes on within the enterprise IT department and why they buy stuff.  Law firms are very much case based and/or expense based buyers as they want to pass on all cost to their clients.   Enterprises, on the other hand, are more into capital expenditures, total cost of ownership and amortizing costs over multiple cost centers for long periods of time.   Law firms have partners that can make quick buying decisions (especially if they have a big case and/or a big insurance company that is paying the bills).  Enterprises, on the other hand,  make decisions through multiple stakeholders that sit on multi-divisional committees that have to negotiate budget commitments and coordinate budget cycles.

Finally, at least for the purposes of this Blog post, law firms for the most part are comfortable with independent technology platforms with little or no integration.   In fact, there is an argument to be made that some law firms actually like technology solutions that require manual intervention that enables increased billable hours.  Enterprises, on the other hand are much more interested in integrated enterprise wide solutions that automate entire business processes.

In the end, the legacy litigation technology providers that survive will probably be absorbed into technology vendors that are providers a much broader base of Governance, Risk and Compliance (GRC) processing and analytics.  In the meantime, the current players in the litigation technology market better figure out how to sell to the buyers that are actually buying technology.

Labels: eDiscovery, eDiscovery Market, eDiscovery Software Sales, GRC, Total Cost of Ownership

posted by Charles Skamser @ 9:12 PM