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The eDiscovery Paradigm Shift

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Monday, May 23, 2011

Gartner Predicts eDiscovery Market at $1.5 Billion by 2013

Gartner announced their inaugural “magic quadrant” for the E-Discovery (eDiscovery) software market on May 13, 2011 and predicted that this market would reach $1.5 Billion in revenue by 2013.

Having lobbied and pleaded my case with Gartner many times over the course of my career in enterprise software, I am very well aware of the politics and other factors that influence the final results of where a vendor ends up on the “magic quadrant”. And, I believe that Gartner does enable or enforces enough integrity into the process to render the results at least marginally interesting and a factor for enterprise buyers to consider. Having said this, I would have to admit that the inaugural '”magic quadrant” for E-Discovery Software paints a fairly accurate picture of the players in this space (with a few exceptions).

Gartner analysts John Bace and Debra Logan identify five leaders in eDiscovery including; (1) Autonomy; (2) Clearwell Systems; (3) FTI Technology; (4) Guidance Software; and, (5) kCura.

I would assume that Autonomy made the list because of its size of installed based, amount of data managed, revenues, etc. And, although it is not clear if Gartner was aware of the pending acquisition, Autonomy’s purchase of Iron Mountain does provide them with an even wider platform. However, if were a buyer in 2011, I would be cautious about Autonomy. They are very expensive, complex, proprietary, have a reputation for less than stellar service and I have never gotten great reviews from any of their clients. The relationship that they have with their client base reminds me a lot of Oracle from the 1990’s when clients would complain about how bad Oracle was as they were signing the purchase order to buy 50 more enterprise licenses. The point being, Autonomy (just like Oracle) has a corner on the enterprise market for clients that have lots of data and need a big legacy system to manage it all. The trade off is that it will not be leading edge or pretty. But, it will get the job done.

Clearwell is Clearwell and probably deserves to be somewhere in the mix just based on market share. They have undoubtedly done a great job literally creating the Early Case Assessment (ECA) market, the demand within the Early Case Assessment (ECA) market and then stepping up to fulfill that requirement. There are much better ECA tools on the market. But, as Clearwell and many other tools vendors have proven, you don’t have to have the best technology to capture a market. As I have indicated in past posts, Clearwell’s marketing success over the past 3 years will be studied at the Harvard School of Business. Let’s just hope that Symantec can add a little technology to mix and give their platform some legs to go along with their market share.

I don’t really have any comments on FTI Technology beyond the fact that they are a subsidiary of global consulting company with 3,400 employees and a large client base that is using FTI software because it is what the FTI consultants tell them to use. As such, FTI as a software player in its current state will linger within the industry for years to come as their client base struggles to defy the FTI consultants and move to a different more competitive platform. As a side note it has always been interesting to watch FTI balance the use of their internal technology with the wishes of their clients. If they hadn’t paid so much money for what the technology that they have, I would suspect that it would make much more business sense for them to go completely technology agnostic. But then the amortization on the investment that they have made would never get completed.

I also don’t really have any comments on Guidance as they will continue to own a decent share of the computer forensics and associated security software market and therefore will continue to be a member of the magic quadrant in someway shape of form. I will predict that the need for computer forensics software is changing and therefore there is an opportunity for some up and commers to steal market share from Guidance.

The last player on this list is kCura and I have to admit that I like Relativity and I am at least intrigued with their mini app store. However, I have found their channel plan to be highly draconian and their enterprise sales plan to be in conflict with their service provider channel. Further, I would suspect that kCura is a takeover target.

Gartner analysts John Bace and Debra Logan also called out challengers Symantec, EMC, IBM, and Nuix. Given the fact that Clearwell is already a leader, Symantec will move into that quadrant automatically. So, we will be left with EMC, IBM and Nuix. This is a really interesting and diverse group. I am not sure that EMC knows that they want to be when they grow up. IBM, as evidenced by its acquisition of PSS Systems, could obviously buy its way into the lead in the eDiscovery market. However, I believe that they understand that eDiscovery is actually just a subset of the overall Information Management and Information Governance market and therefore have their sights set on something much bigger.
The real interesting player in this list is super speedy Nuix. And although I have a bias as I like the Nuix technology and their management team, I truly believe that we are going to see some big moves from Nuix over the next few months and years.

The other players in the report that I like are CaseCentral and Exterro. CaseCentral is a pioneer in understanding and implementing true multi-tenant technology within the enterprise eDiscovery space and has also been expanding its reach back into the ECA and analytics space with connectors into EnterpriseVault from Symantec. Look for CaseCentral to have a major impact as the market moves to Information Governance and eDiscovery in the cloud. As another side note, it will be interesting to see how Symantec handles legacy relationships such as CaseCentral now that they own Clearwell. Maybe CaseCentral is next.

Exterro is the real wildcard in the bunch. They have absolutely outstanding technology with a suite that can take you from data mapping to legal hold to workflow management Unfortunately, they have a flawed channel strategy and they are somewhat difficult to work with. I predict that they will be acquired in 2011 or early 2012 and become a cornerstone component of a much bigger solution.

The player that Gartner contends they are tracking but was missing from the “magic quadrant” was StoreIQ. As a component player in enterprise eDiscovery and probably more likely in enterprise Information Governance, StoredIQ has some really interesting technology. However, they seem to be having some internal struggles in regards to who they are and how they are going to position and sell their IP. I look for StoredIQ to be acquired in 2011 or early 2012.

The one player that was not even mentioned was Digital Reef. They have a very interesting and fairly comprehensive SaaS-based platform. With new executive management to help with the next phase of their growth, look for Digital Reef to make some noise in the market in 2011 and beyond.

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