The eDiscovery Paradigm Shift: 4/1/12

Thursday, April 5, 2012

Amazon is Overlooking the Fiancial Value of eDiscovery

On April 4, 2012, Dick Harris posted a really interested article on Gigacom.com titled "How the cloud could boost Amazon’s slow-moving margins". Mr. Harris quoted an analyst from Morgan Stanley who indicated that Amazon’s cloud computing division could be a shining star (even if not too bright) on the company’s long road toward increased profit margins. However, while their forecast isn’t glowing, it also doesn’t account for the evolution of Amazon’s cloud business from pure infrastructure-as-a-service into higher-level (and higher-margin) services. He went on to state that in the new research report published Monday morning, analysts Scott Devitt, Andrew Ruud and Nishant Verma come to a possibly disconcerting conclusion for any investors banking on Amazon for short-term returns. The report’s gist: “After analyzing Amazon.com’s cost structure in detail and by segment, we conclude that there are far more variable costs than investors believe, leading to an overly optimistic timeline for margin expansion.” But Amazon Web Services is an opportunity Amazon might be able to exploit.

The report estimates that AWS was responsible for $1.19 billion in revenue in 2011 (I predicted in October the business was on a billion-dollar run rate), of which $108 million (or about 9 percent) was sheer profit. It’s able to maintain this margin while constantly dropping prices on its cloud services, the report contends, because AWS uses a cost-plus pricing model. That is, it just adds a premium (about 10 percent) on top of the cost of delivering those services, which continue to drop as Amazon leverages its economies of scale to buy and operate more gear and bandwidth at lower prices.

I found all of this to be very encouraging for Amazon stockholders and the cloud computing industry. However, what really caught my eye was Mr. Harris's contention that AWS margins actually could start rising as the company expands its services beyond sheer infrastructure and into managed services. He indicated that Its NoSQL DynamoDB database service, for example, is a service for which Amazon adds value (and cost) beyond just the delivery of cloud-based infrastructure, and there are lingering rumors of a big data analytics service that will provide higher-level services than AWS’s existing Elastic MapReduce offering.

For those of you who read my Blog, I have been contending for that past 6 months that Cloud Service Providers (CSPs) such as Amazaon are missing a very key competitive advantage by not offering eDiscovery and Information Governance as a part of an expanded Platform-as-a-Service. Please see The Perfect Storm: eDiscovery and Cloud Service Providers, Cloud Computing Architecture and eDiscovery, eDiscovery Will Follow the Cloud Computing Boom and Navigating eDiscovery in the Cloud Shouldn't Be That Difficult.

Based on my research that there is a latent demand for eDiscovery and Information Governance in the Cloud, I conducted a research study asking both CSPs and their clients what they thought about how CSPs were currently supporting eDiscovery and Information Governance in the Cloud. The results were very disappointing as most of the CSPs had not idea what eDiscovery was, the legal requirements nor the vlaue that it would bring to their client bases. You can read the results of this survey at: Results of the 2012 eDSG Investigation of Cloud Service Providers and eDiscovery.

With all of this history of trying to blaze new trails within the Cloud Service Provider market for eDiscovery and Information Governance, I am very encouraged by Mr. Harris's article and optimistic that at Amazon may be headed toward offering additional services to their clients such as analytics, eDiscovery and Information Governance. It may in fact be the key for Amazon to increasing the $1.19 Billion in revenue that AWS posted for 2011 to a much higher level than could have ever been imagined with just IaaS or even standard PaaS services. And, if Amazon doesn't get it or doesn't want to make a move on eDiscovery, I predict that one of the other CSPs will.

The full text of the Gigacom article by Dick Harris is as follows:

According to analysts at Morgan Stanley, Amazon’s cloud computing division could be a shining star (even if not too bright) on the company’s long road toward increased profit margins. However, while their forecast isn’t glowing, it also doesn’t account for the evolution of Amazon’s cloud business from pure infrastructure-as-a-service into higher-level (and higher-margin) services.

In the new research report published Monday morning, analysts Scott Devitt, Andrew Ruud and Nishant Verma come to a possibly disconcerting conclusion for any investors banking on Amazon for short-term returns. The report’s gist: “After analyzing Amazon.com’s cost structure in detail and by segment, we conclude that there are far more variable costs than investors believe, leading to an overly optimistic timeline for margin expansion.” But Amazon Web Services is an opportunity Amazon might be able to exploit.
The report estimates that AWS was responsible for $1.19 billion in revenue in 2011 (I predicted in October the business was on a billion-dollar run rate), of which $108 million (or about 9 percent) was sheer profit. It’s able to maintain this margin while constantly dropping prices on its cloud services, the report contends, because AWS uses a cost-plus pricing model. That is, it just adds a premium (about 10 percent) on top of the cost of delivering those services, which continue to drop as Amazon leverages its economies of scale to buy and operate more gear and bandwidth at lower prices.

Although AWS margins remain flat, the report notes that AWS also comprises a significant portion of Amazon’s overall technology spending, so being able to drive steady, predictable profit from it is a good thing. Non-AWS technology spending, the authors estimate, is about 4 percent of net sales — “represent[ing] the largest opportunity for operating margin expansion in the near-term.” Keeping those cost down means a greater percentage of revenue goes toward profit.

However, the Morgan Stanley report doesn’t address the possibility that AWS margins actually could start rising as the company expands its services beyond sheer infrastructure and into managed services. Its NoSQL DynamoDB database service, for example, is a service for which Amazon adds value (and cost) beyond just the delivery of cloud-based infrastructure, and there are lingering rumors of a big data analytics service that will provide higher-level services than AWS’s existing Elastic MapReduce offering.
We shouldn’t overlook the possibility of AWS expanding its licensing activities, either. As it becomes more entrenched as the de facto cloud computing platforms for many companies, providers of other services and software are keen to get on board. Already, private-cloud pioneer startup Eucalyptus has licensed the AWS API, and Citrix wants to do the same for its CloudStack software. If it’s feeling greedy, Amazon could look to capitalize even further by charging others to integrate directly with its business.
Or it could just give that cost-plus dial about a quarter turn.

Labels: Amazon, AWS, Cloud Computing, Cloud Service Providers, CSPs, eDiscovery, Information Governance, Litigation

Wednesday, April 4, 2012

Lawyer Certification on Predictive Coding

The eDiscovery Solutions Group Weekly Poll that ran from March 26, 2012 to April 2, 2012 asked whether or not lawyers should be able to explain the general technical and statistical mathematics supporting Predictive Coding to be able to utilize Predictive Coding during the eDiscovery and document coding process.

25% of the respondents to this poll indicated that lawyers should be famailiar with Predictive Coding to utilize it during the eDiscovery and document coding process. 62% of the respondents to this poll indicated that lawyers should be somewhat familiar with Predictive Coding to utilize it during the eDiscovery and document coding process. And, 12% of the respondents to this poll indicated that lawyers should not have to be familiar with Predictive Coding to utilize it during the eDiscovery and document coding process.

Given the fact that Judge Peck's decision is still being digested and there continues to be debate among the "technical experts" within the industry about the vetting process for Predictive Coding, many may not think that it is way too early to start worrying about whether or not lawyers understand the technical nuances of this new technology. However, I am not sure that the ABA Commission on Ethics would agree that "it is not yet time" as they are already addressing the question of what level of competence lawyers must have in applying IT concepts to the practice of law.

The technology of eDiscovery in general has leapfrogged any technology issues that most litigators have had to understand in the past. And, Predictive Coding and all of it's cousins in computer assisted eDiscovery and search, may in fact have leapfrogged the eDiscovery technology of just 2-3 years ago.

I am sure that the courts and the industry will fully vett Predictive Coding and develope the appropriate best practice for when and how it should be used. And, I am sure that ABA will figure out what level of competence lawyers must have in applying Predictive Coding. I just have to wonder if the results of this process isn't a tipping point for a changing of the guard within the legal ranks?

And, since this whole "thing" is about providing equal access to the judicial system and adequate representation, let's hope they all get it right. Certification on Predictive Coding for lawyers or not.

Click Here to review the results of this poll and the results of all of the eDSG Weekly Polls on hot topics within the eDiscovery and Information Governance market.

Labels: ABA, ABA Standing Committee on Ethics and Professional Responsibility, American Bar Association, eDiscovery, Predictive Coding

Tuesday, April 3, 2012

Zoom to Predictive Coding

Predictive coding has captured the imagination of the eDiscovery market.    As a result, my daily conversations with members of the legal departments of the global 2000 and the eDiscovery professionals within the major law firms now routinely include questions about how predictive coding works, what predictive coding technologies are available and which predictive coding vendors I recommend. Therefore, in an effort to better serve my curious client base, I caught up with Warwick Sharp, co-founder and Vice President of Marketing and Business Development for Equivio, to learn more about their predictive coding platform.

Founded in 2004 in Israel, Equivio began by developing and marketing near-duping and email thread management software. Its acquired a wide variety of clients, including hundreds of law firms, corporations, government entities and consulting organizations throughout the world. Its client base includes the Department of Justice, the Federal Trade Commission, KPMG and Deloitte. In addition, Equivio technology has also been a favorite integration partner among other litigation software vendors such as kCura and many of the well known litigation service providers.

In early 2009, Equivio made the gutsy decision to enter the unknown and highly under appreciated predictive coding wilderness with Relevance, its standalone predictive coding platform. Along with a handful of other predictive coding pioneers such as Recommind, Orcatec and Xerox, Equivio set out to convince the legal community that this new software with its complex mathematical algorithms and confusing statistical models could do a better (i.e. more statistically significant) job of identifying relevant documents than human reviewers. And, although I haven’t asked Equivio about the early financial returns on this bet, I would suspect that the initial missionary marketing efforts were tough and didn’t produce a financial return on their investment. However, Equivio didn’t give up. And, with the recent landmark court decision by Southern District of New York Magistrate Judge Andrew Peck on the Da Silva Moore case opening the flood gates for the legal tolerance for computer assisted review (aka predictive coding), they are now well positioned as one of the few legacy players in the predictive coding market.

On January 23, 2012 Equivio launched Zoom, a single integrated platform for predictive coding and analytics. As reported in their initial press release, Zoom combines Equivio's best-of-breed near-duplicates, email threads and Relevance components together with data import and export, early case assessment and enriched analytics. These components are seamlessly integrated on a unified web-based platform for easy access and use. This past week, I had a chance to spend some time with Warwick and see Zoom in action.

My first impression of Zoom is that it has an extremely intuitive and attractive web-based user interface that provides an easy to understand workflow management system to lead users through the process of collection, processing, analytics, first pass review with predictive coding and export. Support for collection, processing and initial culling appear to meet or maybe even exceed industry requirements to prepare data for initial review.

From a more detailed standpoint, Zoom enables users to extract text and metadata from raw ingest and generates data profiles for Early Case Assessment (ECA).  It then enables users to subject the data to multi-layered analysis, including de-duping, near-duping, email thread management and language detection. Zoom's search environment also supports keyword analysis and metadata faceting.

From a predictive coding perspective, Zoom enables litigators to efficiently “train the system” to identify and assess documents for responsiveness and privilege with little or no knowledge beyond standard online document review best practices.  The platform displays the complex, yet required, predictive coding statistics with easy to understand graphics and even provides users with the cost of review for the current level of statistical significance and the cost projections for increasing that percentage. Finally, Zoom exports native files, full text and metadata to the user’s review platform of choice. Please note that I have not tested the viability of Zoom’s predictive coding accuracy and therefore, for the purpose of this initial review, I am taking Equivio’s word that it meets or exceeds expectations for computer assisted document identification and that the results would hold up in court.

I have designed, tested and used literally hundreds of Web-based applications over the years and I would rate Zoom among the best for easily guiding the user through a fairly complex process and providing an initial positive experience.

And although Warwick was reluctant to position Zoom as an Early Case Assessment (ECA) tool, I believe that Zoom does in fact have the foundational architecture, features and a workflow that can mature into a formidable competitor in the ECA market. Whether or not Zoom fulfills this destiny will of course be up to Equivio and how they decide to position and market their new product.
Given my position as an impartial industry analyst with the responsibility of being a trusted advisor to my clients and because there are other noteworthy predictive coding platforms on the market from vendors such as Recommind, Orcatec and Xerox, I am reticent to declare Zoom as the leading predictive coding platform in the industry.

And, given the fact that eDiscovery Solutions Group, in partnership with DCIG, will be including Equivio in its 2012 Early Case Assessment Interactive Buyer’s Guide available in May 2012 and the 2012 Predictive Coding Interactive Buyers Guide available later this summer, buyers will have all of the objective information that they require to make their own decisions.

However, after my initial review, Zoom should definitely be on any buyer’s short list of next generation eDiscovery platforms as it definitely provides the culling and analytics required for serious Early Case Assessment (ECA) and integrates an attractive and competent predictive coding component.

For a more detailed overview of Zoom, you can contact me at: productbriefings@ediscoverysolutionsgroup.com.

For more information on Equivio and Zoom, please visit: http://www.equivio.com/.
Click Here to join the International Association of Predictive Coding

Labels: eDiscovery, Equivio, Litigation, Orcatec, Predictive Coding, Recommind, Saas, Software-as-a-Service, Xerox

Monday, April 2, 2012

Executive Interview with CEO of CloudNine Discovery

I recently had the opportunity talk with Brad Jenkins, Founder and CEO of CloudNine Discovery. Mr. Jenkins and his team at CloudNine are pioneers in bringing Software-as-a-Service (SaaS) Document Review technology to the legal technology market. My Interview with Mr. Jenkins provides some interesting insight into the history of the litigation technology market and the genesis of CloudNine Discovery.

History of CloudNine

CloudNine Discovery is a Houston based software and services company that has been around for about nine years. The company's flagship product is OnDemand®, which was one of the very first Software-as-a-Service (SaaS) applications on the market for online document review and eDiscovery. In addition, CloudNine backs up its software offering with a full set of litigation services as may be required to support the requirements of large firms and corporations engaged in a lawsuit.

"We started out as a document imaging company, with a focus on the project management of large scanning and eDiscovery projects. One of our early clients was a large corporation that needed project management of a nationwide scanning project lasting over 2 years (10,000 boxes, 40+ locations). We managed the entire project including collection, scanning and coding. From the need for managing that data evolved our development of a web-based document management application, which is now OnDemand," explained Mr. Jenkins in regards to my request that he describe the history of CloudNine.

"We developed a solid reputation for project management and got to know our partners really well, so we got additional national projects and numerous inquiries from our partners requesting to offer our software to their clients. The software demand continued to grow and ultimately became our company focus while we assisted our partners with project management expertise in transitioning from providing scanning services to a full range of eDiscovery services, continued Mr. Jenkins.

Mr. Jenkins was also proud of the fact that CloudNine Discovery has been included in several lists of fastest growing companies, including the Inc. 5000 list in 2008, 2009 and 2011, Houston FastTech 50 in 2007 and 2009, and Houston Fast 100 in 2008 and 2009.

The Importance of SaaS Technology in eDiscovery

As the founder and CEO of one of the first SaaS technologies companies in the eDiscovery market, I was curious to learn what Mr. Jenkins thought about the importance of SaaS.

"I see it as very important. I found it interesting that Gartner predicts that by 2013, SaaS and business process utilities will account for 75% of the expenses derived from processing, review, analysis and production of ESI," stated Mr. Jenkins."It’s also been reported that the Cloud Computing and Storage market is set to grow from 40.7 billion dollars in 2011 to more than 241 billion dollars by 2020. (Forrester forecasted in May 2011) This means more and more data will be stored in the cloud and companies will be looking to SaaS technology to help with discovery,: continued Mr. Jenkins.

I can appreciate Mr. Jenkins predictions about SaaS. In fact, I predict that within five years that most eDiscovery technology will be SaaS based and most Electronically Stored Information (ESI) will reside in the cloud. As such, it appears that CloudNine is in a great position.

Monolithic vs. Best-in-class Technology

I asked Mr. Jenkins if he thought that a monolithic solution that supported the entire EDRM or a best-in-class integrated approach was better.

"I believe in the best of class approach," stated Mr. Jenkins. "There are so many areas of the EDRM, it would be cost prohibitive for any one company to have the best expertise in every single area. Companies with dedicated resources focused on one area are going to have an advantage in supporting that particular area of the lifecycle versus a monolithic platform. Many of the monolithic platforms have come together through acquisitions and those don’t always work out as planned," added Mr. Jenkins.
This is always an interesting debate. Some buyers want a single vendor to call knowing that the trade-off is that they may not get the best solution across the board. Other buyers are more interested in finding and integrating the best solutions and are willing to spend the extra resources to have to deal with multiple vendors.

Something else to think about in regards to this issue is that as the industry embraces SaaS based technology in the cloud, it is going to be theoretically easier to integrate disparate applications in a much more seamless manner than has been the case outside the cloud and behind the firewall. I don't see the monolithic solutions going away, I just see the opportunity for users to have many more choices in the various categories of the EDRM.

CloudNine in Five Year

I am always curious about a founder's vision and therefore I asked Mr. Jenkins about where he thought ClouldNine would be in five years.

"As our three-time presence on the Inc 5000 list demonstrates we are focused on continued growth. Our company mission is to simplify the discovery process through innovative technology, so we will continue to develop in our core expertise, which includes self-service SaaS and managed cloud hosting," stated Mr. Jenkins.

If history is any indicator of the future, than CloudNine has a very bright future. However, I would add that with all of the consolidation going on within the eDiscovery market that providers such as CloudNine might in fact be an attractive takeover target (Please note that I am note aware of any pending transactions involving CloudNine. I am merely stating my opinion about its future).

Click Here to read the full text of Mr. Jenkin's interview on the eDiscovery Solutions website.For more information about CloudNine, please visit it's website at: http://www.cloudninediscovery.com/.

Labels: Cloud Computing, CloudNine, eDiscovery, Regional Litigation Service Providers, Saas, Software-as-a-Service

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The eDiscovery Paradigm Shift

Thursday, April 5, 2012

Amazon is Overlooking the Fiancial Value of eDiscovery

Wednesday, April 4, 2012

Lawyer Certification on Predictive Coding

Tuesday, April 3, 2012

Zoom to Predictive Coding

Monday, April 2, 2012

Executive Interview with CEO of CloudNine Discovery

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