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 1 Comments

ELM Appliances are First Sign of Falling Costs for eDiscovery

As the namesake of this Blog suggests, the litigation market is in the throws of a major paradigm shift. Most markets that go through these shifts find that consulting fees charged by the early experts seem excessive. But, they are willing to pay these fees for as long as they can produce the required results. A good example or point of reference are the consulting fees that website development firms were able to charge when we were going through the "bricks to clicks" paradigm shift and everyone wanted to get their business on the Web.

Following tradition, when the changes in the FRCP in December of 2006 set the federally sanctioned groundrules for handling ESI, eDiscovery consulting firms filled the need and siezed the opportunity to charge "premium fees". Don't get me wrong, I am not some anti-capitalist passing judgement on economic results of the open market and calling for government intervention and price controls. I am merely pointing out that there is a well defined and historcially proven cycle that technology markets go through during major paradigm shifts. And, part of this cycle enables both premium consulting fees and in some cases premium costs associated with new and required technology.

This all being said, just as technologist came to the rescue of the website development market by automating standard and mundame tasks thereby reducing the overall cost of development and deployment, I beleive that Evidence Lifecycle Management (ELM) appliances and related technologies from such vendors as WorkProducts (http://www.workproducts.com/) are being initially introduced and sold with a Total Cost of Ownership (TCO) and Return on Investment (ROI) model that includes automating the standard mundame tasks that were previsouly being done by $400 per hour eDiscovery consultants.

These mundame tasks include such things as managing the location of employee data sources and therefore easily and automatically enabling the collection of data from multiple data sources such as PSTs from multiple servers in mutliple locations for specific custodians for specific dates and or other routine search tems. This is certainly something that an eDiscovery Consultant could do for $400 per hour. And, if an organization only has 1 or 2 potential matters per year to consider, it may be more financially feasible to hire the consultant.

However, if an organizaiton has the expectation of many potential matters per year, the appliance financial model can't be beat and once in place will probably even enable the organization to address very small matters that they just plain settled in the past because it cost less to settle than to hire the consultants to figure out the merits of the case.

So, am I predicting the collapse and early demise of the very lucrative eDiscovery consulting market? Not at all.

With the rapidly increasing introduction of technology to manage the mundame and standard tasks, eDiscovery consultants can continue to own the more difficult to automate and demanding tasks such as finding deleted data, searching for data needles in enterprise haystacks and positioning themselves for the next paradigm shift and related opportunities.

It's a great system with room for everyone. Consultants support the innovators and early market adaptors by investing the time and resources to figure out what has to be done and how to do it. Hardware and software Technologists then step in and automate these processes and reudce the costs for the mainstream market buyers. And together, they move from paradigm shift to paradigm shift fueling our economies ability to continue to grow through the introduction of new technology.

Labels: Consulting Fees, eDiscovery, eDiscovery Consultants, ELM, ESI, Evidence Lifecycle Management, FRCP, Litigation, Paradigm Shifts, Return on Investment, ROI, TCO, Total Cost of Ownership

posted by Charles Skamser @ 9:45 PM 0 Comments