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

Gartner Confirms that the eDiscovery Software Market is Growing

Again, not surprisingly, Gartner just released the results of a study that indicates that worldwide electronic-discovery (e-discovery) software revenue is on pace to total $1 billion in 2009, a 25 percent increase from 2008 revenue of $807.6 million. They went on to indicate that in 2010, the market is forecast to surpass $1.2 billion, a 23 percent increase from 2009.

Once again, I have to comment that the eDiscovery technology market is really great place to be right now. And, I can't wait to see what Gartner has to say about the Governance, Risk and Compliance (GRC) markets.

The other results as reported in the Gartner Study by Tom Eid, research vice president at Gartner was that transparency of business performance as aligned to governance, risk, and compliance regulations and subsequent organizational reporting, mitigating IT risk through the use of real-time and continuous controls monitoring for transactions, segregation of duties, application configuration, and master data and preventing business failure through fraud detection, improved user-level and application-level security, and corruption were the three important eDiscovery market catalysts that underscore the importance of linking business goals to IT risks and the ability to manage both. More to come on this in future Blog posts.

The full text of Gartner's press release is a follows:

STAMFORD, Conn., December 16, 2009 —   Worldwide electronic-discovery (e-discovery) software revenue is on pace to total $1 billion in 2009, a 25 percent increase from 2008 revenue of $807.6 million, according to Gartner, Inc. In 2010, the market is forecast to surpass $1.2 billion, a 23 percent increase from 2009.

E-discovery is the identification, preservation, collection, preparation, review and production of electronically stored information associated with legal and government proceedings. E-discovery technology can be provided as a stand-alone application, embedded in other applications or services, or accessed as a software-as-a-service (SaaS) offering.

“Increasingly, more organizations are being confronted with litigation regarding bribery and corruption, foreign corrupt practices, securities and financial fraud, government contracting abuses, and healthcare fraud,” said Tom Eid, research vice president at Gartner. “Such unplanned events underscore the need for more-effective enterprise information strategy and information governance policies.”

Mr. Eid said that the e-discovery market is in a period of simultaneous growth and consolidation that should last through 2011. Market and technology consolidation will continue during the next several years as vendors expand their product and service portfolios, obtain market-centric expertise, and acquire new customer bases. As the e-discovery market shifts from an emerging market to a high-growth market, Gartner expects new vendor entrants and nontraditional competitors to participate through technology partnerships and acquisitions.

Until now, vendor revenue for e-discovery has focused on the U.S., with approximately 90 percent of market revenue for 2008. However, going forward, market growth is also expected in common-law jurisdictions, such as Australia, Canada, South Africa and the U.K., as new civil litigation regulations are passed regarding privacy and disclosure. In addition, many organizations based in the U.S. have subsidiaries in countries around the world that will provide further pockets of regional growth.

“The December 2006 amendments to the Federal Rules of Civil Procedures (FRCP) in the U.S. regarding the discovery of electronically stored information (ESI) and passing of subsequent similar statutes in other countries, has really spurred market interest in e-discovery,” said Mr. Eid. “This is prompting many companies to rethink their overall information management strategies, from the policy level to the implementation level.”

Mr. Eid said three important e-discovery market catalysts underscore the importance of linking business goals to IT risks and the ability to manage both. The three core market catalysts are:

- Transparency of business performance as aligned to governance, risk, and compliance regulations and subsequent organizational reporting.
- Mitigating IT risk through the use of real-time and continuous controls monitoring for transactions, segregation of duties, application configuration, and master data.
- Preventing business failure through fraud detection, improved user-level and application-level security, and corruption.

Additional information is available in the Gartner report "Dataquest Insight: E-Discovery Software Marketplace Continues Its High Growth Pace." The report is available on Gartner's website at http://www.gartner.com/resId=1228213.

Labels: 2010 eDiscovery Predictions and Trends, eDiscovery Software Sales, Gartner

posted by Charles Skamser @ 1:37 PM 0 Comments