Why EMC Wants to Buy eDiscovery Vendor Kazeon

By Irina Guseva (@irina_guseva) Sep 2, 2009

EMC Wants to Buy eDiscovery Vendor Kazeon

No longer rumored in the halls of the ILTA conference, the intent of Enterprise CMS and storage vendor EMC (news, site) to acquire Kazeon (news, site) is now official. The unconfirmed deal size is at about US$ 75 million.

What does that mean for the two companies? How did the eDiscovery industry take the news? Let’s take a look at some first reactions and thoughts.

What Kazeon Brings to the EMC Table

Kazeon Systems, Inc. is a privately held company focusing on analysis and review, collection and culling, and legal hold for Electronically Stored Information (ESI) in accordance with the Electronic Discovery Reference Model (EDRM) framework. One of the ESIs Kazeon works well with is various content management repositories, and, of course, EMC Documentum.

Kazeon’s software is said to be able to perform early case assessments and eDiscovery activities across multiple ESI sources — in addition to analytics, concept-based search and collaborative review. Exactly what EMC needs to round up its SourceOne software suite and to make it all in-house without having to OEM any of its parts.

When the acquisition is completed in Q3 2009, Kazeon will become a part of EMC's Content Management and Archiving Division.

EMC positions the outcome of the deal as an “end-to-end eDiscovery solution” that will extend capabilities of the existing SourceOne family of products from eDiscovery, archiving and compliance perspectives.

But can Kazeon really support that claim? The competition doesn’t think so. According to Recommind’s Craig Carpenter, Kazeon can do collection and legal hold, but doesn’t have sophisticated review capabilities, which will need to be either built or acquired.

Reactions From the eDiscovery Industry

Coincidentally, EMC has been reselling eDiscovery software from Kazeon, StoredIQ and Clearwell Systems in the past. But it was Kazeon that was welcomed to the family. Carpenter told us that the acquisition plans were “not a very well-kept secret.” But the “heavy-betting money was on StoredIQ. Clearwell was also an option ahead of Kazeon.”

What helped Kazeon to differentiate from other candidates, says Carpenter, is its enterprise search capabilities, which are considered a critical component in today’s eDiscovery.

As Carpenter notes, there’s no shortage of candidates in the eDiscovery industry with more than 20 vendors out there. “It all depends on whether you want to be more strategic or tactical,” concluded Carpenter.

Alas, StoredIQ didn’t make the cut, even though EMC is (for now) using StoredIQ’s technology in the Discovery Collector module of SourceOne.

Clearwell's CEO, Aaref Hilaly, expressed his thoughts on the acquisition in a blog post, highlighting the deal size is “well within the usual range of US$50-100 million that most acquirers pay for technology that has not yet matured into a business.”

This acquisition is a long-awaited chance to pop that champagne for Kazeon’s “long-suffering shareholders,” as Hilaly refers to them. Kazeon raised a whopping more than US$ 60 million in funding in the past several years only to report less than optimistic revenues of around US$ 8 million.