The e-discovery market has had a long time to mature — and it still has room to grow. Gartner predicts the market will grow from its current value of $1.8 billion to $3.1 billion by 2018.
The market is also in the midst of significant change. Enterprises are moving away from service providers for identification, preservation, collection and processing of data to in-house data management and discovery.
An Important Sector
The findings are contained in this year’s Magic Quadrant for E-Discovery, one of the largest that Gartner publishes. There are 22 vendors in it this year, including nine in the Leaders Quadrant. Apart from the fact that enterprises are moving e-discovery in-house, the growth is also being pushed by the rising global awareness of the importance of e-discovery, especially in Europe and Asia/Pacific.
There are also a number of adjacent software markets that are feeding into e-discovery, including information governance, enterprise content management, file analysis and data analytics. Many of the vendors in this space will add e-discovery functions to their existing capabilities.
But what exactly are we talking about here? The growth in the e-discovery market is a direct response to the growth in the amount of information that is now being forced to comply with many different regulations, especially since the financial crisis of 2008.
To monitor and discover various sources and kinds of information, enterprises are increasingly turning to software, even in professions with long-standing dependencies on paper.
The market in the past was characterized by many small vendors along with a handful of large ones. But this is changing. The emphasis now is on software and management service providers, and manual processes and custom systems are being replaced by off-the-shelf systems.
Further disruption to this market is also expected soon with changes to the Federal Rules of Civil Procedure (FRCP), which were proposed in early 2013. According to Gartner, once these are finalized, the e-discovery market faces further upheaval.
MQ Inclusion Criteria
Here is what a vendor needs to do to be included in the Magic Quadrant for e-discovery: sell enterprise software licenses, offer a software application or e-discovery Software-as-a-Service (SaaS) and optionally provide e-discovery services. Vendors also have to cover at least two out of three broad functional areas relating to the Electronic Discovery Reference Model (EDRM).
The EDRM was developed in 2005 and consists of a highly detailed reference model that is used as a standard for the discovery and recovery of digital data. The three broad areas for the sake of the MQ consist of:
- Left-hand side of the EDRM: Identification, collection, preservation and processing vendors that have either a workflow-based system or a search and information access system for IT and legal departments to use.
- Right-hand side of the EDRM: Vendors focused on processing, reviewing, analyzing and producing documents, either in early case management or at a later stage of review, whose products include features such as document categorization and redaction.
- Information management: Vendors offering information management or repository functionality plus e-discovery functions.
Of course vendors that cover the entire end-to-end process are also included as, according to Gartner, more and more enterprises are looking for products that provide end-to-end functionality. They also must demonstrate the following:
- That they generate at least $20 million in revenue per year from the sale of e-discovery software
- Own the intellectual property and copyright to the software
- Have at least 50 customers in production
Unlike last year when four new vendors — FTI Technology, Exterro, kCura and Kroll Ontrack — pushed their way into the Leaders’ quadrant, there has been no change this year. The Leaders remain the same: Access Data, Exterro, Guidance Software, HP Autonomy, FTI Technology, Kroll Ontrack, KCura, Recommind and Symantec.
These nine vendors are leading an IT space where consolidation is still underway across the entire software market. The consolidation is driven by moving e-discovery in-house, pricing pressure and the need to develop economies of scale in data management.
Gartner expects double digit growth this year and is also expecting the pace of consolidation to slow down, with only a couple of noticeable acquisitions in 2013.
While consolidation has slowed in the e-discovery market, it has kept apace in the legal services market. This market is driven by the desire to bring e-discovery in-house, as well as the need to control costs, and ensure access to data and data driven processes.
For the legal services firms that don’t succumb, there are two options. The can either become “one-stop-shops” for e-discovery, but not technology firms or large firms that are one-stop shops with proprietary technologies for all aspects of EDRM.
There is still room for regional and even specialist players, but they are operating in a space that is getting smaller all the time as the larger players start to dominate. The larger firms will also need to expand internationally as the market develops in new geographies.
It is worth noting here that the amount of non-US business is growing for e-discovery vendors.. Garter points out that all countries are struggling with increasing volumes of data that require the same kinds of e-discovery tools to navigate it.
Final points worth noting here — and ones that are likely to have long term effects on the data privacy and discovery market — is the fallout from the US National Security Agency’s surveillance program and the massive hack of retailer Target’s credit card information.
Gartner noted that both cases have resulted in a growing interest in incidence- or event-triggered processes.