MarketScope for E-Discovery Software Product Vendors

Transcription

1 Research Publication Date: 21 December 2009 ID Number: G MarketScope for E-Discovery Software Product Vendors Debra Logan, Whit Andrews, John Bace Recession has accelerated the move to in-house e-discovery and more companies have brought, or are considering bringing, e-discovery in-house. This report will help enterprises build a business case, create a list of possible vendors and determine which ones best meet their needs. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions epressed herein are subject to change without notice.

2 WHAT YOU NEED TO KNOW E-discovery is a maturing market with entrants from multiple categories, including storage and archiving, search and information access, content and records management, and workflow, as well as tools designed as end-user applications for legal professionals and forensic data collection tools aimed at security professionals, regulators and law enforcement agencies. All of these categories of software vendors have added e-discovery to eisting suites or purport to cover various aspects of the e-discovery process. There are also pure-play e-discovery vendors to consider. Enterprises purchasing e-discovery software can reduce the costs of litigation by improving their control over unstructured content, and semistructured content, most notably . Our client references consistently report that they have cut costs and risks by taking control of litigation hold, litigation-hold-tracking, file collection, file processing and legal review, instead of outsourcing these functions. The selection of e-discovery software is a joint decision and sometimes a joint purchase between the IT department and the legal department. These two groups must work together to determine the needs of the organization and the individual users, and to build the business case for purchase. Although many corporations do not know the true costs of their legal activity, there is evidence that those costs are substantial. Because the work of legal and regulatory response is spread over different departments, and legal matters can span multiple years, traditional cost accounting does not do a good job of tracking the cost of litigation and regulation. The legal department pays for outside counsel's services and e-discovery providers; business units pay liability costs if a plaintiff wins a monetary judgment; and the IT department bears the epense of any internal discovery work. That makes it difficult to track costs in a meaningful way. In addition, litigation can go on for years, meaning a single case must be tracked over its lifetime. This, of course, does not follow the way accountants do things, which is on a yearly basis. Legal departments seldom have "budget" allocated to them but, of course, must pay the bills of outside counsel and other providers of legal services, and that money comes out of the legal reserve (see Note 1). Gartner clients that do track "all" legal costs, and that have purchased e-discovery software, report that the software pays for itself in a matter of months, or is justified by the projected cost of "one big case." The cost savings as reported by clients for early case assessment, along with in-house collection and preservation, can more than justify the purchase of moderately priced e-discovery software ($100,000 to $500,000), or even more epensive software (costing more than $500,000). When interviewed for this MarketScope, clients reported a return on investment (ROI) within three to si months or, alternatively, after one big case, particularly intellectual property disputes (see Note 2). The main areas of cost reduction are in processing data by eternal service providers, as less time and, therefore, money is spent on outside attorney review, as less material is passed to them. These benefits are achieved by defensibly culling the amount of data that is passed on to further steps in the e-discovery process, by allowing in-house attorneys to "go back to the well" and refine their searches, either coming up with more data (to avoid sanctions) or refining eisting data sets to the relevant documents to pass on for further consideration. E-discovery takes place at the request of outside counsel, or before counsel is retained, at the request of an internal legal department. The amount of material turned over to outside counsel for review has a direct bearing on the cost of litigation or regulatory investigation. Opportunities to reduce spending on both the processes of e-discovery itself and the subsequent review by attorneys of materials obtained during e-discovery are the heart of the e-discovery vendors' value proposition. Publication Date: 21 December 2009/ID Number: G Page 2 of 27

3 Using this report, data center managers, information security officers, information architects, inhouse legal personnel and records managers can find information to build a business case, create a list of possible vendors and determine which ones best meet their needs. STRATEGIC PLANNING ASSUMPTION(S) By the end of 2011, there will be 25% fewer vendors in the e-discovery market as a result of merger, acquisition and vendors eiting the market. Through at least YE10, only 10% of enterprises will acquire end-to-end e-discovery capabilities from a single vendor. Achieving full proactive control over unstructured data will take between five and 10 years for most enterprises. MARKETSCOPE Market Growth and Trajectory The e-discovery product market received a boost from the recession of 2008 to Because all costs began to be scrutinized, including previously immune legal budgets, corporate legal departments had to start looking for a way to cut their costs. In addition to the recession, awareness of the 2006 changes to the Federal Rules of Civil Procedure (FRCP) in the United States (see Note 3) and parallel efforts on the part of the European Union, South Africa, Australia and Canada continued to grow among the legal profession, providing further growth stimulus. As a final impetus to growth, the Obama administration stimulated demand among government agencies, particularly regulators, by giving them a mandate to make government more transparent. In addition, in 2009, for the first time, our client inquiry showed accelerating interest and awareness of discovery and disclosure in Europe, particularly regarding privacy versus disclosure. The perception of e-discovery as one of the few growth areas in an otherwise flat or declining software market attracted a number of new entrants in The year also saw a few acquisitions both by those wishing to enter the market and those that sought to add to their eisting functionality. In 2008, we wrote: "The numbers of new entrants into the market grew in 2007, with more established companies joining the fray in 2007 and 2008, following the market demand with their own established products. Although there have been a few acquisitions along the way, overall, there are more e- discovery vendors in 2008 than there were in We epect this trend to continue in 2009, as this is a rapidly growing space. Since litigation is counter-cyclical, current economic conditions may in fact accelerate market growth. Simply put, there is money to be saved and money to be made and both enterprises and vendors will continue to enter the market despite the recession." These statements have largely been borne out. The year 2009 was one of consolidation in terms of product functionality, as well as overall revenue growth; 2010 will be a year of reckoning. The scope for successful entry into the market will diminish, as the established players take more of the business based on "referenceability," scope of functionality and company size. No longer composed of tiny startups or megavendor e-discovery "wannabes," the market now contains a number of credible solution providers that can meet enterprises' discovery needs either in part or fully. The larger, established vendors are moving toward a suite of products that together constitute a way to govern information in a more effective way. and file archiving, records management and content management applications, coupled with software to manage retention, Publication Date: 21 December 2009/ID Number: G Page 3 of 27

4 disposition, policy and e-discovery, are all components of a governance platform. In 2010, several vendors will begin marketing governance solutions with these component parts. In 2008, e-discovery vendor revenue grew at 30%. Spending on e-discovery software technologies and service offerings is forecast to grow by 21% annually through This is a decline in the growth Gartner has seen in the past few years, which was running at about 50%. The decline in growth is a result of market saturation and continued overlapping functionality from archiving, content and records management, search, and other technologies. However, we epect net year-over-year revenue will continue to increase through Gartner estimates that the total software revenue in the worldwide enterprise e-discovery software marketplace was $808 million in The five-year compound annual growth rate is approimately 21%. This market is in a period of simultaneous growth and consolidation that should last through 2011 (see "Dataquest Insight: E-Discovery Software Marketplace Continues Its High-Growth Pace"). User Wants and Needs: E-Discovery Moves In-House In 2009, enterprises became clearer about their actual needs and what part of the e-discovery process they wished to manage themselves. Enterprise demand began to coalesce around a set of features and functions. The consolidation in the market has been around a set of features and functions most desirable to in-house applications. As in previous years, we will use the Electronic Discovery Reference Model (EDRM) to describe both the process of e-discovery and how the vendors fit their products into the model. Despite some credible argument that the model is "not detailed enough," it still makes a good starting point for vendor categorization. The EDRM is shown in Figure 1, so that clients can reference it for the purposes of vendor analysis. The main deficiency in the model has proved to be that it lacks a definition of "early case assessment," which many vendors discuss, and which is high on the list of functionality that corporate buyers want. Figure 1. The Electronic Discovery Reference Model Source: EDRM (edrm.net) Publication Date: 21 December 2009/ID Number: G Page 4 of 27

5 This has not prevented vendors from offering early case assessment, or clients from using the capabilities in various tools to perform that function. In February 2008, we wrote: "Technologies from simple relevancy calculation-free search to advanced content analytics will provide increasingly predictable value for enterprises seeking to assess the risk or opportunity that a given legal case provides them. Strategies eploiting such technologies will reduce the time it takes to identify likely losing and winning cases, therefore reducing attorneys' hours and speeding appropriate settlements. Most studies of legal reviews indicate cost savings of up to a factor of 10 when technology is introduced as a culling agent. Use of such technologies for early case assessment is more palatable, as it does not necessarily have to satisfy judicial scrutiny, and so the potential cost savings stretch across more cases." This is why, as we predicted, more and more enterprises are looking to insource at least part of the e-discovery function, especially litigation hold, litigation-hold-tracking, archiving with accompanying e-discovery functionality, identification, preservation and collection of electronic files, along with processing. Through vendor briefings and client inquiry calls, we have discovered that more companies are taking a proactive approach by investing in content and records technologies and processes to be able to respond quickly to discovery requests, as well as to provide in-house counsel with a tool that can be used to assess potential risk or early case assessment. E-Discovery as an In-House Business Process: Predictability, Regularity and Control Until recently, many companies regarded litigation and e-discovery as things that were not subject to normal business process constraints or rules. The view was that each case was different, the processes involved in preserving and collecting evidence were customized, and most of the work was beyond the scope of what normally happened in a corporation. Thus, e- discovery was largely handled by service providers specialized vendors that dealt with most or all the process on a one-off basis. Since the change to the FRCP in late 2006, that view has undergone a gradual change. Rather than looking at each case as an eceptional event, corporations are recognizing that e-discovery is, in fact, a routine business process. As such, opportunities for making it more efficient do eist and, when it comes to efficient eecution, the company itself has more of a vested interest in efficiency metrics than providers that are charging for time and materials. When one considers the number of lawsuits that are ongoing or are begun in any one year, it is clear that e-discovery needs to be treated like any other business process. Opportunities for efficiency and cost savings must be sought wherever possible, which is what e-discovery vendors try to address. For an idea of the volumes of suits faced by companies, we cite Fulbright's sith annual Litigation Trends survey report (see Note 4). In Fulbright & Jaworski's survey, 53% of companies reported spending more than $1 million on litigation in 2009, up from 45% in The number of smaller companies spending more than $1 million rose from 4% in 2007 to 13% in 2009, while the number of midsize companies spending $1 million or more went up from 26% to 28%. Of the largest companies, 78% spent $1 million or more. In the healthcare, insurance, energy/utilities and telecommunications/high-tech sectors, spending is most likely to be more than $10 million. Of the companies surveyed, 16% planned to spend more on e-discovery in Forty-five percent of all companies in the survey said they had at least one regulatory matter commenced against them. The survey also indicated that companies were more inclined than previously to handle regulatory inquiries themselves, reporting a decrease in their use of outside counsel. Publication Date: 21 December 2009/ID Number: G Page 5 of 27

6 There are interesting figures from other sources that may be interpreted as supporting the assertion that "e-discovery is moving in-house." In Fulbright's Litigation Trends survey, the 2008 and 2009 responses indicated that lawyers were anticipating a decline in both litigation and e- discovery disputes. The 2009 survey indicated that lawyers think 2010 will see an increase in litigation, with 40% reporting that 2010 will bring more litigation than Of the companies surveyed, 48% were doing some e-discovery processes in-house, a trend we epect to continue. Twenty-si percent of respondents said they used law firms with specialized e-discovery practices, a trend that we believe will also drive the tools market, as firms use technology epertise to compete for and win this business (see Note 5). These facts can be interpreted to support the conclusion that in-house e-discovery, and especially early case assessment, may indeed be having an impact on both the overall volume of litigation and its cost. Another corroborative source is the 2009 Socha-Gelbmann Electronic Discovery Survey (see Note 6). Overall, the survey showed a drop in the overall size of the market for services and software of 9% while simultaneously saying overall "volume of business" is up. Although the authors of this study say these contradictory numbers "conceal more than they reveal," we see two possible drivers behind these seemingly contradictory results. First, the move to in-house e-discovery favors product vendors, rather than service providers, and our own research shows that the product companies included in Gartner's MarketScope survey grew for the most part. This has eacerbated the price pressure in the services market. Oversupply has led to price cutting and, as the ranks of service providers have swelled since 2006, pressure to provide e-discovery services that are inepensive, quick and good has increased. In other words, business is up for them in terms of cases and data volumes, but prices are down because they had to cut them to compete. We believe this supports the contention that the market for e-discovery tools that can be used in enterprises or by law firms will continue to grow. The market continues to be driven by the need to control costs, seek early resolution of disputes to avoid litigation completely and to prepare to meet opposing counsel for pretrial discussions about discovery, as specified by the FRCP. How Legal and IT Departments Can Jointly Build an E-Discovery Program Business Case elawforum, an online legal journal, has compiled litigation data over the past eight years, with more than 20,000 cases spread over 500 of its clients (see Note 7). It has drawn the following facts from this data: Among Fortune 500 companies, it estimates the total cost of litigation to be $210 billion in 2008, equivalent to a third of the after-ta profit of those companies. The structure of corporate cost accounting encourages legal departments to delay the resolution of cases, that is, to spread the cost over several years. Delay inevitably increases costs, as Fortune 500 companies prepare every case as if it were going to trial, but 97% of cases are settled to avoid trial and to prevent the matter from entering the public domain. This behavior encourages the plaintiff's bar to hold out longer for bigger settlements, as it knows that the closer the approach of trial, the likelier the chance of a settlement and the higher the monetary value of that settlement. Delayed resolution also leads to higher costs because the longer a case goes on, the larger the fee to the plaintiff's lawyers paid by the corporation if the plaintiff wins. Publication Date: 21 December 2009/ID Number: G Page 6 of 27

7 These facts are relevant to Gartner's IT clients, as they form the basis for beginning a dialogue with personnel from the legal and finance departments, as well as for formulating the business case for bringing some of these functions in-house. When it comes to cost justification, the cost of e-discovery software can be offset against fees that accrue downstream. Even though these are not direct IT costs in many cases, any IT program that helps the business and saves the company money should at least get a hearing. In the absence of the total cost picture, companies can frequently identify at least some of the costs associated with legal and regulatory proceedings. These are typically high, more than $1 million per year. Respondents to our client reference survey for this MarketScope told us that payback periods could be as short as three months, with few reporting ROI taking more than a year. Generally, the cost of software is offset against fees charged by outside service providers to process data for discovery or against the reduction in legal fees charged by outside attorneys reviewing massive amounts of written electronic material. The payback is immediate and direct. It has an impact on bottom-line profitability, with profits being the source of the fees being paid to outside lawyers and other legal service providers. In 2009, the average hourly billing rate for an attorney in a small or midsize practice was $284, with an average of 1,835 billable hours epected for an associate. That means that one lawyer working for one year on a case would bill a total of $521,140. That figure does not take into account the billing rate of the plaintiff's lawyers (on average $413 per hour, for a yearly total of $757,855) or additional costs, such as data discovery or processing and hosting by a service provider. Lawyers' hourly rates make e-discovery software look like a bargain when offset against these costs (see Note 8). Against this cost backdrop, when we look at even the high end of the e-discovery software market, with systems costing $1 million or more, clients report ROI in the short term. Market/Market Segment Description The criteria for vendor inclusion in this year's MarketScope have changed because the market has changed. The emerging nature of the market justified inclusion of smaller vendors in 2008, but this year's revenue cutoff of $15 million reflects the growing maturity of the players, as well as their consolidation and growing revenue bases. With the amount of interest and activity in this market, smaller players with interesting technology are likely acquisition targets. Without major differentiating technology, the barrier to successful entry into the e-discovery market became higher this year, and vendors without the budget to create awareness or to develop the necessary channels to market will not be able to rise above the "noise" around e-discovery. The functionality that the vendors offer is often confused and overlaps with other product categories. It seems likely that enterprise clients will continue to have fragmented e-discovery tactics spread across different product categories for the near-term future. Another change has been in adjacent markets, particularly archiving. E-discovery functionality covering litigation hold and review and/or analysis has become necessary for all archiving vendors. It is no longer sufficient that an archiving vendor provides these capabilities on its own archive to be considered for this MarketScope. It would need to have augmented this basic functionality with the ability to archive and hold other file types, collect (alone or in partnership) on an ad hoc basis and possess more sophisticated review and analysis capability, in addition to a means to eport from the archive for production, at least in native format or EDRM-XML. The e-discovery market includes products and services that allow electronically stored information (ESI) of all types to be identified, preserved, collected, processed, reviewed, produced and managed over a period of time. There is some overlap with markets beside Publication Date: 21 December 2009/ID Number: G Page 7 of 27

8 archiving, including enterprise content management (ECM), records management (RM), content monitoring and filtering, workflow and information access. E-discovery is independent of all of them, despite the overlap. This is due to the combination of functionality that is required, and the unique requirements that result from the e-discovery process being ultimately specified by the FRCP and scrutinized and defined by the courts. To be included in this market, a vendor must address at least three of these functional areas, which have been chosen to reflect the clustering of user wants and needs and the process of e- discovery as reflected in the EDRM: Identification of machines connected to a network, plus the ability to identify, mark and/or copy individual files contained in systems, file servers and other sources. Software must have a means of identifying the requested information using a variety of parameters including file type, creator or custodian, date of last access, date of creation, system of origin and keywords. Identification can also include a workflow-based means for attorneys to identify and track custodian-led collection. Preservation of files and metadata, and the tracking of these preservation requests, known as litigation hold. Preservation consists of knowing a file eists and either "holding it in place" or copying it to a secure repository for hold purposes. If preservation is custodian-led, the software must have a way of tracking the custodian's responses to preservation requests. Collection can be custodian-led or automated. In custodian-led collection, lawyers identify the people who created files or control them, send them a notice to preserve and then ask them to copy or tell them their files will be copied. Collection can also be automated and may involve "copy and move." Information deemed responsive must be copied for processing. Reports for the IT and legal departments in terms of what has been preserved and what custodians have been notified is desirable. Products must preserve the integrity of metadata in the collection process and provide logs of collection activities. Evidence repository, archiving repository, content repository or RM repository, which allows at least the preservation of files in an unalterable format, the tagging of files for short- or long-term retention, that is, under the control of a repository database that allows the administration of the files within. Initial processing of data, including culling by file type, deduplication or near deduplication, producing reports that show the amount of data that has been collected, categories that have been culled, and the ability to categorize the data. Keyword search and the ability to view and review files in native formats are also necessary. Functionality to assist legal personnel in document review for inclusion or eclusion in production for opposing counsel, regulators or courts. Attorney review tools may include Bates numbering (see Note 9), sophisticated search capabilities, process support, visualization and pattern recognition techniques, categorization and classification functionality, redaction, native file format viewers, integration with common desktop tools such as Outlook, and the ability to eport files in various formats especially for litigation support databases and other review products. Search and information access functionality, including at least the ability to connect to multiple repositories ( , archiving, file shares, basic content services and document management systems, plus desktops) and a way to find individual items within those repositories, including at least keyword or Boolean search. Publication Date: 21 December 2009/ID Number: G Page 8 of 27

9 Ability to produce documents at some point in the process, either as "load files" for review platforms, or as a set of documents to be produced for an outside party to review. This functionality implies that various viewing and eport facilities be provided; for eample, the ability to view documents in their native format, or a transformation to another more portable format, or as XML files. The categories of vendors that have emerged are: Information governance players, which include ECM, RM and archiving vendors, that base their capability on eisting and file archiving, records or content management, with associated litigation hold, preservation, processing, and early case assessment. Identification, collection, preservation and processing vendors that have either a workflow-based system for attorneys to track custodian-led collection or a search and information access system for the IT and legal departments to use. The vendors that focus on this part of the EDRM are also increasingly claiming to have early case assessment functionality. Vendors focused on processing, reviewing and analyzing documents, either early case assessment or a later state of review, including features such as document categorization, redaction and mechanisms to mark documents as privileged or in other ways to categorize and process them. This category includes the attorney review platforms that have been used for 10 or more years by the legal community to perform document review. It encompasses the older term "litigation support databases." Changes in the Vendor Landscape There have been a few significant acquisitions in Autonomy acquired Interwoven, and EMC acquired Kazeon. Clients can epect more changes in the market, including mergers, acquisitions, eits, entries and repositioning. The predicted level of activity in the market is based on the facts that it is fast-growing, and contains large, established players and smaller, technology-rich startups. In addition, the evidence continues to accumulate that corporations can save costs and reduce risks by adopting e-discovery technology in-house, and so the growth of the market will continue. In these fertile conditions, a high degree of movement and change is inevitable. For a complete list of the market changes we have tracked in the past several years, see "Dataquest Insight: E-Discovery Market Drives New Information Governance Investments." By the end of 2011, as the market moves from emerging to early-stage consolidation, and the early adopters continue to report their results, there will be 25% fewer vendors in the e-discovery market as a result of mergers and acquisitions and vendors eiting the market. Vendors in this report have met this year's inclusion criteria, including a significantly higher revenue threshold than in Gartner is, however, tracking and recommending other vendors in the market. The e-discovery challenge is comple and the approach that enterprises take varies by vertical industry, size of company, and litigation profile, along with other factors. Enterprises are approaching these challenges in various ways sometimes with very tactical point solutions, sometimes with more holistic approaches. There is still some room in the market for innovative and differentiated technology. The list of vendors that Gartner is tracking includes, but is not limited to: StoredIQ: This is a competent vendor that performs identification, preservation and collection, with processing, review and analysis features. StoredIQ is a competitor to Autonomy, AccessData, Guidance Software and Kazeon, among others. Its heritage in search makes it a good choice for clients looking for fleible, powerful identification, Publication Date: 21 December 2009/ID Number: G Page 9 of 27

10 collection, litigation hold and early case assessment. StoredIQ is positioned well to take advantage of growing market interest in information governance and legacy information management. Eterro: A competitor to PSS's Atlas Suite, Eterro enables litigation hold and litigationhold-tracking, along with a workflow tracking of the entire e-discovery process. Its Fusion Genome product is a data map that is automatically and continuously refreshed and linked to the company's organizational structure. It allows enterprises to locate information sources relevant to particular matters. This map is continuously refreshed via automated means. Eterro's applications are built on an etensible workflow platform to support integration with other enterprise applications. Nui: Nui competes with Clearwell, Autonomy and other vendors that cover processing and early case assessment. It is highly "referenceable" among its current client base, with clients citing its scalability, speed, cost-effectiveness and language independence as key differentiating features. It is embedded as an OEM module in the solutions of highly regarded service providers and product vendors. Like many companies that do not have their headquarters in the U.S. (its headquarters are in Australia), its penetration of the vital North American market has been slower than that of some of its competitors. Starting from a different region is no barrier to success, but it does affect the revenue trajectory of the company. kcura: kcura's product Relativity is a Web-based review, analysis, and production platform that competes directly with CT Summation, Concordance, Autonomy's Introspect, CaseLogisti, FTI Technology's Attene, Ringtail Legal and others. Relativity is offered as both an on-premises solution and a hosted solution by many well-known and highly regarded e-discovery service providers worldwide. Relativity has gained momentum by combining customizable workflow and scalability to accelerate the document review process. These vendors will be formally rated when and if they meet the inclusion criteria. There is no reason not to consider them now if they meet your company's needs. It is worth noting that no vendors in this year's MarketScope scored below Promising. That is an indication that user wants and needs and vendor offerings are converging into an offering that could possibly be evaluated by our Magic Quadrant methodology. This market has moved very swiftly from the emerging to consolidating phase, driven by the changes to the FRCP, the everescalating costs associated with keeping vast amounts of data that companies have accumulated over a decade or more of automation of business processes, and spiraling legal fees. For a further eplanation of our methodologies and market trajectories, see "Magic Quadrants and MarketScopes: How Gartner Evaluates Vendors Within a Market." Looking Ahead to Further Market Changes: Information Governance The recession has made end-user client organizations aware of the ways in which their own data management tactics are creating unnecessary cost. The drive for cost reduction, coupled with the pressures of e-discovery and regulatory actions, have raised awareness of the vast amounts of digital information that companies hold. Many of the vendors in the e-discovery space come from an information management background. The archiving and content management vendors, along with the information access vendors, are positioned to help their clients with technology to support better information governance. Many IT organizations have used the e-discovery driver to raise awareness with upper management that the "digital landfill" currently under their control must be dealt with to reduce the associated costs and risks. This is corroborated by Fulbright's Publication Date: 21 December 2009/ID Number: G Page 10 of 27

11 sith annual Litigation Trends survey, in which lawyers said that increasing scrutiny of legal costs had caused them to rethink both discovery and information management issues, with about one in seven saying they were "using other methods" to decrease the cost of e-discovery. Interestingly, a very common and, we think, ultimately futile approach to this has been to block access to social networking sites. As the number of companies that find it difficult or impossible to keep the content from social media sites out of the courtroom, we epect more will have active retention and usage policies that will again rely on good governance methods to work. When enterprises have dealt with their most urgent e-discovery issues, they are turning their attention to the larger subject of information governance. The net focus of end-user organizations will be using technology, people and process to manage legacy information, as well as to control more effectively the creation of data and content on a "go-forward" basis. The market for information governance products will overtake and subsume most of the vendors in the e-discovery market within the net five years, although a much smaller stand-alone market of pure-play vendors will remain. Enterprises are continuing to acquire e-discovery tools tactically but are increasingly guided by a strategic framework. Those vendors that have capabilities across the discovery spectrum (from identification through production) will be best positioned to take leadership of the e-discovery market. E-discovery projects are being seen in the contet of an overall information governance or enterprise information management strategy. Achieving full proactive control of all data which is the ultimate answer to legal challenges will take at least five years, given the scale of the problem. Gartner encourages clients to view e-discovery solutions in this way, as reflected in the EDRM itself, which starts the discovery process with the task of "information management." For most companies, full control over all the data they hold is several years away. However, e- discovery can serve as a driver to jump-start a program that will eventually reach every part of the enterprise and that will have quantifiable business benefits. Evidence is growing that corporations are trying to reign in legal spending "at the source" by adopting new strategies to deal with regulation. Initially, this will mean an increase in law firm work, but the ultimate goal will be to reduce overall legal spending by making sure regimes are in place to manage all information, particularly legal and regulatory information, in a more systematic way (see Note 5). Against this background of increasing enterprise interest in information governance, success will be more elusive for new players, as user behavior changes subtly. E-discovery requirements have proved to be a powerful factor in forcing companies to think about the way they manage electronic information. As the scope of the legacy information management problem became clearer, IT eecutives, lawyers and corporate officers became aware of the vast amounts of money they spend on keeping data that is not in any way useful from a current business perspective. The recognition that information governance (including RM, archiving, content management, storage management and other technologies) must become an area of focus to control cost and risk is changing the market for e-discovery software. User wants and needs are beginning to coalesce around these components, but most organizations are too immature in their information management and governance practices to take advantage of them. Rule and policy development are prerequisites for making information governance work, and human resources must be dedicated to formulating and implementing policies. The vendor's governance platform components will be ready before companies are ready to take advantage of them. More Granular Market Coverage Gartner is moving to segment the e-discovery market into three distinct elements. The first is e- discovery software that speaks to the products behind the firewall products, which are covered in this report. Gartner has published two previous MarketScopes on this segment. The second Publication Date: 21 December 2009/ID Number: G Page 11 of 27

12 segment of the e-discovery market on which we are focusing is hosted/software-as-a-service (SaaS) solution providers. These are the vendors that provide primarily processing, review and analysis via either a hosted platform or a SaaS model. Finally, the third segment we will be eploring is e-discovery professional service providers. These are primarily consulting companies that help the enterprise by providing the needed epertise and staffing to meet e- discovery needs. They often leverage e-discovery software, as well as hosted/saas, as part of their service delivery model. Inclusion and Eclusion Criteria To be included in this MarketScope, a vendor must meet the following criteria: Have a software product that can be licensed for implementation and use inside a company's firewall or by a third-party service provider. Cover at least three of the functional areas of the EDRM. Have e-discovery-related product and maintenance revenue of at least $15 million. Added Vendors We added EMC, CT Summation (Wolters Kluwer) and Concordance (LeisNeis) to this year's MarketScope. EMC's acquisition of Kazeon means that the two are now evaluated together. Dropped Vendors We dropped Nui from this year's MarketScope as it did not meet the revenue criterion. We dropped i365 as the company has effectively eited the market. Rating for Overall Market/Market Segment Overall Market Rating: Positive. The necessity to react effectively to requests for information and subpoenas is forcing this market to grow swiftly (see "Dataquest Insight: E-Discovery Market Drives New Search, Content and Records Management Investments"). Users must navigate a confusing collection of vendors with conflicting ambitions, but the criticality of represented functionality will attract significant spending. In addition, large vendors have entered the market either organically or through acquisition. Clients have reported that they have saved money on storage, legal discovery services and spending on outside law firms by purchasing e-discovery software this year. The Positive rating is also based on the many vendors that have entered the market in the past three years, either with new functionality or by relabeling or finding new uses for eisting products. Our own numbers, based on vendor surveys, indicate that vendor revenue is growing by 35% a year. The reasoning behind the rating being Positive and not the highest rating, Strong Positive, is the sensitivity of the market to eternal conditions, namely judicial scrutiny. We have also seen companies and law firms changing their tactics and the overall volume of litigation decreasing because of the ecessively high cost of e-discovery. More cases are settled out of court and more are using alternative dispute resolution. The number of vendors involved and the remaining uncertainty over which way companies will choose to manage their data in the long term prevents us from rating this market as Strong Positive. Publication Date: 21 December 2009/ID Number: G Page 12 of 27

13 Evaluation Criteria Table 1. Evaluation Criteria Evaluation Criteria Comment Weighting Overall Viability (Business Unit, Financial, Strategy, Organization) Customer Eperience Market Understanding Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product, and will advance the state of the art within the organization's portfolio of products. In the e- discovery market, quality of partnerships is vital in overall viability. Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on. Ability of the technology provider to understand both the legal professional's and the IT department's needs and to translate these needs into products. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those wants with their added vision. Market understanding in the e-discovery market includes thought leadership activities, such as participation in The Sedona Conference or the Electronic Discovery Reference Model group. Because of the strong tie that vendors must necessarily have with the legal community, we see such memberships and participation in forums that include both IT and legal professionals as vital to understanding present conditions and future direction. High High High Publication Date: 21 December 2009/ID Number: G Page 13 of 27

14 Evaluation Criteria Comment Weighting Sales Eecution/Pricing The vendor's capabilities in all sales and presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support and the overall effectiveness of the sales channel. The industry has several pricing models that should be reflected here. Straightforward enterprise licenses and named user licenses are still important, but pay per use is a model that suits the e-discovery industry particularly well. Standard Offering (Product) Strategy Product/Service The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements. In the case of the e-discovery market, adherence to the EDRM has been important, but as it is evolving, we epect vendors to be able to anticipate features and feature sets that do not necessarily reflect the standard model as it is now. Core goods and services offered by the vendor that compete in/serve the defined market. These include current product/service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria. Partnering for the right combination of features is especially important in the e- discovery market. Standard Standard Publication Date: 21 December 2009/ID Number: G Page 14 of 27

15 Evaluation Criteria Comment Weighting Sales Strategy The strategy for selling products Standard that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that etend the scope and depth of market reach, skills, epertise, technologies, services and the customer base. The e-discovery market has many channels that can be eploited. Vendors must have their resources aligned with the best channels and eploit as many of them as are viable, given resource constraints. Source: Gartner Figure 2. MarketScope for E-Discovery Software Product Vendors RATING Strong Negative Caution Promising Positive Strong Positive AccessData Anacomp Autonomy CA Clearwell CommVault CT Summation EMC FTI Technology Guidance Software IBM LeisNeis Mimosa Systems Open Tet PSS Systems Recommind Symantec ZyLAB As of 2 December 2009 Source: Gartner (December 2009) Vendor Product/Service Analysis AccessData Founded in 1987, AccessData is a privately held company that has been addressing the e- discovery market since 2003, with a workforce of 170. Its software focuses on the identification, Publication Date: 21 December 2009/ID Number: G Page 15 of 27

16 preservation, collection and processing phases of the EDRM. The AccessData product is well known to law enforcement officials and courts as a forensic data collection tool. AccessData can collect from a range of data sources, including desktops. Its search methodology supports multiple relevancy models and multiple file-culling methods and concepts. AccessData is able to do identification and collection on the basis of its distributed technology, which allows IT administration to place hidden agents on individual workstations. A high percentage of its customers are using these capabilities in support of multiple types of investigation (inappropriate activity, remote intrusion, e-discovery), and it would be valid to characterize them as generalpurpose discovery and forensic engines. AccessData differentiates itself on the basis of its forensically sound collection methods, market longevity and presence in many organizations, particularly in the law enforcement field. Identification, preservation and collection are difficult and technically comple parts of the process and AccessData's ease of use in these areas is a differentiator. It added early case assessment in The company must epand its sales and marketing efforts to remain viable. AccessData's main competitors are Autonomy, Clearwell, EMC (Kazeon), Guidance Software and StoredIQ. It was rated Positive in last year's MarketScope. Rating: Positive. Anacomp In business since 1968, Anacomp is a public company that has been addressing e-discovery since 2007, following its acquisition of CaseLogisti. It employs 600 staff. Its EDRM focus is on processing, review, analysis and production, but its e-discovery is an element of a broader product line, including document archiving and retrieval. The vendor has a good understanding of the legal end user and is highly rated among its service provider partners. CaseLogisti can ingest and eport a wide range of file types and indees. It supports native file review for hundreds of file types, including audio and video, without third-party applications. Collection and search are facilitated through embedded dtsearch, augmented by integration with key technology partners. CaseLogisti is offered in both on-demand and on-premises models. Anacomp's epertise in hosting and managing large amounts of unstructured data, its data center presence in the U.S. and Europe, and presence in law firms are advantageous. It has recently epanded its functionality to include early case assessment and advanced content analytics. It must work to penetrate more corporate legal departments, as well as leverage its integrated document archiving and retrieval customer base and data to differentiate itself in the ever-more crowded ondemand model for review and analysis. It competes primarily with other on-premises and hosted processing, review and analysis platforms. The vendor was rated Promising in last year's MarketScope. Rating: Positive. Autonomy Autonomy is a public company with 1,400 employees. Its products have been addressing e- discovery (Introspect) since The suite covers all aspects of the EDRM: information management (Zantaz archiving, Interwoven document management and Meridio Records Management), identification, preservation and collection (Aungate Legal Hold), processing, review, analysis and production (Introspect). Autonomy has grown organically and through acquisition. It has an unmatched range of connectors and a sophisticated, tunable relevancy model that includes being able to search audio and video. Stellar marketing, an aggressive sales style and multiple use cases have made Autonomy a formidable competitor, appearing in all categories of e-discovery deal types. Software is available both on demand and on premises. Third-party service providers (Huron Consulting, Deloitte and Ernst & Young) have used it to build on-demand services. Autonomy has become a comple vendor with many offerings that cover all Publication Date: 21 December 2009/ID Number: G Page 16 of 27

17 aspects of the EDRM, so client eperience depends on which products they buy. An ongoing commitment of technical resources is necessary to success for enterprise-scale implementations, but other more limited implementations (for eample, EAS archive) are simpler to run. Depending on the components a company chooses, implementation can take between one and si months or longer. Autonomy competes effectively with PSS Systems, Guidance Software and StoredIQ. Because of its range of functionality, Autonomy also competes with Clearwell, Symantec, IBM, EMC (Kazeon) and CA. Autonomy is rated in "Magic Quadrant for Active Archiving," "Magic Quadrant for Enterprise Content Management," "Magic Quadrant for Information Access Technology," "MarketScope for Records Management" and "Magic Quadrant for Web Content Management." It was rated Positive in 2008's MarketScope. Its breadth of functionality, appearance on client shortlists and improved client references have moved it to Strong Positive. Rating: Strong Positive. CA CA is a public company that entered the e-discovery market in 2005 with its purchase of ilumin and subsequent acquisition of MDY. CA's coverage of the EDRM includes information management (archiving and RM), identification, preservation, collection, and processing. It has recently added analysis, review and production. CA has approimately 200 employees focused on e-discovery. CA's archiving products are not market share leaders, but are not far behind those of IBM or Autonomy, which has enabled it to become an information management player. It is particularly strong in government. CA has both on-demand and on-premises models. CA's approach to holistic control and disposition of physical, electronic and content via a single policy engine for enterprise content is a strength for organizations with disparate content sources. As with other platform players focused on governance, CA depends on clients wanting to do the right thing regarding information governance. As a visionary vendor with an information governance message, CA's best performance may be ahead of it, but it needs to gain more traction for its foundation platforms, particularly archiving. Because archiving is still the primary driver for clients that wish to move to more comprehensive information governance, Symantec remains CA's strongest competitor, along with Autonomy (Zantaz), and EMC. CA is rated in "Magic Quadrant for Active Archiving" and "MarketScope for Records Management." The vendor was rated Positive in last year's MarketScope. Rating: Positive. Clearwell Clearwell is a privately held company, with approimately 100 employees, focused solely on e- discovery, covering the identification, processing, review, analysis and production phases of the EDRM, along with early case assessment. Its product is offered as an appliance and is quick to install and use, with most users reporting that it took only hours or minutes to install. Clearwell's fast-to-install and easy-to-use enterprise appliance model gives it clear advantages to organizations that are under pressure to have data processed on time. Clearwell's go-to-market strategy has been strengthened by its developing partner network, including e-discovery service providers that offer Clearwell in a hosted SaaS model. It has a highly scalable implementation model, a strong understanding of the market and a proof-of-concept methodology that allows users a free software trial before they purchase. Clearwell's recent product announcements have epanded its capabilities to cover the identification, review and production parts of the EDRM, and demonstrate that the company has an understanding of customers' wants and needs. Clearwell must continue to epand its functionality to encompass more of the EDRM in order to maintain its strong market position. The vendor was rated Strong Positive in last year's MarketScope. Publication Date: 21 December 2009/ID Number: G Page 17 of 27

18 Rating: Strong Positive. CommVault CommVault is a public company. Its Simpana software addresses the information management (archiving), identification, preservation and collection aspects of the EDRM, along with review, analytics and production. It has been in the e-discovery market since 2005 and has 1,100 employees, with 100 focused on e-discovery. CommVault is a data and information management software vendor that, in recent years, has etended its archiving and data protection capabilities with search and analytics functionality to provide e-discovery capabilities in its archive. It incorporates Fast Search & Transfer (acquired by Microsoft in early 2008) to enhance its indeing and search capability. It is unique in that it can search backups and archives as a single repository. CommVault has a growing customer base in e-discovery, underpinned primarily by its backup and archiving. It has a particularly wide range of file types and sources that it can collect, archive and inde. CommVault's vision is etensive, as it aims to be a complete information governance platform. The compleity of its product and features may prevent clients from seeing its true capabilities. Currently, it succeeds primarily in situations where it is already an incumbent backup and recovery vendor. By positioning itself as a platform player, its competitors are Symantec, EMC, Autonomy and IBM, formidable companies with large marketing budgets. CommVault is rated in "Magic Quadrant for Active Archiving." This vendor was rated as Promising in last year's MarketScope. Rating: Promising. CT Summation CT Summation its parent company is Wolters Kluwer has been providing litigation support products since 1988 and has approimately 130 people working in its e-discovery division. CT Summation was one of the first litigation support databases adopted by law firms and is thus very familiar to much of the legal community. CaseVault and Discovery Cracker are processing, review, analysis and production tools, applications aimed at legal end users. Its current customer base is dominated by law firms, with only a very small percentage of corporate clients. Concordance is well entrenched with lawyers and paralegals and, given its cost-effectiveness, will certainly remain an important review tool for small to midsize document sets. With a longestablished place in the litigation support market and historically having only one or two competitors, CT must revamp its products and strategy to meet the demands of the highly competitive market space in which it now finds itself. The product is new to the MarketScope this year. The Promising rating does not reflect Summation's current status in the legal community, which is strong, but rather the significantly changed competitive landscape of today's e-discovery marketplace. Rating: Promising. EMC EMC has revolutionized its position in the e-discovery market. In April 2009, with the release of SourceOne for archiving, with additional e-discovery management modules, the company made it clear that it was serious about the e-discovery and information governance markets. The recently closed acquisition of Kazeon to cover the identification, collection and legal-hold capabilities outside the archive will enable EMC to compete against the most capable vendors in the e- discovery market. EMC's Documentum product family, which includes RM, is widely deployed in heavily regulated industries, the same industries most in need of end-to-end e-discovery capabilities. EMC's acquisition of Kazeon is confirmation of the trend that e-discovery must become part of infrastructure vendors' offerings, as enterprises seek short-term tactical solutions to their most pressing e-discovery issues, along with a longer-term strategy of better information Publication Date: 21 December 2009/ID Number: G Page 18 of 27

19 governance. EMC has a solution that covers information management through processing and that allows for early case assessment. Along with its worldwide sales and marketing teams, which include a unique legal and technology sales team, EMC is now a formidable competitor in the e- discovery market. EMC is rated in "Magic Quadrant for Active Archiving" and "Magic Quadrant for Enterprise Content Management," Kazeon is rated in "Magic Quadrant for Information Access Technology," and EMC's RM product is covered in "MarketScope for Records Management." EMC was not formally rated in last year's MarketScope, while Kazeon was rated as Positive. Rating: Positive. FTI Technology FTI Consulting is a public company that was founded in 1982 and has more than 3,000 employees, approimately 550 of whom work in the FTI Technology practice. FTI owns the brands Ringtail and Attene, which were integrated in 2009 to provide processing, analytics, review and production. It seeks to sell both on-premises software and to provide hosted services. Gartner regards this as a good strategy, as many companies will need both on-premises and hosted solutions, with the hosted solution providing a growth driver for on-premises solutions and vice versa. FTI's partner channel has shrunk, but with more focus on revenue-producing partners, this is not a negative development. There are still many providers that do not have their own technology, that address different market segments or have otherwise overlapping but not wholly competing businesses. As service providers begin to require more commercial off-the-shelf software, rather than doing development themselves, FTI has an opportunity to grow its partner channel significantly. Being both a services and a product business is difficult, but FTI seems to be performing well so far. Its technology offerings, revenue growth and road map position it for continued positive performance in It has recently added an in-house appliance-based offering that will allow early case assessment, moving it to the left in the EDRM, where Gartner believes there will be strong growth for product vendors. FTI was rated as Strong Positive in last year's MarketScope. Rating: Strong Positive. Guidance Software Guidance is a public company with 410 employees. Its EnCase product has been in the e- discovery market since EnCase Enterprise searches, collects and preserves data for e- discovery, and EnCase ediscovery can be used for identification, preservation, collection, processing and producing load files for review platforms. Guidance is able to do identification and collection on the basis of its distributed technology, which allows IT administration to place hidden agents on individual workstations. A high percentage of its customers are using these capabilities in support of multiple types of investigation (inappropriate activity, remote intrusion, e-discovery), and it would be valid to characterize EnCase as a general-purpose discovery and forensic engine. Guidance's products are well known to law enforcement officials and courts as a data collection tool. Their ability to reach every node in a network, including desktops, make them a well-known collection and processing tool among e-discovery service providers, as well as enterprises. Guidance sells a "single user version" and an enterprise version, both delivered onpremises. The interface and implementation were revised late in 2008 to make them more "lawyer friendly." It has also released a litigation-hold-tracking module. Guidance's main competitors are AccessData, Autonomy, EMC (Kazeon) and StoredIQ. Guidance was rated Positive in last year's MarketScope. Guidance's performance in 2009 takes place against a background of positive but difficult change within the company, as it moves from a technology-led to a marketing-led organization. Changes to pricing models and sales strategies have not yet had Publication Date: 21 December 2009/ID Number: G Page 19 of 27

20 their full effect but demonstrate willingness to adapt and compete in a fast-changing market. These strategic changes had a positive impact on the company's performance in 2H09. Rating: Positive. IBM IBM entered the e-discovery market in 2002 with archiving and RM, formally adding ediscovery branded modules in As with other large companies, a breakdown of the numbers of employees devoted to e-discovery product development and sales, along with revenue, is not available. IBM is committed to the e-discovery market and has demonstrated that with investment in technology, marketing and partnerships in the past three years. IBM provides an e-discovery product (IBM InfoSphere ediscovery Manager [edm]) for collection, classification, RM, search, search refinement, case foldering, release/hold management, and native and EDRM XML eport for production. Based on the same platform, IBM is able to collect files from file servers and also from desktops. IBM InfoSphere ediscovery Analyzer (eda) provides analytics capabilities, purpose-built for attorneys, paralegals and litigation support specialists. These analytics offerings, which are a strong differentiator for IBM, also support early case assessment. It partners with PSS Systems (Atlas) for litigation-hold-tracking functionality. Because IBM provides information infrastructure components for so many companies, its discovery products should at least be shortlisted for clients that use its content management, archiving or business application platforms. IBM has consolidated various pieces of functionality for a more straightforward offering, although its offering remains a multiple product or module purchase. IBM is rated in "Magic Quadrant for Information Access Technology," "Magic Quadrant for Enterprise Content Management," "Magic Quadrant for Active Archiving" and "MarketScope for Records Management." The vendor was rated Positive in last year's MarketScope. Rating: Positive. LeisNeis LeisNeis its parent company is Reed Elsevier acquired Concordance in Concordance had been one of the first litigation support databases adopted by law firms and is thus very familiar to much of the legal community. Concordance and LAW are processing, review and analysis tools, applications aimed at legal end users. They are also widely used by hosted service providers. The current customer base is dominated by law firms, service providers and government agencies that do investigations and prosecutions. Concordance is described by its legal end users and service providers as a necessary tool but one that does not meet 100% of their needs. Concordance is well entrenched with lawyers and paralegals and, given its costeffectiveness, will certainly remain an important review tool for small to midsize document sets. Its current strategic plans for product, marketing and sales direction recognize the dramatically different e-discovery marketplace in which it now competes. LeisNeis has announced that Concordance is undergoing a major upgrade and is adding significant new functionality, including early case assessment, litigation hold/hold tracking and a Web client in a series of planned 2010 releases. The product is new to the MarketScope this year. Its Promising rating is a reflection of its current status in the legal community and its strategic direction in response to significantly changed market conditions. Rating: Promising. Mimosa Systems Mimosa was founded in 2003, has 240 employees and is privately held. Mimosa is an archiving vendor that has etended its capabilities to include several other file sources, including SharePoint, desktops and file archiving. It covers the information management, identification, Publication Date: 21 December 2009/ID Number: G Page 20 of 27