The Gartner Magic Quadrant for EDiscovery Software and other EDiscovery Market Matters

As I have often said, I am content to stick to my own part of the e-Disclosure / e-Discovery world and leave others to theirs. Deciphering market trends is the job of analysts; journalists can react quickly to news; the clammy dead hand of the industry press release, with its boilerplate verbiage and breathless hyperbole, can find its way round the world in minutes without any help from me; earnest lawyers can deal with properly foot-noted and referenced reports of cases. My role requires me to pull together such of the threads as will encourage lawyers to make the best use of the rules and of the technology to reconcile their clients’ objectives with the requirements of the courts, helping them to understand just enough of the technology to know what is available and broadly what it does.

May is always a busy time, thanks to IQPC’s information Retention and eDisclosure Management Summit in London and Guidance Software’s Computer Enterprise and Investigations Conference (CEIC) in the US, both of which always take place back to back on opposite sides of the world; one year found me rushing straight from Gatwick to IQPC, where I was caught sleeping through a session – fortunately, not one of my own.

This May has brought in addition the Gartner Magic Quadrant for E-Discovery Software, Autonomy’s acquisition of Iron Mountain’s digital assets and Symantec’s purchase of Clearwell, all on top of Epiq Systems’ acquisition of Encore Discovery Solutions in April. Tens of thousands of words have been written about these things, any one of which would be significant in any month, let alone all of them together. What do they mean for the lawyer, whether in-house or external, who has responsibility for managing electronic disclosure? Is there much to add to what has already been said?

Probably not, but it is worth gathering some of the threads together, using the Gartner Magic Quadrant as a background source. Gartner’s authority in this area needs no endorsement from me, and it is probably not necessary for me to say that I know both the authors, Debra Logan and John Bace. I am, of course connected with many of the names which appear in the Magic Quadrant as well as many who do not. Having pointed you to it, I do not feel the need to mention everyone who appears in it, sticking with those which illustrate some point beyond their bare appearance there.

The Magic Quadrant is formally described as a “Core research note” but I will be forgiven if I refer to it loosely as “the report”. Be aware that in the copies I have seen, there is some duplication of content between pages five and seven. It can be downloaded from, for example, the Nuix and Clearwell web sites, and the primary graphic, the Quadrant itself, appears below.

Gartner Magic Quadrant

The Quadrant itself is designed, in theory at least, to diminish the appearance of a ranking. There is no doubt that the word “Leaders” indicates that the top right-hand corner is the best place to be. Thereafter, the axis labels notwithstanding, it is hard to say which of “Challengers”, “Niche Players” and “Visionaries” are the bronze and silver rating. I have not tracked down every player’s reaction to the report, but Epiq Systems’ reaction to their ranking as a niche player, for example, suggests that they are perfectly content with that designation. As I suggest at the end, we will need the niche players when the consolidation predicted by Gartner is worked through; Challengers and Visionaries keep the market on its toes. The short message (to anticipate something else covered below) is that you should not use the Magic Quadrant’s categorisation to dictate buying policy, though its apparently even-handed summaries about the companies will help point to the providers whose offerings match your requirements.

Whilst you have these names in front of you, incidentally, be aware that (as mentioned above) there have been market changes affecting the conclusions: the report anticipated an Iron Mountain assets sale to somebody, but the Symantec / Clearwell deal came from the sky for most of us. The next round of the process of consolidation referred to in the report is already on its way – a whole page is devoted to listing recent ones.

Bear in mind also that this is a report on ediscovery software vendors and the names, numbers and predictions, including the estimate that the revenues should reach $1.5 billion in 2013, reflect that.

Much of the report is taken up with a careful recital of the definitions and criteria for inclusion and exclusion, with a table of recent acquisitions, a list of important US court decisions, and the descriptions of each of the players. There is a succinct history of the development of the industry and a recital of the pressures which will influence the development of the market. The passages which I quote or refer to below are not necessarily more important than any others, merely ones which caught my eye:

“A business imperative drives demand for this software, yet the profession demanding it is often slow to understand and adopt technology.”

“Predictive Coding technology employs unique workflows that change the way review is performed, but this kind of automated review has yet to be widely accepted by the legal community.” This, of course illustrates the point above about lawyers being slow to understand and adopt technology despite the obvious business imperative to do so – I have an article coming up on this.

“By 2014, consolidation will have eliminated one in every four enterprise e-discovery vendors.”

“Vendor revenue is concentrated in the U.S., which accounted for 87% in 2009. But growth will occur 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.”

“Legal departments still rely on outside counsel to advise – or sometimes tell – them which SaaS providers to use. Even when outside counsel is not involved, legal departments still want to avoid involvement with enterprise IT departments or to form their own IT departments……. The source of the friction here is twofold. Legal staff have never before had to involve IT staff in these decisions, and in some cases they view them as unresponsive or obstructive because of implementation cycle times. Procurement staff, for their part, are struggling to understand the pricing, service and support models historically used by legal service providers.”

Note the “Four groups of buyers of e-discovery products and services” on page 4/5

If you are responsible for any aspect of information management, including legal and compliance matters, read the section headed Likely Future Market Directions on page 5 and in particular this:

“Unlike other technology markets, the market for e-discovery products and services is not being driven simply by market forces and technological innovation. National and international regulations, laws and judicial decisions also influence it, sometimes greatly – and decisions made by regulators, lawmakers and judges – not always informed by an understanding of technology – often have unintended consequences.”

From the section Evaluation Criteria on page 9, note in particular the emphasis on support, on continuity of personnel, on knowledge and understanding of the market in which the software is to be sold, and on the quality of marketing materials and programmes. My own gloss on this is that poor marketing has an adverse effect on everyone, not just on the company which sends out drivel ‘n hype in place of clear explanations of benefits.

Note the definitions, starting on page 11, of what the four Quadrant definitions – Leaders, Visionaries, Challengers and Niche Players – mean in the context of the report.

There is a great deal of learning and research crammed into the Quadrant’s few pages, and any law firm or company which is considering the purchase of ediscovery software should read it, as much for its understanding of the market as for any express or implied recommendation. The companies which appear in it have met stringent requirements to feature at all, and none is to be ignored when considering your own requirements. No potential buyer can examine every possible contender and requirements are surprisingly diverse. There is a human element even within the largest of these companies and, as prices both reduce and even out, and as the technology outstrips the ability of most lawyers to use all of it properly, that human element should be a serious factor in comparing the players. The young thrusters amongst them may appeal to some buyers more than the established giants and if your requirement is a niche one then a niche player may be just what you need; the biggest players offer potentially more touch-points within some organisations. Do you like the people? Do you trust them to be there when the deadlines loom? Do they understand your organisation and the market in which you work, or are they just selling the stuff? Do they have happy clients – or unhappy ones – whose scale and business and needs are similar to yours?

The question which of them will be the acquirer or the acquired in the coming consolidation is probably not the dominant selection criterion. Your instinct may be to back the potential acquirers but (apart from the difficulty of accurate prediction in this regard) those who aim to be acquired will need a strong base of repeat clients to attract the best price, and that may work through in good deals and strong support.

What can we learn from the developments which have actually taken place recently? Nuix has just been the recipient of a large investment which has consolidated shareholdings and is expressly targeted at growth. Iron Mountain’s retreat was from huge ambitions, and seems to have been driven by out-of-market shareholders, perhaps before it had had time to capitalise on its investments in a crowded market. You may find the attached article by Garry MacFadden on Iron Mountain’s new strategy is helpful in this context. My Twitter list continues to be full of Iron Mountain articles about ediscovery and, whilst the sale takes them out of the software market, the strong services division could remain a strong player. Reculer pour mieux sauter, perhaps.

Symantec’s acquisition of Clearwell is a less complicated and more obvious guide to the future. Symantec’s strength lies in e-mail archiving, where a company’s problems begin, and for the cost-driven and compliance-aware decision-makers, that matters. Symantec had already set off down the road towards ediscovery, fortified, as Gartner says, by “thought leaders and specialised sales personnel” as well as “a broad base of customers”. IBM, EMC and others also fit this pattern and have the requisite purchasing power. You may care to read the acquisition presentations of Symantec and Clearwell, together with a thoughtful article by Greg Buckles on the eDiscovery Journal site.

Not everybody will want to buy a cradle-to-grave solution from a monolithic supplier. The need for a light-on-its-feet niche player whose role begins when the litigation starts or the regulator arrives can only be enhanced by the disappearance of rivals who are swallowed up by the archiving giants. Gartner makes adverse reference to the ability of some of the players, particularly the big ones, to get their marketing messages right across all their products and services. When you have everything to sell, you try to sell everything, and can easily lose the message that part of your offering, perhaps acquired by purchase, has strengths of its own independent of its place in an end-to-end offering. Symantec will want to retain the strong brand identity of Clearwell if it is to retain a stand-alone presence in Clearwell’s present marketplace. If it does not, then someone else will fill that space. Perhaps the niche players’ best time has yet to come.

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