Loading ...The Daegis acquisition by Unify caught my attention this morning as I was coding the latest batch of news and blogs from the eDJ search engine. After the 2009 slump, I expect to see a string of consolidation and acquisition within the eDiscovery market. Knowing some of the talented folks at Daegis (including some of the best of SPI), I did not expect them to be acquired for a 1.5 multiplier. That was a shocker. Daegis reported $24 million in revenue with a healthy 27% profit for fiscal 2009. That was pretty good for last year. So why did they accept $38 million in cash, notes and stock? They are advertising it as a merger and taking the Daegis name, which indicates that they are going after the corporate eDiscovery market as opposed to the corporate archive or database support market. If that seems confusing, consider that Unify specializes in database management and migration software. Unify acquired AXS-One for $8 million in stock last June. AXS-One seemed to be struggling in the archiving market, which has been consolidating for a while.
The story around the acquisition is that the new company will be positioned to offer integrated archiving through production to corporations. The Daegis consulting team and DocHunter will certainly give them a well supported review and production offering, but legal search and collection from an archive is much more than connecting to an API. I am afraid that I have to disagree with the Ferris Research blog’s assertion that the marriage of case management and archiving is a new story. Autonomy, Symantec, EMC and others have long since added corporate discovery components to their archives. I hope that the Daegis team can drive eDiscovery workflow and legal requirements into the integration development and bring some new synergy to the market.
No one questions that we are in a consolidating market and last year certainly accelerated the trend. Pure play service providers who have been riding high on per-GB pricing have fallen on hard times. But I think that innovative providers who have invested in developing their own IP like Daegis, Planet Data, Lateral Data and others should be able to transition from service to software if they play their cards right. I am disappointed with the Daegis multiplier, but the true value of deals like this are better evaluated after a year or so.
HI Greg,
Don’t be to blindsided by the multiplier. I think Daegis is practicing a little of seeing the forest beyond the trees on this merger decision. I was the person who recommended this class of acquisition to Unify while I was still with them, so I’m positive that given the right post merger co-management that they will be well positioned to capitalize on a broader portfolio of offerings and customer “stickiness”.
The inherent problem with the archive business, is as it got pulled more and more into the world of eDiscovery all of the other eDiscovery components became pertinent, so what was happening was; that the archive solution was doing all of the heavy lifting of crawling lots of sources, analyzing, collecting, indexing, storing, managing retention, managing storage API connections, searching, supervising, etc. etc. and note storing is “complicated” search is “complicated”, crawling multiple systems such as Notes, Exchange, File Systems, etc. is complex, especially when you are dealing with hundreds of GB sometimes TB’s in a single day for processing and potentially 1000’s of Exchange and Notes targets around the world. Anyway, after the archive vendor does all of the heavy lifting, what happens? The customers uses the archive to extract data for a few custodians and exports the data and then they use Clearwell, or other, for review and further downstream processing; review vendors like Clearwell were getting more if not equal license revenue, and more services revenue, for less work, less sophistication, etc.
It was a logical step for the archive vendor to embrace the review process (i.e. Doc Hunter) and “build it in” to the archive, so that was the data stays resident in one place all the time, and the customer is dealing with one vendor across the board. Not to mention the potential cost savings for document review, especially in serial litigation. Currently, firms are paying to have the exact same document reviewed over and over again across matters, because each matter is treated independently as a single project. By using the single corporate archive in tight integrated “built in” conjunction with the review process, you will know if document one is marked privileged in matter one so when matter two comes up and that document is part of the same collection you [more than likely] don’t need to review it again; the potential cost savings to major corporations with heavy litigation is in the millions upon millions! Not to mention that this merger stops the leakage of revenue seeping out to other vendors in the overall value chain.
“He” who owns the data, should logically be the king of the mountain, but without the review component Unify/AXS-One was just a collector and holder of the data and then a data router to other systems, and over time the other systems would incorporate archive (the ability to keep things for a long time with assurance, readability, accuracy, chain of custody, etc., not just store files on a file system or database) and then eventually fork lift AXS-One/Unify out of the account. This merger prevents that and once the review process is “built into the archive” increases the customer stickiness and keeps more overall customer wallet share. It’s good for the customer and the vendor, a win win.
But, this is just step number one. There are a few more to take a real leadership position left to do.
Also, agree 100% on your note re: Ferris Blog, we at AXS-One had incorporated full blown case management and records management across every object (billions) that were resident in the archive back in 2005. The stand-alone case management vendors are still falling away, and becoming a dying breed. The first was when MDY got gobbled up by the software company collection firm CA. MDY suffered from being a great records management company with no durable repository. The same happened to Illumin, they found out to late that Centera did not equal a real-long term repository. More pure plan legal case management vendors will find themselves in the same predicament.
The one common thing that legal discovery had with Archving technology, is that you have to keep files around for a long-time, the retention periods can span 20+ years easily, and with that the data has to be maintained so its readable 20 years from now, so all of the storage sundries around physical and logical migrations come into play, this is where the AXS-One technology will continue to have a huge advantage, they have been in that space for the largest companies in the world for two decades now.
The overlaying of domain expertise should make things start to pop.
Best regards,
Peter Mojica
http://www.csi1000.com
July 6, 2010 at 11:41 am
pmojica
Member Type: Corporate | Role: Consultant | Size: Solo | Years of Experience: 25
Peter,
Great feedback! I love hearing from folks on teh ground floor of these deals. Too often we try to analyze things based on press releases and historical knowledge without all the pieces. I will be looking forward to see what comes from the merger. Daegis has a great talent pool and AXS-One has the time and chops in the archiving market.
Archive platforms have had discovery search, review and case management tools for over 10 years now, although the typical workflow has been to hand off the email to a more traditional review platform hosted by the firm/vendor. I did the design work for Symantec’s Discovery Accelerator back in 2000. The value proposition has always been there, but it takes a mature corporate legal department to be willing to manage the process and not abdicate ownership.
One step at a time.
Greg Buckles
July 6, 2010 at 10:19 pm
Greg Buckles
Member Type: Other | Role: Consultant | Size: Solo | Years of Experience: 22 | Certifications/Licenses: court certified expert witness