Are The Winners And Losers In The eDiscovery Software Market Already Determined?

Migrated from eDJGroupInc.com. Author: Barry Murphy. Published: 2012-05-22 09:58:47  An interesting question came up during an internal meeting of eDJ’s analysts last week:  Are the winners and losers in the eDiscovery software market essentially already determined?   (Or at the very least, is the winning pool of candidates firmly established?)  For so long, a large number eDiscovery software vendors competed in the market and it felt like there would be rounds of consolidation.  Some commoditization has occurred, but not as much as we thought would have by this point.The eDiscovery market is a complex one.  Not only are there distinct types of consumers (e.g. corporate and law firm) with diverse and often conflicting needs, but there are also many categories of vendors.  There are pure-play vendors that offer very specific functionality (e.g. near-deduplication).  There are vendors that offer various modules in an effort to address as much of the eDiscovery lifecycle as possible.  There are vendors that offer software only, and there are vendors that offer services only.  These service providers may leverage their own technology, the technology of partners, or a combination of both.Understanding who is winning versus who is losing can be complicated, especially since many vendors are private and do not disclose revenue.  To analyze the market, eDJ looks at a variety of sources of information gleaned from the vendors themselves in briefings, the feedback we hear from end-user clients during inquiries and other interactions, the cumulative experiences of the eDJ Group’s consultants, the folks on the ground helping clients optimize information governance (IG)and eDiscovery programs, what we hear from our venture capital and private equity contacts, and other public sources of information.Initially, some strange signals eDJ’s Consulting Group got during a recent engagement prompted this question to come up in the first place.  eDJ’s Consulting Group is in the process of helping a client with an RFP process for a legal hold notification management system.  We worked with many of the vendors we know to offer hold management modules/products to get the RFP to them.  Surprisingly, many of them declined to respond, saying that legal hold notification management was not a true focus of their business.  That is a strange signal given that a.) these vendors offer products in this area and, b.) the project could evolve beyond legal hold notification management.  Our collective antennae went up—we had to wonder if perhaps these vendors were giving up on the eDiscovery space.Looking further out at the market, there seem to be some vendors retrenching into peripheral markets, and others that seem to be dropping off the radar altogether or not pushing the eDiscovery story very hard.  For example, many vendors are trying to get ahead of the market by heavily pushing IG stories.  But, we also notice the vendors that focus specifically and heavily on eDiscovery functions seem ripe for continued growth, leading either to IPOs or acquisition by larger software companies (e.g. EMC, IBM, Oracle).With this question brewing, and as we continue to analyze vendors as we get ready to launch our new eDJ Matrix, we decided to create a brief summary of the players in the eDiscovery software market.  Greg Buckles and I sat down and compared notes on the many vendors we cover.As always, we welcome your comments – did we miss anyone?  Do you agree or disagree with our perspective on these vendors?  Join the conversation by commenting on this article.  Here is our summary of the eDiscovery software players: The Big Guys

• EMC/Kazeon.  This vendor is one of the software giants but eDJ has not seen EMC around much on the eDiscovery playground.  Our last meeting with EMC featured more push around GRC (governance, risk, and compliance) than eDiscovery.  While GRC is related, the Kazeon acquisitionwould have seemed more appropriate for the eDiscovery market specifically.  While EMC continues to get some consideration in eDiscovery deals, we believe the company will need another acquisition in order to deliver compelling eDiscovery solutions.  The Company has been trying to make the OneSource (correction: SourceOne) offering for almost a decade, dating back to the acquisition of Legato for archiving.  The addition of the Kazeon product to the OneSource (correction: SourceOne) portfolio does not seem to have pushed EMC over the edge just yet.  eDJ is scheduled to get an update briefing in late May, so we look forward to seeing if there has been significant evolution of the product from a feature/function perspective.
• Google.  The company recently announced the availability of Google Vault, which has archiving and eDiscovery capabilities for customers using Google Apps and Gmail.   eDJ is soon to be briefed on the offering.  Google is certainly messaging many of the right things and has brought on an experienced team to manage Google Vault, but it is unclear how committed the company is to offering a real eDiscovery platform approach for customers or if the messaging is simply a story for the sake of story.  At $5/user/month, the price will certainly be right for many customers and may allow Google to build an interesting customer base.
• HP/Autonomy.  Clearly HP has a market that runs far past eDiscovery, but its Autonomy unit is very focused on the eDiscovery market and generally acknowledged as one of the leading providers within it.  That said, most successful deployments of Autonomy solutions require significant investment and resources that are typically more than non-Fortune 500 customers can afford.  The company has moved to create more affordable appliance solutions and Cloud-based solutions, but it will take some time to see if those offerings can gain traction.  Still, HP/Autonomy is the only software giant that appears to be truly committed to the eDiscovery market.
• IBM.  This software giant bought PSS Systems last year and has now unified its product portfolio into capabilities versus products.  Instead of selling individual components like the old IBM CommonStore, IBM has taken Atlas (the legacy PSS offering) and integrated it across IBM’s information management portfolio.  IBM’s offering in the eDiscovery market now runs from the ability to issue and automate legal holds across multiple data sources, collect, cull and assess evidence; and manage custodians, collections and data source obligations.  The company also heavily pushes defensible disposition.  The strategy is to allow customers to reduce legal risks and costs at the same time, while also better managing storage costs.  IBM, with its information management breadth, can now lead with eDiscovery offerings (such as legal hold management) and move upstream into other information governance areas.  In our latest IG survey, several respondents did indicate that the Atlas product was in use to manage legal hold processes.  It is unclear what traction IBM has gained beyond legal hold management – eDJ has not seen IBM come up a lot outside of legal hold across our interactions with consulting clients, end-user inquiries, or conversations with major consulting firms.  However, the company reports closing deals with very large enterprises and its investment in the CGOC (Compliance, Governance, and Oversight Council) does give the company a voice with close to 2,000 legal, IT, and records management professionals.  If IBM can build on the base of Atlas customers, the company should be a major player in the eDiscovery and broader information governance markets.
• Microsoft.  The company has increasingly built more and more eDiscovery capabilities into products like Exchange and SharePoint, but is not active in briefing eDJ on eDiscovery strategies.  From afar, it appears to eDJ that Microsoft is not yet serious about making a big push in the market.  It is easier for Microsoft to let partners create more specific solutions and then, if and when the time is right, acquire or copy the partner functionality.
• Symantec/Clearwell.  With its purchase of Clearwell, Symantec has established that it plans to use eDiscovery as a way to extend its archiving and security footprint.  Clearwell was a case study in focusing on specific capabilities to establish a customer base.  Symantec seems to be truly integrating Clearwell as opposed to simply buying a customer base.  The Clearwell functionality brings valuable capabilities to customers already using products like Enterprise Vault.  The combined companies allow Symantec to tell a compelling IG story even if it currently lacks the broader enterprise content management message that the other software giants already have.

The Market Specialists

• AccessData.   This vendor tells a strong eDiscovery story as it integrates its acquisition Summation to provide a platform to handle the full eDiscovery lifecycle.  While the company also has a security story to tell, it is putting considerable resources behind the eDiscovery business.  Unlike its closest competitor, Guidance Software, AccessData is focused on on-premise software to address eDiscovery.  Whereas Guidance Software now offers CaseCentral’s review capabilities via SaaS, AccessData offers the Summation product line via on-premise deployments (though the company does seem to be abandoning the desktop Summation market).  This will be an interesting point of competition.  (Correction:  AccessData does in fact offer SaaS via its Valhalla, NY litigation services division.  Currently, the company runs the CaseVantage legal review platform there, but will be offering the new Summation as a hosted service by Q3 of this year.  In addition, the company is not abandoning the desktop Summation market.  AccessData offers Summation Express, which is a small imprint software that can be installed on a single machine or for a single or mobile user on a laptop.  This product still is web-based, but is very much designed to pick up the desktop customers who have traditionally used iBlaze.)
• Catalyst Repository Systems.  Just this spring, Catalyst received $31 million in venture capital funding to recapitalize and expand into new markets.  Historically, Catalyst was viewed as a deal room repository and document review tool with strengths in managing Asian language documents.  Now, the company offers a compelling eDiscovery review platform with integrated analytics and continued foreign language support.  The company has also built out a nice list of service provider channel partners.  Catalyst seems to be laser focused on eDiscovery and not messaging out to a broader information governance audience.  eDJ analysts feel that Catalyst could use something of a brand update to move beyond the historical perception.  The focus on the eDiscovery market combined with the recent significant funding round should enable the company to extend its brand.
• CommVault.  This vendor continues to offer enterprise backup and archiving solutions.  Previously, CommVault seemed to back off the archiving business, but recent briefings with eDJ have showed that CommVault is actively developing its archiving platform, including eDiscovery capabilities.  While the eDiscovery features and functions are not necessarily leading edge, they do add value to the Simpana platform.  CommVault’s message is more around broader information management and governance, and its eDiscovery capabilities are not a lead-in for that message but rather are complementary to it.
• Digital Reef.  Several rumors cropped up recently about Digital Reef exiting the market.  However, when reached for comment, the company claims to be doubling down on the eDiscovery market, albeit with a different approach.  The company is now pursuing a channel strategy and no longer targeting corporate customers.  As such, the companies mass marketing efforts are down.  In addition, Digital Reef has moved away from selling perpetual software licenses and has embraced a SaaS strategy (both through its own data center in Virginia and through partners).  The company claims strong growth, but it is difficult to put that into context as the company is private and does not disclose revenues.   There is also not a lot of new legal service providers (LSPs) listed on the company’s web site to date.  It will be interesting to see if this growth strategy works for the company.
• Equivio.  This company is very focused on providing specific functionality—technology-assisted review (TAR)—within the eDiscovery market.  Also, the company recently added their Zoom processing platform.  While it currently does not offer full production capabilities (e.g. redaction), it definitely expands the Equivio platform and integrates the components within it.  As Equivio builds out a broader eDiscovery platform, it does risk competing somewhat with some of its partners (many platform vendors use Equivio for de-duplication), but historically, that kind of thing has been part and parcel of this market.  If the company can show promise with its predictive coding application, there should be plenty of interest from larger suitors.
• Exterro. Historically, Exterro has been seen as the main competitor to PSS Atlas primarily for discovery workflow and legal hold management. The company has done a good job of adding more and more capabilities in a modular fashion so as to now offer many of the features of a full eDiscovery platform. Exterro continues to address an early market reputation that its enterprise-class software is expensive and complex as compared to other point solution offerings. eDJ works with many corporate clients who have expressed some confusion about the products that Exterro offers (e.g. Zeta, Genome). We expect that Exterro will continue expanding its marketing effort to gain recognition for the Fusion platform and its modular components. Exterro is squarely focused on the eDiscovery market and dipping a toe into the related GRC market, but doing so without taking its eye off the eDiscovery ball.
• FTI Consulting.  This vendor is a player in both the eDiscovery managed services and eDiscovery software markets.  FTI has a solid customer base of Ringtail clients, some using the tool on-premise, others as a service.  The Ringtail development team’s recent focus on large-scale analytics and user experience resulted in what the company believes is a new user-friendly interface in 2011. A new version of Ringtail, including a redesigned Document Mapper module, is expected to be available this summer.  This evolution will allow FTI to better compete in the technology-assisted review (TAR) market.  eDJ believes that that FTI’s software business would ultimately be better served as a spin-off company or if it were sold to a larger software company.  But, there is plenty of time for that evolution to take place.  In the meantime, FTI is content to develop its products in close contact with its consulting clients.  In the short-term, that is the advantage of having a software development function within a consulting company.  Longer term, we expect that FTI might spin off or sell some of its technology assets.
• Guidance Software.  The investment in CaseCentral is an example of Guidance Software’s commitment to the eDiscovery market.  While there are other components (e.g. forensics and digital investigation, cyber-security), the main focus of Guidance Software’s business is eDiscovery.  The company is working to extend the reach of the solutions it can provide its mainly corporate and government customers.  The question to ask is whether or not CaseCentral was the right review application to buy.  Yes, it gives Guidance Software an SaaS story, but CaseCentral has had a hard time growing and gaining traction in corporations because few corporations standardize on one service provider for an enterprise evidence repository—and many have their law firms choose service providers on a case by case basis.  Perhaps the corporate client base of Guidance Software proves a fertile ground for CaseCentral’s offering.
• iCONECT.  The company continues to offer review products to corporations, law firms, and the service provider channel.  The new XERA product stresses user interface improvements that are aimed at the new types of devices that users access.  iCONECT does not actively brief eDJ, but it certainly appears the company is staying focused on review and functionality that can make review faster and more efficient.  iCONECT could be interesting “old-is-new-again” competition for kCura’s Relativity.
• Index Engines. It appears Index Engines has moved away from a mainly eDiscovery-focused message to one of information governance and defensible disposition.  Index Engines does not brief eDJ often, but in looking at the company’s website, it’s clear that eDiscovery has taken a back seat to the broader IG message, with some secondary messaging around legal hold and preservation, and an eDiscovery message aimed specifically to the service provider channel.
• IPRO.  This vendor grew revenues last year by 12%.  The latest releases of its Allegro, eCapture, and Eclipse products show steady progress of integration.  The company has a vision of an end-to-end eDiscovery platform, but the products are still separate today.  One thing IPRO does have going for it is a true understanding of what customers in the field require: the products are mature in terms of granular features.  This vendor’s understanding of what customers need and an ability to meet those tactical needs could make it an interesting target for a larger company looking to grow its customer base.
• ISYS.  This company is something of a wild card in the industry.  ISYS offers enterprise search software (search is always an important component of eDiscovery) and document filters.  The ISYS document filters side of business is one of few alternatives to the Outside-In filters from Oracle and the KeyView filters from HP/Autonomy.  Given the competitive nature of the business, many eDiscovery companies may not want to rely on HP/Autonomy for a core product component.  This leaves opportunity for ISYS, as we wrote about last year. What makes ISYS more of a potential wild card is the fact that Lexmark bought ISYS this year.  Lexmark is in the printing, imaging, document workflow, and content management business; while Lexmark does not have the heft of HP, it is easy to see the direction it is going.  eDJ expects to see a more integrated IG platform message coming from Lexmark in the future, or at the very least an enhanced sales channel and expansion into more software markets.
• kCura.  The vendor continues to focus on making its Relativity review application the preferred choice of corporations, law firms, and service providers alike.  There is no messaging outside of eDiscovery, which means kCura is laser focused on this market.  While the company does offer a legal hold module, it does not appear to be truly pursuing functionality in the upstream eDiscovery lifecycle that would make Relativity more of a corporate eDiscovery platform.  However, there is a new optional TIFF production engine that seems to be a precursor of an actual processing engine.  If that were the case, kCura may have to watch the impact that expanding their capabilities will have on the company’s channel partners.
• Kroll Ontrack.  This vendor is a real wild card in the eDiscovery software market. To date, Kroll Ontrack has been known as more of service provider with its own proprietary technology. Lately, though, Kroll Ontrack is beginning to make moves to give customers a cloud-based do‐it‐yourself (DIY) eDiscovery option. And, now that Kroll Ontrack is free of former parent company Marsh & McLennan Companies and owned by a private equity firm, it seems as if the vendor is poised to also become a software company. The wild card aspect is that Kroll Ontrack has the resources and customer base to make an impact in the market—maybe more so than some of the venture‐backed vendors in the space.
• Lateral Data.  Although well established as a regional service and consulting provider, this company has quietly made strategic sales of its Viewpoint platform to top law firms and service providers. This controlled release has minimized the usual growing pains of a company transitioning from service to software. It remains to be seen if this company and its relatively mature platform will launch a real marketing campaign with a publicly available product. At present time, they will have an uphill struggle to gain brand recognition in a crowded market.
• Lexis Nexis.  The company is not active in briefing eDJ, but we have kept tabs on many of Lexis Nexis’ products including Concordance, CaseMap, and LAW.  Since Lexis Nexis acquired these products years ago, product development seems to have slowed down.  While it does not appear that Lexis is trying to evolve into a major software competitor with eDiscovery platforms, we have heard of some improvements to the LAW processing engine that give it at least some element of improved user interface to data.  It does not appear that Lexis Nexis will have a major impact on the eDiscovery software market.
• Navigant.  This consulting company is currently mixing a technology development team with a services group.  The company has built two applications: (1) a legal hold application built on SharePoint 2007 and (2) a matter management application that it acquired in February 2012.  In addition to offering these applications, Navigant also partnered with vendors like kCura for the use of Relativity and has built an application for reviewing and redacting structured data (a little-mentioned but important capability).
• Nextpoint.  This vendor is focused on eDiscovery in several ways.  First, the company offers the ability to collect and preserve the new forms of content that are hot—Web pages and social media.  That gives the company a nice, niche focus.  In addition, Nextpoint has processing and review capabilities built on the Amazon Cloud, which allow it to compete well on price for eDiscovery deals.  Like X1 Discovery, Nextpoint is focused on solving that next batch of problems that will be going mainstream, which should give it some differentiation from the rest of the pack of vendors that offer eDiscovery on the same old sources of data.
• Nuix.  This vendor is preaching an IG story.  It still weaves eDiscovery into its messaging, but Nuix seems to be trying to leverage the heat around Big Data to boost business.  Nuix does not actively brief eDJ, so we cannot say how much of this is forward-looking (as vendors do need to be out in front of the market to a certain extent) versus a re-trenching of the company away from a focused eDiscovery message.
• Orcatec.  This vendor is laser focused on the eDiscovery market.  Its TAR application is well-respected and getting a boost in the market due to an explosion of interest in the topic.  Orcatec also has a more coherent eDiscovery platform message with its Document Decisioning Suite, compared with many other offerings.  The company also offers a monthly flat pricing model, which helps to differentiate it from the volume-based pricing that dominates the market.
• PureDiscovery.  eDJ took a briefing from this vendor because we like to track new and interesting offerings.  PureDiscovery continues to offer stand-alone and integrated content clustering directly to users and through many OEM channels. This company’s analytic visualizations and scalable architecture make it an attractive acquisition target now that VC money is again moving into the eDiscovery space.
• Recommind.  This vendor is a good example of a company that has a forward-looking element to its marketing (see predictive information governance), but a clear focus on what it can win with today—its predictive coding offering.  The company looks to be one of the winners in the eDiscovery market and a likely acquisition target for many of the larger software vendors.  The recent buzz around the Da Silva Moore and Kleen Products cases could benefit Recommind, but there is real concern about market fatigue over the company’s very aggressive marketing of new case law in this area.  eDJ has heard from several end-users—both corporate and law firm—who are now very skeptical of vendors using case law for marketing purposes.
• Sherpa Software.  The company offers eDiscovery search and processing applications targeted a specific data sources like Exchange, Lotus Notes, and file systems.  They are staying laser focused on the desktop IT sale with reasonable single seat licensing. With so many software companies seemingly abandoning the SMB market to the early Cloud providers, Sherpa knows its customer base and continues to let their requests drive the product road map. Sherpa briefed eDJ on their latest version of Discovery Attender and a new ESI profiling tool, Report Attender. Sherpa represents an interesting acquisition or investment opportunity because of their specialized market segmentation.
• StoredIQ.  StoredIQ is focusing on taking its core eDiscovery capabilities into weaving them into a broader IG message. The company is in no way abandoning the eDiscovery market, but rather making eDiscoveryjust one of several stories within the IG umbrella. While eDJ research doesshow IG gaining traction in organizations, this move does have a déjà vu all over again feel to it. Just under a decade ago, vendors like StoredIQ and Kazeon (since acquired by EMC) were telling IG stories only to focus on eDiscovery in order to gain traction. Clearwell (since acquired by Symantec) proved to be a case study in focusing on doing one thing very well in order to succeed, instead of trying to boil the ocean. Is the market ready to adopt a broad IG solution from a relatively small vendor? Time will tell.
• Wave Software.  Although this vendor has briefed eDJ several times over the last two years, only recently have we seen any substantial product or partner press releases. They recently released a rebuilt Trident Pro as Trident Expert, an EDA platform with low introductory pricing.  The low pricing begs the question of whether Wave is in danger of losing market momentum as customers push for broader eDiscovery platform solutions. The company has acquired a couple of niche products, which suggests their revenue is still strong and that we could see a big market push in the next few months.
• X1 Discovery.  This vendor is focusing on the eDiscovery market with a new twist.  The company has offered X1 Rapid Discovery for some time; customers can use this to do on-premise collection and preservation across various systems.  Last fall, the company launched X1 Social Discovery specifically to deal with the intricacies of collecting and preserving social media.  This gave X1 Discovery a cool niche product that could get out ahead of the social media growth curve.  Then, the company reintroduced X1 Rapid Discovery with a cloud-deployable component, becoming one of the first ISVs to get into the Amazon AWS partner ecosystem.  This could be a significant move given the popularity of the Cloud and the fact that companies leveraging the Cloud need eDiscovery solutions (because eDiscovery has traditionally been an afterthought in the Cloud).
• Zylab.  This vendor is an example of one that actually bucks the trend a bit.  Zylab has long been known as a broad ECM (enterprise content management) suite, but is now focusing on its eDiscovery message in the United States market because it is where many dollars are being spent in the near-term.  Having broader capabilities should help Zylab expand eDiscovery deployments with customers it does win.

It’s clear the eDiscovery software market remains competitive.  There are likely other players that deliver proprietary technology through services engagements and possibly some software players we have missed. If there are, let us know so that we have them on the radar.Let’s go back to our original question: Are the winners and losers in the eDiscovery software market essentially already determined?   We believe the specific winners and losers are not already defined but that the pool of potential winners and losers is basically set.  There are several vendors that are laser focused on areas like review, and many of them could find homes within the portfolios of larger software vendors.  There should be some pure-play eDiscovery platform vendors that gain traction in corporate America and thus appeal to larger information management vendors.  However, we do not foresee the entrance of new vendors with the same old messaging the way we did just five years ago.