Migrated from eDJGroupInc.com. Author: Barry Murphy. Published: 2010-08-20 05:40:49Format, images and links may no longer function correctly. eDiscoveryJournal has noted the consolidation taking place in the eDiscovery market. Altegrity acquired Kroll; AccessData acquired Summation; Autonomy acquired CA’s Information Governance division.  Rumors persist that Autonomy will buy OpenText (though these rumors point out that Autonomy has assembled a $1 billion war chest for the acquisition and the OpenTex market capitalization is $2.12 billion…rumors can sometimes be just that – rumors).  Often overshadowed by the consolidation hype are the moves that eDiscovery vendors make to extend functionality organically.

The EDRM framework as seen below is a good model to use when thinking about the functionality necessary within an eDiscovery solution.  For many organizations, having all the functionality within the EDRM is overkill.  For example, some corporations leave review and production to their law firms.

Solution vendors have traditionally come from specific areas of strength, like processing or analytics & review.  As their customers evolved, the vendors were forced to evolve.  Some have moved to the left on the model, hoping to gain traction within corporations.  Others have moved to the right, hoping to get more revenue from existing clients.  Some gain functionality through acquisition.  But, some are building out the functionality organically.

One recent example is Clearwell’s addition of a review module.  The company is moving its eDiscovery platform to the right on the EDRM – this makes sense given that their target user is legal.  Legal typically tells IT to go collect the data and get it ready for review.  Clearwell could move to the left on the EDRM, but that is a major effort, one that is likely better done via merger or acquisition given the number of tools that already do collection and processing.  What Clearwell is doing is focusing on its user base and their needs.  If Clearwell can win over corporate legal departments, the company will be in a good position to make out nicely when larger scale consolidation happens over the next 18-24 months.

The larger scale consolidation I refer to is really the large software vendors (ECM and storage, mainly) buying up the eDiscovery vendors that prove successful.  Many have wondered why the likes of IBM, HP, and Oracle have not made acquisitions in the eDiscovery space, but these vendors have learned about consolidating markets the hard way.  A decade ago, the ECM vendors were in a rush to build out the ECM “suite” (document management, imaging, records management, web content management, etc) – they bought emerging vendors, only to find integration challenges and realize that “strategic” acquisitions can be hard to justify financially.  In the eDiscovery market, the big players have the luxury of waiting for winners to emerge.  I would guess that if Clearwell can get to $40-$50 million in revenue, the company would make out very nicely and be acquired at a nice premium by a big player.

In the meantime, eDiscovery vendors need to be very careful about how they expand functionality across the EDRM.  Focusing on the right features to organically build into the solution is critical.  Buyers need to beware of lame product add-ons (beware of modules called “legal hold”) and partnerships that involve nothing more than a logo swap.

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