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As part of an interview request, I did a fast review of SaaS processing, hosting providers suitable for small firms looking for fixed price service. The market does not make this easy for you or for me to make sense of in the eDJ Matrix. The line between software, SaaS and professional services continues to blur as providers create web interfaces to upload/download ESI with hidden 3rd party tools and manual tech time behind the curtain. We originally differentiated between the traditional software and hosted service offerings with the assumption that the hosting providers were using a publicly available technology, example: Catalyst CR by Lighthouse eDiscovery listing indicates that Lighthouse manages/hosts the Catalyst CR platform. There are 115 eDJ Matrix SaaS technology offerings for the Small-Medium Business (SMB), but only 40 Managed Service SaaS offerings for the SMB. Frankly, this is because we only expanded the eDJ Matrix to cover service providers in our last year of analyst work. I started the eDJ Matrix to track and compare technologies many years ago and that is still the most mature data. Updating the Everlaw listing after my briefing last week was easy because they claimed to be free of 3rd party code. My check turned up two relatively new players in the SaaS eDiscovery market, Wind Legal and Escalate. Neither one gives enough hard information on their minimalist websites to confidently categorize them, but at least Wind discloses that they are a custom interface for Relativity.

Several year's ago, my friend Craig Ball put forth the Edna Challenge, a quintessential small matter with minimal ESI and a $1,000 budget. Earlier this week I posted a blog about SaaS providers and concluded with an opinion that the eDiscovery market is not friendly to smaller litigants, namely non-public companies and boutique firms without litigation support teams. One of the new providers that I called out stepped up to own the fact that they only cover a narrow slice of the discovery lifecycle. Escalate did not dodge my unfiltered take. Instead, they sent me a demo login and asked for my feedback, good and bad. Well here it is:

I had almost thought that the venerable Yahoo LitSupport list had finally died when a classic question arrived this morning seeking replacement options for LexisNexis’s LAW. Although the poor poster will now undoubtedly get a wave of sales rep responses, they were probably prepared to deal with the spam. The good news is that there are LOTS of processing/EDA/ECA tools on the market, but most are server based platforms instead of desktop apps. The main difference is the sticker shock you will get looking at ‘modern’ Processing/ECA tools compared to the old school LAW flat purchase price. LAW’s low cost and lack of volume caps/costs is why it is still around. Responding to the request (yes, I still answer posts on the list and direct questions) got me thinking about how the classic small firm or private company solo lit support power user has been caught in the market transition.

Something occurred to me while working on my upcoming Ipro Innovations session on ‘Who’s Making the Jump to the Cloud & Why?’ The fundamental role of IT was to create and maintain the dynamic technology infrastructure that supported the applications, connectivity and storage required by the business users. Over time, simple server-client applications evolved into customized enterprise platfoms that made strong IT department essential for competitive corporations and firms. Long standing virtualization and centralized storage trends have made these enterprise platforms relatively hardware agnostic, a key requirement for migration to a public Cloud environment. Now that CIO’s everywhere seem to be sending pilot balloons into the Cloud, is there a role for the traditional IT administrator? Many traditional processing/hosting service providers are asking the same question about their future role in the eDiscovery lifecycle. Are they needed when the ESI is created, collected, processed, reviewed and produced in the Cloud? Because that is the direction that companies small and large seem to be headed. It will be a couple years before Microsoft is giving away fully integrated Equivio Zoom functionality to all Office 365 customers, but sharp providers and IT should be looking at that road map and redefining their own roles if they want to stay relevant and employed. I will share some high points from my session or you can participate in person if you happen to be in Phoenix next week. Meanwhile, here is a fun graphic from my deck.

We had a customer question on whether they should/could disable read receipts in corporate email. There was little business value in their vertical for active use of read receipts (i.e. they did not have a large sales division) and a smart attorney on the stakeholder team thought that they posed more risk than reward. Doug Austin’s blog about Fox v. Leland Volunteer Fire/Rescue Department Inc. is a good read on the potential risks of ‘automatically authenticating’ the fact that a custodian saw a specific message, even if I can think of a dozen scenarios where read receipts falsely report custodian awareness. Shutting down read receipt functionality on Exchange or Office 365 is a simple Powershell Cmdlet:

For the last several years, eDJ has conducted surveys that confirmed the accelerating trend of companies moving their messaging, collaboration and other IG systems to the Cloud. This year I am interested in whether consumers are starting to actually conduct discovery in the Cloud as well. My ongoing eDJ poll ‘Where do you conduct eDiscovery’ has yet to turn up anyone who ‘knows’ that their eDiscovery is being conducted in the public Cloud out of the 16 respondents so far. I know that many popular hosted platforms and well known channel providers use the public Cloud (Amazon S3, Microsoft Azure, etc) for secured servers and storage. This makes me wonder if most customers are either not asking the right questions or if savvy providers have figured out ways to ‘rebrand’ the public Cloud with ‘private instances’. Sounds like I need to add some new features and categories to the eDJ Matrix to separate the apples from oranges.

Matter management platforms that are suitable for large enterprise customers are not as common as a simple Google search or general software purchasing site would lead you to believe. There are LOTS of home grown Saas offerings suitable for solo or small firms, but very few with mature, customizable workflow actually designed for corporate legal departments managing hundreds or thousands of legal matters. When Mitratech announced that their acquisition of Bridgeway would benefit these enterprise customers, I immediately wanted to see how many viable competitors were left in the market, which is not as easy as that sounds. I created a matter management category in our eDJ Matrix that found 9 solutions, but experience tells me that our categories require some research to tune and nudge the providers to update their listings. My quick impression is that one of the leaders in enterprise legal management (ELM) just absorbed another primary competitor. That leaves providers with broader offering suites such as Thomson Reuters, HP, Exterro and IBM. eDJ’s clients now have fewer options for matter management functionality without all the baggage.

Just as I was lamenting the shrinking field of Matter Management offerings suitable for enterprise level customers, the founders/execs of iManage announced that they have extracted their product from Autonomy-HP borg. I hope that the developers did not drink the IDOL Kool-Aid and are able to revert the database/index/analytics back to something practical for customers to deploy. This on the same day as U.S. District Judge Charles Breyer approved a $100 million settlement between a Dutch pension fund and HP over the Autonomy acquisition. Catch the Courthouse News Service article title, “Pensioners Get $100M for HP’s Takeover Flop”. Nice juicy terms such as “disasterous $10.3 billion purchase of Autonomy Corp.”, “botched acquisition” and “blamed former Autonomy executives for misrepresenting its revenue”. Fun.

This headline scrolled through my feeds, “CACI wins $102M contract for litigation services.” So who is CACI and how did they beat out ‘market square leaders’ such as Epiq, DTI, D4, FTI and others with ample analyst budgets? CACI ranks 28th in the 2013 Top 100 Contractors Report, 12 slots below Booz Allen and 9 below HP. These are overall IT-Security service leviathans cruising the market depths for the big government scores while familiar sharks and killer whales battle for corporate and law firm victims. CACI does indeed do investigations and litigation support. They have an accredited forensics lab and their own cloud hosting platform (OMEGA) that stresses Section 508 security compliance for “specific collections” to supplement the usual tools – Relativity, Clearwell, Equivio, iCONECT, Axcelerate and Summation. This announcement is a good reminder that our view of the eDiscovery market can be a bit myopic. We live in the midst of the marketing trees and have to climb a government mountain to see the trees in proportion.

With the announcement of Roper Industries acquisition of practice management software provider Aderant for $675M, my rough tally of publicly disclosed investments in the eDiscovery/Info Gov market space hit $2.2B with a billion this week. Rob Robinson keeps a good chronological list of M&A activity here. A couple interesting notes for your consideration. 2014 had 34 announcements, but only quantified roughly $92M in press releases. I know that unquantified acquisitions of familiar private players such as Applied Discovery, TeamConnect and Falcon Discovery represent several times that total, but 2015’s higher rate of disclosure demonstrates more mature, outside investment in our market. We all discount HP’s 2011 $11B Autonomy acquisition as an aberration in the market, but 2015 shows that eDiscovery is slowly integrating into the global enterprise technology/services market space. Although Aderant does not publish their revenue, Roper’s bullish projection of $125M in 2016 revenue for Aderant leads me to ballpark their 2015 revenue around $100M. That give this deal a 6-7x multiple, which beats most deals that I analyzed in 2014. Nice to see the multiples creep back up and enough M&A to justify the $15B+ market estimates batted around between the ivory tower analyst shops.