e-discovery 2.0

HP announced today that it has signed an agreement with Clearwell to resell the Clearwell E-Discovery Platform. The two companies have been partners for some time and have many joint customers such as Constellation Energy, Del Monte, and Universal Music. But, under this new agreement, thousands of HP sales people will now be compensated for selling Clearwell, giving them a powerful incentive to introduce their customer base to Clearwell’s e-discovery solution.

To my knowledge, this is the first time that a major archiving vendor has agreed to resell a partner’s e-discovery solution, and it raises a couple of interesting questions: why did HP do this deal? And, what does it mean for HP customers?

Ask anyone who tracks the email archiving market, and they will tell you that e-discovery is a major driver of archive purchases. As Gartner’s Carolyn DiCenzo observes: “Legal discovery is being mentioned by almost every client evaluating an e-mail archiving solution.” That’s because whenever a company has litigation, regulatory inquiries or internal investigations, IT is required to provide relevant electronic information to legal or information security. Far better to have it in one repository than spread out on user desktops, email servers, and file shares. So, CIOs are partnering with General Counsels to deploy email archives, much as they did – in years gone by – with the VP of Sales to implement CRM systems.

The problem is that, when you look at archives as e-discovery solutions, they only solve 50% of the pain. In EDRM terms, archives are a very effective solution for collection and preservation, but awful for processing, analysis, and review. They provide a bulletproof way to capture and preserve every message, but do not make it easy to perform early case analyses and cull down data to the very small set of documents relevant to the case at hand.

That’s why enterprise customers find it so compelling to pair up an archive, such as HP’s Integrated Archive Platform, with an e-discovery solution, such as the Clearwell E-Discovery Platform. So to summarize, HP is doing this deal because it’s the best way to provide HP customers with an end-to-end solution for e-discovery. The two products integrate out-of-the-box, have been proven to work together at several large enterprises, and can be purchased from a single supplier (HP). That’s a much easier, lower risk decision for many enterprises than purchasing separate point solutions and cobbling them together.

Very few companies have as much mindshare with corporate CIOs as HP. It can only be good news for the e-discovery market as a whole to have one the largest technology companies in the world out there educating its customers on the value of lowering the costs and risks of e-discovery.

Perhaps the single greatest component of e-discovery costs is review, meaning the pain-staking process whereby teams of attorneys evaluate information to determine its relevance to the case at hand. Why has review become so expensive? A recent Sedona Working Group Paper explains:

In 1990, a typical gigabyte of storage cost about $20,000; today it costs less than $1 dollar. As a result, more individuals and companies are generating, receiving and storing more data, which means more information must be gathered, considered, reviewed and produced in litigation. But, with billable rates for junior associates at many law firms now starting at over $200 per hour, the cost to review just one gigabyte of data can easily exceed $30,000.

That’s quite a difference: $1 to store a gigabyte of data vs. $30,000 to review it; and it has driven corporate legal departments and law firms to embrace e-discovery review platforms. These review platforms, which can be either packaged software or a hosted service, typically emphasize one of two main benefits:

• “Review Faster”: Traditional review platforms increase attorney productivity by increasing the number of documents they can review each hour. For example, the name “Attenex” derives from the claim that it will help attorneys review documents “at 10x” the speed that they could do otherwise. These products help to a point, but – no matter how good the software – there is a limited number of documents that the human brain can digest in a day, so, even with them, review remains very expensive;
• “Review Less”: More recent e-discovery solutions have focused on having attorneys review fewer documents by culling down data prior to review. This can massively reduce review costs, since 80%+ of documents can be eliminated without being read, but it does raise one serious question: how can you be sure that responsive documents do not inadvertently get culled?

The technical term for this issue is “elusion”, meaning: out of all the material judged as not responsive, how many are in fact responsive (i.e., how many false-negatives does your culling methodology produce)? It is virtually impossible to answer that question definitively without a human reviewing the entire dataset to assess relevance which, of course, defeats the point of culling in the first place. So the accepted practice is to use statistical sampling theory, whereby you test a sample that gives you a certain confidence level about the total population. For example, to get a margin of error of 2-sigma with 95% confidence level, you need to randomly select and process one-in-400 documents. How easy is this to do? Actually, it’s pretty straight forward. Any good e-discovery solution should let you create a separate folder containing a subset of non-responsive documents for human review as a quick check on the effectiveness of culling. You can determine the size of your sample according to what confidence level you want to have.

This is an area that Sedona and others have considered in great depth, and there are many excellent papers on the subject by people far more knowledgeable than me. To pick just a few, Herbert Roitblatt has written extensively about sampling in e-discovery and elusion; and, Daticon’s paper may be a few years old, but is well worth reading to understand the origins of the “review less” movement.

Practically speaking, as someone who has seen both approaches in action, I think that “review faster” is helpful, but if you want to massively reduce your e-discovery costs, then the big win is “review less” – even with sampling to mitigate concerns about elusion.

UPDATE: Since writing this post, I have received additional information suggesting that this deal was NOT for Zantaz’s Desktop Legal Hold product, as previously reported. Please see comments section for full details.

I must confess, I was skeptical when ZANTAZ announced its new desktop legal hold solution without a single reference customer. But events have proved me wrong:

On January 3^rd, Autonomy (ZANTAZ’s parent company) let slip in a UK publication that that “an unnamed major international bank” had purchased ZANTAZ’s “compliance and regulatory solutions” for an eye-popping $70 million. Later reports confirmed the number, and provided more detail: Citigroup will pay ZANTAZ $70 million over 4 years for Desktop Legal Hold.

Citigroup is an existing ZANTAZ customer with a lot of data in Digital Safe. My guess is that the deal covered much more than just Desktop Legal Hold, and that many of the scheduled payments are tied to performance milestones. But regardless, this is a spectacular transaction (perhaps the largest ever e-discovery software deal?) and I offer the ZANTAZ team my hearty congratulations.

Beyond being good news for ZANTAZ, the deal has broader significance in two regards:

1. It confirms that the sub-prime mortgage crisis is driving demand for e-discovery software. That syncs with my own experience with several of our financial services customers;
   
2. It may spur other archiving vendors to add desktop legal hold solutions to their product portfolios, so that they are not at a competitive disadvantage to ZANTAZ.

This deal will also accelerate Autonomy’s increasing focus on e-discovery. In its core market of enterprise search, Autonomy is caught between a “rock” (Google) and a hard place (Microsoft, which announced the acquisition of Autonomy’s larger competitor, FAST). Moving towards e-discovery is the obvious way Autonomy can avoid getting crushed by the giants. I expect more news about Aungate is coming soon.