e-discovery 2.0

Yesterday, George Socha and Tom Gelbmann published summary results for their 2008 EDD survey. George and Tom gathered self-reported data from 85 e-discovery service providers and 40 e-discovery software companies. To help vendors resist the temptation to “exaggerate” their accomplishments, they then cross-referenced the responses against independent surveys submitted by 29 law firms and 19 corporations, and applied a healthy dose of their own good judgment. The outcome, which they will publish in-full next month, is a great snapshot of the industry, and probably the most objective ranking of e-discovery vendors that you can find.

By comparing this year’s results to the 2007 survey, you get a sense for how much has changed in the e-discovery world over the past 12 months:

Top E-Discovery Software Companies

Note: arrows show change to rankings from last year’s Socha-Gelbmann Survey

Autonomy and Clearwell move up to the Top 5, overtaking Attenex and CT Summation which slip back to the second tier. There are also 3 new names ranked 6 through 10 (Epiq, iConect and Symantec) who displace Cataphora, Doculex, ISYS, and Oracle, none of whom even make it into the top 15. In other words, 70% of the rankings have changed since last year.

If a litigation support manager were to focus only on the Top 5 in making her e-discovery software decision, she would have a choice of some very different solutions. Autonomy positions itself as a high-end (expensive) platform for corporations, while Lexis offers a comprehensive toolset for law firms. Guidance and Clearwell are complementary in that both provide best-of-breed solutions for parts of the EDRM model: Guidance is the leader in collection and preservation, while Clearwell is the leader in processing, analysis and review. Finally, FTI takes a services-based approach which centers around RingTail, its hosted review application.

Looking lower down the list, there were some other interesting results, primarily around which companies were NOT ranked. Kazeon made it into the third tier (ranked 11-15) whereas StoredIQ, its main competitor, did not. Nor did Recommind break into the rankings, despite making a major push into e-discovery from knowledge management over the past year. But the most striking absentees are PSS Systems and Exterro, which have pioneered litigation hold management for Fortune 100 companies. I can only guess that they cover too much of niche market to warrant inclusion in an industry-wide report.

Top E-Discovery Service Providers

In contrast to the world of software, e-discovery services saw much less movement in this year’s rankings:

Note: arrows show change to rankings from last year’s Socha-Gelbmann Survey

There was only one change to the top 5: Fios moved up, displacing Guidance which plummeted 10-20 places down to a 16-25 ranking. In addition, there were two new players in the top 10, Epiq and Huron, who edged out Electronic Evidence Discovery and Ernst & Young.

Conclusion

Changes to the software rankings reflect broader changes in the e-discovery market. As e-discovery has moved in-house, corporations have become a major driver of purchase decisions that were previously left to law firms. Many software companies, such as Attenex, have struggled to make this transition, while others, such as Clearwell, have capitalized on it. There has been no such change in the service provider world and, as a result, the rankings are relatively stable.

It will be interesting to see what happens next year. Every other software space is dominated by a small number of players, like Oracle for databases or VMWare for virtualization. If the same is true for e-discovery, then we can expect many fewer changes to the software rankings in future surveys as the leaders pull away from the pack.

As companies use Clearwell’s e-discovery solution on more and more cases, I often find myself speaking to their litigation support service providers. Other than being in the same industry, these service providers have nothing in common: they vary from small shops to large, national companies; from unprofessional cowboys to highly principled professionals. But despite these differences, they all say the same thing: theirs is a very tough industry.

Perhaps everyone says that, but in their case there are good reasons for believing it to be true. It is very hard to differentiate litigation support services, other than by price; law firms make for demanding customers; barriers to entry are low so there’s constant price pressure from new entrants; and, it can take a long time to get paid, given that you are at the end of a long chain (enterprises must first pay law firms who then pay service providers).

That led me to wonder, “What would I do, if I were in their shoes?” The answer is that I would seek to differentiate my service by leveraging technology to swim upstream.

Neither of these ideas (leveraging technology, moving upstream) is original in its own right. Every litigation support service provider leverages technology in some way or other, and many have even built their own in-house review platforms. The larger ones have also sought in one way or another to swim upstream, meaning sell to their customer’s customer (the enterprise) directly rather than to law firms who then sell their services to enterprises.

But what service providers historically have not done is combine the two ideas: i.e., use technology as the means by which they can more easily sell to the enterprise. To paraphrase what the bright, forward-looking CEO of one service provider recently told me: “If I can get technology into the enterprise behind the firewall, then that makes my corporate accounts more “sticky”. It makes it easier for them to export data into my review platform and more likely they will use my services on any given case.” This technology does not have to be developed in-house; service providers can partner and integrate with providers of corporate e-discovery solutions to achieve the same effect.

My respect for litigation support service providers has only increased as I have come to appreciate the severe market pressures under which they operate. So has my excitement for the opportunity before them. Litigation support services is a large, fragmented, growing industry –- a level playing field in which service providers who innovate can see large returns.