e-discovery 2.0

A couple of weeks back, I attended a now-infamous meeting at Sequoia Capital, which has since been widely covered in the press and the blogosphere. For those unfamiliar with Sequoia, it is the world’s leading venture capital firm, with a string of early-stage investments in companies such as Apple, Cisco, and Google as well as, more recently, AdMob, Clearwell, and Loopt. The presentation says it more colorfully, but Sequoia’s point is simple: “We are at the beginning of a global economic slowdown that could last for years, and the cost of capital has sky-rocketed. In light of that, everyone needs to re-evaluate their growth plans and, if necessary, reduce expenses immediately.”

That message sent a chill through Silicon Valley. In the days that followed the meeting, several start-up companies announced layoffs, closely followed by larger companies like eBay and Yahoo, all citing economic conditions in the wake of the financial crisis. So naturally, the meeting and its aftermath got me thinking about what impact our current economic malaise will have upon the e-discovery industry.

If history is any guide, economic downturns lead to more litigation, and more litigation leads to more e-discovery. That’s why e-discovery has often proven to be a counter-cyclical business, and that certainly appears to be the case again now. While traditional technology companies like SAP and Seagate missed their numbers last quarter, the top e-discovery software companies posted strong results. And many lawyers are expecting even better times ahead, if last week’s ACC show or the recent Fulbright & Jaworski 2008 Litigation Trends Survey are any indicator. In particular, the survey results were quite striking, with more than one-third of companies surveyed predicting more lawsuits, and a quarter forecasting more regulatory inquiries. This makes sense in light of the fact that what we are facing is no “normal” recession; rather, it’s a downturn triggered by the sudden and widespread collapse of the banking sector which has left many people wanting legal redress for their grievances.

But, more important than any short-term increase in litigation, I think the real significance of the current crisis is that it will spur a sustained, long-term increase in demand for e-discovery solutions. As revenue growth slows, companies will focus on reducing costs to maintain profit growth. That will prompt many of them to examine the vast amounts of money being spent on e-discovery and accelerate the pace at which they use technology to cut costs by bringing elements of e-discovery in-house. Law firms and litigation support service providers will similarly find their invoices attract greater scrutiny. Their old ways of taking terabytes of data and dumping it into a linear review platform without first removing irrelevant or unresponsive data, will look increasingly profligate.

To learn more about how best to prepare for the coming wave of litigation, and associated increase in e-discovery, I strongly recommend next week’s webinar with Ron Best from Munger, Tolles, and Olson (MTO). Ron is a real innovator in this area, with extensive experience dealing with multi-party, complex litigation. He is also full of practical advice about how best to reign in e-discovery costs and manage with limited resources – skills that will be increasingly important in the coming months.

No industry is an island and, to some extent, we all get impacted by the same economic forces. But the unique thing about the e-discovery industry is that the worst of times can often be the best of times. Consider it a silver lining to the very large cloud hanging over our economy.

It has now been over a month since I started blogging about Email Intelligence and eDiscovery, and perhaps the most pleasant surprise has been to find that I am not alone. As the chart below shows, there has been an explosion of activity around eDiscovery in the blogosphere since the FRCP Rule changes on December 1, 2006, with the happy result that today there are several voices which are well worth listening to.

To assist you in your travels, I offer a brief (and by no means comprehensive) guide to the blogs which have caught my eye. In general, they fall into 3 categories:

1. Messaging Mavens: For an entertaining look at email in the news, I would suggest Roger Matus’ Death by Email, which has everything from videos to colorful commentary. In a similar vein, Chris Foreman’s Messaging Mogul offers an interesting perspective on relevant technologies, in a way that is refreshingly free of the usual mind-numbing marketing-speak.

2. Legal Eagles: There are many lawyers who blog, often covering arcane topics or issues particular to a specific industry. But the one general, business-oriented legal blog that I would recommend is Andrew Cohen’s blog, which makes a range of complicated legal topics accessible to the general reader.

3. Article Clippers: Finally, there are the folks who helpfully collect interesting articles from around the web into a single place, so you can get a filtered view of the latest eDiscovery stories. Foremost among these is Jeff Fehrman and Bob Krantz’s edd blog online which focuses on eDiscovery and forensics.

I do not pretend to have anything close to a complete list. So if there are others worthy of a mention, please add them as a comment so that I can update my list.