e-discovery 2.0

It’s widely known that Microsoft is a Clearwell customer, and uses our product for e-discovery across a wide range of matters. One such matter is the case of Datel Holdings v. Microsoft Corporation, which is presently in District Court for the Northern District of California. As part of those proceedings, Microsoft mentioned Clearwell in its Opposition to Datel’s Motion to Compel that was ruled upon on March 11, 2011:

Defendant explains that after potentially responsive documents were collected from custodians, they were loaded into a computerized document processing system known as “Clearwell.” Clearwell extracted metadata from each document and converted the documents into a format that allowed for text searching. Once the documents were processed through Clearwell, they were entered into an online platform, where they were reviewed by attorneys. For reasons still unknown to Defendant, Clearwell truncated some “Re-auth” documents during processing.

In itself, this sounds unremarkable. But we’ve noticed that some of our small competitors have been using this statement, and particularly the last line of it, to suggest that there are problems with the Clearwell product.

We realize that, as the market leader, there will always be small competitors seeking to leverage any opening to their advantage. Usually, we ignore this nonsense. But this time, to set the record straight, we asked our customer at Microsoft to respond on our behalf

Here’s what Joe Banks, who manages the e-discovery team at Microsoft, wrote about the issue and gave us permission to publish:

Statement from Microsoft:

In regard to the Declaration of Hojoon Hwang referenced in the 3/11/11 Order granting in part and denying in part plaintiff’s Motion to Compel in Datel Holdings LTD v. Microsoft, No.C-0905535EDL in the Northern District of California, the statement ‘For reasons still unknown to Defendant, Clearwell truncated some ‘Re-auth’ documents during processing’ should be corrected.  Microsoft subsequently learned that the cause of the truncation was the Microsoft software (AD/RMS Bulk Protection Tool) employed to decrypt previously encrypted content, and the truncation issue had nothing to do with Clearwell’s technology whatsoever.  Shortly after Mr. Hwang’s declaration was filed, he clarified – on the record in open court on February 22 – that Microsoft’s decryption process was the true cause of the data truncation:

6 A lot of Microsoft documents, including e-mails, are

7 encrypted when they are sent. And for production purposes, we

8 have to decrypt it. In that process, some of the material got

9 cut off.

Microsoft does not use Clearwell technology to decrypt its data.  In actuality, Clearwell’s Engineering and Support teams were instrumental in helping to identify the root cause of the truncation issue.  Microsoft continues to use Clearwell’s processing and analysis technology on this matter and greatly appreciates the partnership and support Clearwell provides without fail.

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.

I tend to have a “Mark Twain perspective” on statistics and apply a healthy grain of salt to any numbers quoted by analysts and industry experts. But when end-users speak, I sit up and listen. That’s why I was very interested to read here that Microsoft “spends an average of US$ 20 million for e-discovery per litigation, according to one company exec.” (My thanks to George for alterting me to the article)

If true, it is an astounding number – but one that is quite consistent with what we have seen first hand working with other large enterprises ourselves. Once you factor in processing costs (an average of $1,800 per GB), review costs ($200/hour), and the huge volume of information being generated and stored, you can get up to $20 million on a single case surprisingly fast.