e-discovery 2.0

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.