EDD Market Growth Will Continue

In general, e-discovery spending continues to grow, although with changing processes and tightening prices, some providers are beginning to feel the pinch.

Consolidation also continues, with larger electronic data-discovery (EDD) providers buying smaller ones, and companies outside the market looking for opportunities to enter what they see as a lucrative area.

Consumers and providers are showing greater sophistication when it comes to EDD, but clearly both groups have much to learn.

Market Growth

Our survey covered the 2005 calendar year. Based on our research, we estimate that 2005 commercial EDD revenues were nearly $1.3 billion, up 56% from 2004. We estimate that the top 30 providers collected about $450 million. An additional 360-plus providers accounted for another $455 million, while 'do-it-yourself' firms (law firms and companies handling EDD work themselves that otherwise would have been sent to a provider) represented $90 million.

Judging from consumer and provider expectations, we anticipate the market growing approximately 37% from 2005 to 2006, 37% from 2006 to 2007, and 29% from 2007 to 2008.

Market Leaders

We expanded our rankings this year to include top service and top software providers, and we differentiated top service providers by litigation stage (see, Scope and Methodology, below).

For service providers, we looked at seven sets of criteria:

1. Experience and reputation (10%);
2. Capacity (20%);
3. Types of services (20%);
4. Software usage (10%);
5. Law-firm rankings (15%);
6. Corporate rankings (10%); and
7. Revenue (15%).

For software providers, we examined a slightly different list of factors:

• Experience and reputation (10%);
• Nature and scope of software of-fered (20%);
• Capacity (10%);
• How extensively consumers used the software offered (20%);
• Law-firm rankings (15%);
• Corporate rankings (10%); and
• Revenue (15%).

We also ranked service providers based on the extent and depth of their activity at each step of the EDD process as defined in our Electronic Discovery Reference Model (EDRM):

• Identification;
• Preservation;
• Collection;
• Processing;
• Review;
• Analysis;
• Production; and
• Presentation.

(For more on the Electronic Discovery Reference Model, see, 'Steering e-Discovery's Course: Effort Is Launched To Develop Standards and Guidelines,' p. 3, in the July 2005 edition of e-Discovery Law & Strategy. See also, 'Electronic Discovery Market Takes Leap: Sales Increase Nearly 100% in a Year,' p. 4, in the September 2005 edition of e-Discovery Law & Strategy.)

All rankings are in alphabetical order within a category (top five, etc.). We started with more than 300 categories and subcategories of information, set percentage weights for each category and subcategory, and gathered information for each criterion.

For every provider evaluated, we rated all the information we could get. Our goal was to arrive at results that rewarded the best-rounded providers in each category considered. Of necessity, the extent to which we could get information limited our approach. While we accepted information from every organization willing to provide it, some declined to participate while others provided only selected information.

Overall ServiceProvider Rankings EDD Services Leaders 1-5:

• Fios Inc.;
• Kroll Ontrack Inc.;
• LexisNexis Applied Discovery;
• Renew Data Corp.; and
• Zantaz Inc.

Services Leaders 6-10:

• Deloitte;
• Electronic Evidence Discovery Inc.;
• First Advantage;
• KPMG; and
• OnSite E-Discovery.

Services Leaders 11-20:

• Capitol Digital Document Solutions;
• CaseData;
• Cataphora Inc.;
• Cricket Technologies;
• Daticon (just purchased by Xiotech Corp.);
• Doar Inc.;
• Encore Legal Solutions;
• Ibis Consulting Inc.;
• RLS Legal Solutions; and
• Xact.

Overall Software Provider Rankings EDD Software Leaders 1-5:

• Attenex Corp.;
• Dataflight Software (just purchased by LexisNexis);
• Electronic Evidence Discovery Inc.;
• Guidance Software Inc.; and
• Zantaz Inc.

EDD Software Leaders 6-10:

• CT Summation Inc.;
• DocuLex Inc.;
• iConect Development;
• MetaLincs; and
• Stellant's Outside In Technology Group.

Top Service Providers by e-Discovery Stage

Identification

When providers help determine the scope, breadth and depth of electronically stored information (ESI) that might be pursued during discovery.

The Top 5 Providers:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• First Advantage;
• KPMG; and
• Renew Data Corp.

Next:

• Cricket Technologies;
• IE Discovery Inc.;
• Kroll Ontrack;
• LexisNexis Applied Discovery; and
• Xact.

Preservation

Providers help ensure that ESI is protected from destruction or alteration.

Leading the Market:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• KPMG;
• Kroll Ontrack Inc.; and
• Renew Data Corp.

Next:

• Cricket Technologies;
• Deloitte;
• First Advantage;
• IE Discovery Inc.; and
• LexisNexis Applied Discovery.

Collection Providers

These organizations help gather ESI from various sources (tapes, drives, portable storage devices, networks).

The Top 5:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• KPMG;
• Kroll Ontrack Inc.; and
• LexisNexis Applied Discovery.

From 5 to 10:

• Capitol Digital Document Solutions;
• Deloitte;
• First Advantage;
• IE Discovery Inc.; and
• Renew Data Corp.

Processing Providers

These work to reduce the overall set of ESI through deduplication, culling and similar strategies and, as necessary, convert ESI to more readily usable formats.

Leading the Pack:

• Aaxis Technologies;
• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Next:

• CaseData
• DTI Global;
• IE Discovery Inc.;
• Kroll Ontrack Inc.; and
• OnSite E-Discovery.

Review Providers

Review providers help evaluate ESI for relevance and privilege. Some offer application service provider (ASP) or other platforms while other providers offer actual review services.

Leaders:

• CaseData;
• Fios Inc.;
• Kroll Ontrack Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Followed by:

• Integreon Managed Solutions Inc.;
• CaseShare Systems;
• Electronic Evidence Discovery Inc.;
• Encore Legal Solutions; and
• IE Discovery Inc.

Analysis Providers

These companies help evaluate ESI to determine such information as key topics, important people, specific vocabulary and jargon, and important individual documents. Additionally, analysis is performed throughout the EDD process to assess the validity of the work performed at each stage.

Leaders:

• CaseData;
• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Next:

• Integreon Managed Solutions Inc.;
• CaseShare Systems;
• Cataphora Inc.;
• DTI Global;
• Encore Legal Solutions; and
• IE Discovery Inc.

Production

Production entails the delivery of ESI to various recipients, such as opposing counsel. Issues included are form of production (native .TIFF, etc.), delivery media (CD, FTP site, etc.), and configuration of ESI and related data for loading into specific software.

Top Providers:

• Aaxis Technologies;
• Integreon Managed Solutions Inc.;
• Encore Legal Solutions;
• IE Discovery Inc.; and
• Xact.

Followed by:

• Capitol Digital Document Solutions;
• Doar Inc.;
• DocuLegal;
• RLS Legal Solutions; and
• SysInformation Inc.

Issues Influencing the Market

Key factors driving the EDD market last year fell into five broad categories:

1. Costs and cost-management;
2. Standards or lack of them;
3. The overwhelming volume of data with which litigants must contend;
4. Lack of quality education and in-depth understanding; and
5. Fear ' of the unknown, of the consequences of not doing EDD right and of the changes coming with the revisions to the Federal Rules of Civil Procedure.

We also heard increasing disillusionment with and distaste for conversion of ESI to quasi-paper formats (.TIFF and .PDF); but that was combined with an apparent inability to kick the conversion habit. To be fair, the technology hasn't advanced to the point where conversion can be abandoned.

Scope and Methodology

The 2006 Socha-Gelbmann Electronic Discovery Survey examines the demands for, and consumption of, comercial EDD services and software. By EDD, we mean the activities suround-ing the identification, preservation, collection, processing, review, analysis, production and presentation of electronically stored information that started its life in electronic form, and remained in electronic form until it and the discovery process collided.

For the 2006 survey, we gathered information from 91 organizations ' 62 services and software providers, and 29 law firms and corporate legal departments. We also gathered information from secondary sources.

We do not pay participants; participants will receive a participant report. For those organizations that provided meaningful data and also subscribe to the report, we provide information about how they ranked. All participants were promised anonymity.

The cost to subscribe to the survey is $5000. Details are posted at www.sochaconsulting.com/2006survey.htm.

Factors

We built our analysis around more than 300 factors. The top-level factors were:

Experience and reputation. The length and depth of the providers' experience in the EDD industry, the breadth and depth of the organizations' offerings, and their reputations.

• Software (software providers only). The breadth of use in the EDRM stages, intended installation (ASP, network, etc.) and frequency of consumer use.
• Capacity. The level of resources that providers dedicated to the EDD market.
• Types of services (services pro-viders only). The types of services providers offered, as defined in EDRM.
• Software usage. The breadth of software providers used in delivery of services, including the level of software use in each EDRM stage.
• Rankings by law firms. Law firms' views on providers ' which ones the law firms used, providers preferred, and their perceptions of volume, and quality of services and overall reputation.
• Rankings by corporations. Corporations' views on the same issues.
• Revenue. Estimated annual revenues for the providers, calculated to exclude revenues for activities other than EDD.

Tiers

We divided providers into four groups.

1. Tier 1 providers. Established in the market; revenues averaging $25 million; national or international scope; wide market recognition; broad range of services offered.
2. Tier 2 providers. Averaged $5 mil-lion in revenues; offered a wide variety of services; may have been national or regional in scope.
3. Tier 3 providers. The remainder of providers active in the EDD arena; may be smaller versions of the Tier 2 providers, or might be larger or-ganizations that devote only a small portion of their energies to EDD.
4. The do-it-yourself operations. Law firms and corporations doing EDD work internally that otherwise would have been sent to a provider.

Disclosures

Since 2003, Socha Consulting has provided paid consulting services to, or has been reimbursed for travel expenses by, 15 of the 34 providers named in this report, and has provided consulting services to a number of providers not mentioned in this report.

George Socha and Tom Gelbmann founded the EDRM, the EDRM Metrics and the EDRM XML projects ' in which 19 of the providers mentioned in this report have been active participants. More information, including full lists of participants, is available at www.edrm.net, or www.sochaconsulting.com.

(Editor's Note: Some of the vendors mentioned in this article have provided e-Discovery Law & Strategy with expert-authored articles or information for ALM-authored articles that have appeared in the newsletter. There is no connection to any editorial contributions from the vendors and the information in this article, which is taken exclusively from the Socha-Gelbmann report.)

George Socha is president of Socha Consulting. Thomas Gelbmann is the principal of Gelbmann & Associates. Both are based in St. Paul, MN. Reach the authors at [email protected] and [email protected], respectively.

In general, e-discovery spending continues to grow, although with changing processes and tightening prices, some providers are beginning to feel the pinch.

Consolidation also continues, with larger electronic data-discovery (EDD) providers buying smaller ones, and companies outside the market looking for opportunities to enter what they see as a lucrative area.

Consumers and providers are showing greater sophistication when it comes to EDD, but clearly both groups have much to learn.

Market Growth

Our survey covered the 2005 calendar year. Based on our research, we estimate that 2005 commercial EDD revenues were nearly $1.3 billion, up 56% from 2004. We estimate that the top 30 providers collected about $450 million. An additional 360-plus providers accounted for another $455 million, while 'do-it-yourself' firms (law firms and companies handling EDD work themselves that otherwise would have been sent to a provider) represented $90 million.

Judging from consumer and provider expectations, we anticipate the market growing approximately 37% from 2005 to 2006, 37% from 2006 to 2007, and 29% from 2007 to 2008.

Market Leaders

We expanded our rankings this year to include top service and top software providers, and we differentiated top service providers by litigation stage (see, Scope and Methodology, below).

For service providers, we looked at seven sets of criteria:

1. Experience and reputation (10%);
2. Capacity (20%);
3. Types of services (20%);
4. Software usage (10%);
5. Law-firm rankings (15%);
6. Corporate rankings (10%); and
7. Revenue (15%).

For software providers, we examined a slightly different list of factors:

• Experience and reputation (10%);
• Nature and scope of software of-fered (20%);
• Capacity (10%);
• How extensively consumers used the software offered (20%);
• Law-firm rankings (15%);
• Corporate rankings (10%); and
• Revenue (15%).

We also ranked service providers based on the extent and depth of their activity at each step of the EDD process as defined in our Electronic Discovery Reference Model (EDRM):

• Identification;
• Preservation;
• Collection;
• Processing;
• Review;
• Analysis;
• Production; and
• Presentation.

(For more on the Electronic Discovery Reference Model, see, 'Steering e-Discovery's Course: Effort Is Launched To Develop Standards and Guidelines,' p. 3, in the July 2005 edition of e-Discovery Law & Strategy. See also, 'Electronic Discovery Market Takes Leap: Sales Increase Nearly 100% in a Year,' p. 4, in the September 2005 edition of e-Discovery Law & Strategy.)

All rankings are in alphabetical order within a category (top five, etc.). We started with more than 300 categories and subcategories of information, set percentage weights for each category and subcategory, and gathered information for each criterion.

For every provider evaluated, we rated all the information we could get. Our goal was to arrive at results that rewarded the best-rounded providers in each category considered. Of necessity, the extent to which we could get information limited our approach. While we accepted information from every organization willing to provide it, some declined to participate while others provided only selected information.

Overall ServiceProvider Rankings EDD Services Leaders 1-5:

• Fios Inc.;
• Kroll Ontrack Inc.;
• LexisNexis Applied Discovery;
• Renew Data Corp.; and
• Zantaz Inc.

Services Leaders 6-10:

• Deloitte;
• Electronic Evidence Discovery Inc.;
• First Advantage;
• KPMG; and
• OnSite E-Discovery.

Services Leaders 11-20:

• Capitol Digital Document Solutions;
• CaseData;
• Cataphora Inc.;
• Cricket Technologies;
• Daticon (just purchased by Xiotech Corp.);
• Doar Inc.;
• Encore Legal Solutions;
• Ibis Consulting Inc.;
• RLS Legal Solutions; and
• Xact.

Overall Software Provider Rankings EDD Software Leaders 1-5:

• Attenex Corp.;
• Dataflight Software (just purchased by LexisNexis);
• Electronic Evidence Discovery Inc.;
• Guidance Software Inc.; and
• Zantaz Inc.

EDD Software Leaders 6-10:

• CT Summation Inc.;
• DocuLex Inc.;
• iConect Development;
• MetaLincs; and
• Stellant's Outside In Technology Group.

Top Service Providers by e-Discovery Stage

Identification

When providers help determine the scope, breadth and depth of electronically stored information (ESI) that might be pursued during discovery.

The Top 5 Providers:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• First Advantage;
• KPMG; and
• Renew Data Corp.

Next:

• Cricket Technologies;
• IE Discovery Inc.;
• Kroll Ontrack;
• LexisNexis Applied Discovery; and
• Xact.

Preservation

Providers help ensure that ESI is protected from destruction or alteration.

Leading the Market:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• KPMG;
• Kroll Ontrack Inc.; and
• Renew Data Corp.

Next:

• Cricket Technologies;
• Deloitte;
• First Advantage;
• IE Discovery Inc.; and
• LexisNexis Applied Discovery.

Collection Providers

These organizations help gather ESI from various sources (tapes, drives, portable storage devices, networks).

The Top 5:

• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• KPMG;
• Kroll Ontrack Inc.; and
• LexisNexis Applied Discovery.

From 5 to 10:

• Capitol Digital Document Solutions;
• Deloitte;
• First Advantage;
• IE Discovery Inc.; and
• Renew Data Corp.

Processing Providers

These work to reduce the overall set of ESI through deduplication, culling and similar strategies and, as necessary, convert ESI to more readily usable formats.

Leading the Pack:

• Aaxis Technologies;
• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Next:

• CaseData
• DTI Global;
• IE Discovery Inc.;
• Kroll Ontrack Inc.; and
• OnSite E-Discovery.

Review Providers

Review providers help evaluate ESI for relevance and privilege. Some offer application service provider (ASP) or other platforms while other providers offer actual review services.

Leaders:

• CaseData;
• Fios Inc.;
• Kroll Ontrack Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Followed by:

• Integreon Managed Solutions Inc.;
• CaseShare Systems;
• Electronic Evidence Discovery Inc.;
• Encore Legal Solutions; and
• IE Discovery Inc.

Analysis Providers

These companies help evaluate ESI to determine such information as key topics, important people, specific vocabulary and jargon, and important individual documents. Additionally, analysis is performed throughout the EDD process to assess the validity of the work performed at each stage.

Leaders:

• CaseData;
• Electronic Evidence Discovery Inc.;
• Fios Inc.;
• LexisNexis Applied Discovery; and
• Xact.

Next:

• Integreon Managed Solutions Inc.;
• CaseShare Systems;
• Cataphora Inc.;
• DTI Global;
• Encore Legal Solutions; and
• IE Discovery Inc.

Production

Production entails the delivery of ESI to various recipients, such as opposing counsel. Issues included are form of production (native .TIFF, etc.), delivery media (CD, FTP site, etc.), and configuration of ESI and related data for loading into specific software.

Top Providers:

• Aaxis Technologies;
• Integreon Managed Solutions Inc.;
• Encore Legal Solutions;
• IE Discovery Inc.; and
• Xact.

Followed by:

• Capitol Digital Document Solutions;
• Doar Inc.;
• DocuLegal;
• RLS Legal Solutions; and
• SysInformation Inc.

Issues Influencing the Market

Key factors driving the EDD market last year fell into five broad categories:

1. Costs and cost-management;
2. Standards or lack of them;
3. The overwhelming volume of data with which litigants must contend;
4. Lack of quality education and in-depth understanding; and
5. Fear ' of the unknown, of the consequences of not doing EDD right and of the changes coming with the revisions to the Federal Rules of Civil Procedure.

We also heard increasing disillusionment with and distaste for conversion of ESI to quasi-paper formats (.TIFF and .PDF); but that was combined with an apparent inability to kick the conversion habit. To be fair, the technology hasn't advanced to the point where conversion can be abandoned.

Scope and Methodology

The 2006 Socha-Gelbmann Electronic Discovery Survey examines the demands for, and consumption of, comercial EDD services and software. By EDD, we mean the activities suround-ing the identification, preservation, collection, processing, review, analysis, production and presentation of electronically stored information that started its life in electronic form, and remained in electronic form until it and the discovery process collided.

For the 2006 survey, we gathered information from 91 organizations ' 62 services and software providers, and 29 law firms and corporate legal departments. We also gathered information from secondary sources.

We do not pay participants; participants will receive a participant report. For those organizations that provided meaningful data and also subscribe to the report, we provide information about how they ranked. All participants were promised anonymity.

The cost to subscribe to the survey is $5000. Details are posted at www.sochaconsulting.com/2006survey.htm.

Factors

We built our analysis around more than 300 factors. The top-level factors were:

Experience and reputation. The length and depth of the providers' experience in the EDD industry, the breadth and depth of the organizations' offerings, and their reputations.

• Software (software providers only). The breadth of use in the EDRM stages, intended installation (ASP, network, etc.) and frequency of consumer use.
• Capacity. The level of resources that providers dedicated to the EDD market.
• Types of services (services pro-viders only). The types of services providers offered, as defined in EDRM.
• Software usage. The breadth of software providers used in delivery of services, including the level of software use in each EDRM stage.
• Rankings by law firms. Law firms' views on providers ' which ones the law firms used, providers preferred, and their perceptions of volume, and quality of services and overall reputation.
• Rankings by corporations. Corporations' views on the same issues.
• Revenue. Estimated annual revenues for the providers, calculated to exclude revenues for activities other than EDD.

Tiers

We divided providers into four groups.

1. Tier 1 providers. Established in the market; revenues averaging $25 million; national or international scope; wide market recognition; broad range of services offered.
2. Tier 2 providers. Averaged $5 mil-lion in revenues; offered a wide variety of services; may have been national or regional in scope.
3. Tier 3 providers. The remainder of providers active in the EDD arena; may be smaller versions of the Tier 2 providers, or might be larger or-ganizations that devote only a small portion of their energies to EDD.
4. The do-it-yourself operations. Law firms and corporations doing EDD work internally that otherwise would have been sent to a provider.

Disclosures

Since 2003, Socha Consulting has provided paid consulting services to, or has been reimbursed for travel expenses by, 15 of the 34 providers named in this report, and has provided consulting services to a number of providers not mentioned in this report.

George Socha and Tom Gelbmann founded the EDRM, the EDRM Metrics and the EDRM XML projects ' in which 19 of the providers mentioned in this report have been active participants. More information, including full lists of participants, is available at www.edrm.net, or www.sochaconsulting.com.

(Editor's Note: Some of the vendors mentioned in this article have provided e-Discovery Law & Strategy with expert-authored articles or information for ALM-authored articles that have appeared in the newsletter. There is no connection to any editorial contributions from the vendors and the information in this article, which is taken exclusively from the Socha-Gelbmann report.)

George Socha is president of Socha Consulting. Thomas Gelbmann is the principal of Gelbmann & Associates. Both are based in St. Paul, MN. Reach the authors at [email protected] and [email protected], respectively.