Discovering Money
EDD software sales, now at $1.4 billion, are predicted to double by 2017.
Electronic data discovery software
sales reached $1.4 billion worldwide in
2012 and will reach $2.9 billion by 2017,
predicted Gartner Inc. research vice pres-
ident Tom Eid in a December report,
“Forecast: Enterprise E-Discovery Soft-
ware, Worldwide, 2012-2017.”
If the prediction proves correct, it
means that EDD software will increase
by more than 15 percent annually over
the next five years — with a growth rate
double the rate of overall business soft-
ware. That rate exceeds the growth rate
of overall “enterprise” business software
that targets large organizations, which
is below 7 percent — but the market is
mature at $119 billion in 2012, Eid noted.
The statistics all bode well for EDD
vendors and their investors, Eid said. “It is a high-growth area,”
he said. “To double something that is already growing, in a
down market overall, is really a positive sign.” Eid based the
report on the same 21 companies included in Gartner's e-discovery “Magic Quadrant” evaluation from May 2012, he said.
The new numbers exceed Gartner’s own predictions from
2011, in which analysts at the Stamford, Conn.-based company
foresaw $1.5 billion in software sales for 2013. Now that prediction is nearly $1.67 billion.
The adjustment in the numbers can be explained in many
ways. “Part of it is that the vendors themselves are actually performing better than we anticipated,” Eid said. Gartner itself is
also doing better at learning the depth of the e-discovery market’s many arms, he acknowledged. “Part of the increase is
we're just more knowledgeable of the vendors and we have a
broader base of vendors that we’re tracking,” he said.
International Growth. Another reason is international
growth. Gartner evaluated 2011 data and found that 82 percent
of EDD soft ware revenue stemmed from North America, 12 percent from Europe, the Middle East, and Africa, 5 percent from
the Asia-Pacific region, and 1 percent from Latin America.
Europe, the Middle East, and Africa grew 5 percentage
points since 2008, while the Asia-Pacific region increased 3
percent. Eid observed that many countries are cracking down
on bribery and corruption, often through U.S.-style laws,
which leads to more litigation — and, with that, more EDD
software sales. Government spending is a major part of the
international growth, as well as part of U.S. market growth
— as EDD software is increasingly used in antitrust investigations, intellectual property matters, and mergers/acquisitions
research, Eid said.
Traditional corporate and law firm
use of EDD software also is growing as a
consequence of trends in Big Data — the
booming global increase in the amount
of raw data itself, largely spawned by
cloud and mobile applications, he said.
Terabyte-sized storage networks were
impressive a decade ago, but now the
corporate IT world lives in petabytes.
Eid added that data awareness is
another reason for the predicted growth.
“Most organizations today use a reactive
approach to the e-discovery process: An
interrogatory is received, legal counsel is sought and the production is initiated,” Eid noted. However, “Starting
in 2008 and expanding in 2011, Gartner
saw a shift in mind-set,” he continued.
Explaining that shift, “Through vendor briefings and client
inquiry calls, we have seen that more companies are taking a
proactive approach by investing in information management
technologies and processes to respond quickly to discovery
requests, and to provide in-house counsel with a tool that can
assess potential risk or assess case risks,” he said.
Philip Favro, an e-discovery attorney at Symantec Corp.'s
Clearwell Systems division, said the Gartner report is good
news for software companies, but noted that it’s a wake-up
call for customers. Upon hearing the $2.9 billion projection,
he remarked, “That’s a substantial figure, isn’t it?” Favro says
one area that is experiencing e-discovery growth is cases relat-
ing to the Foreign Corrupt Practices Act and other anti-corrup-
tion efforts. “Companies have to take those laws into account
in their information governance programs.”
Favro said he isn’t worried about the forecast indicating a
possible bubble. “This isn’t like the real estate industry where
the value of homes went up ridiculously, given the number of
low-income buyers that didn’t have the ability to keep up with
mortgate payments. I see this as long-term growth,” he said.
“The one word of caution I would offer would be [that]
we don’t know the impact of any potential amendments to
the Federal Rules of Civil Procedure,” Favro said. If there are
amendments that reduce data preservation requirements, he
said, then EDD industry revenue could be softer than Gartner
predicts. Conversely, EDD costs could rise as brand name IT
companies enter the field. In addition to Symantec, major IT
players include EMC, Hewlett-Packard, and IBM. Google has
archiving software, Microsoft added e-discovery to its SharePoint 2013 application, and Oracle reportedly has considered
e-discovery acquisitions. — Evan Koblentz
