Electronic discovery is replacing the paper kind. A few fairly new enterprises assist large enterprises in managing their compliance documents and litigation discovery requirementsThe Kansas City Star Business. "Nothing's in the file cabinets anymore," staff rep for Kroll Ontrack Inc., a firm that maintains electronci records for discovery and corporate compliance. the inexpensive abundance of data storage, high-profile lawsuits and strict new laws such as Sarbanes-Oxley that demand thorough corporate archiving - are making electronic discovery a lucrative and competitive slice of information technology.
The overall market is worth close to $2 billion and growing at about 35 percent a year, says Michael Clark, who analyzes the field at EDDix LLC. The number of companies offering computer-related evidence gathering appears to have doubled in the past two or three years, with several hundred now hanging a shingle.
This surge has led Kroll Ontrack to quadruple the size of its data-crunching center in less than 18 months, from a half-petabyte of storage to two petabytes. That's 2 million gigabytes. Consider that the Internet Archive, which aims to store almost every public Web page ever to appear, currently totals one petabyte.
Rival e-discovery vendor Fios Inc. had 48 employees three years ago. This year, the Portland, Ore.-based company expects to employ more than 120, with revenue of $30 million - nearly double its 2004 figure.
Increasingly, e-discovery customers are not just law firms enmeshed in big corporate cases. More and more, companies are working proactively with e-discovery vendors, getting a handle on their data troves so they can meet regulatory requirements - or just in case they are sued.
After all, 90 percent of U.S. corporations are engaged in some type of litigation, according to research by the law firm Fulbright & Jaworski LLP. The average company bigger than $1 billion is wrestling with 147 lawsuits.
"The big risk for companies is too much data that there's really no business need for, being kept in ways that if they had to go looking for it, would be uneconomic," said e-discovery pioneer John Jessen, who founded Electronic Evidence Discovery Inc. in 1987. (It began after Jessen, who had a small computer business in his basement, was able to find a seemingly absent mailing list on a defendant's computer.
Some notable cases involving electronic discovery:
UBS AG equities trader Laura Zubulake won a $29 million award in a federal gender discrimination suit in which she had requested that the bank turn over all internal communications about her. The bank produced 350 pages of documents, but Zubulake knew there were more - she had retained some herself. The judge even sanctioned the defendant for suppressing discovery. July 2003 and 2004 decisions here.
financier Ron Perelman won $1.6 billion from Morgan Stanley & Co. after a judge said the firm had failed to turn over e-mails and other digital evidence in a lawsuit stemming from its role in the 1998 sale of Perelman's Coleman camping gear company to Sunbeam Corp.
The case is being appealed, but still proving instructive. "
on the other hand some laws require companies to get rid of records, making a fine line to walk
European data-privacy laws and the new Fair and Accurate Credit Transactions Act - require companies to go in the opposite direction and dispose of certain kinds of records.
How the data mining companies work:
Generally, a vendor gets raw material from corporate computers and backup tapes, then dives in - with specialized software rather than humans - to remove duplicate files or records that have no bearing on a case, while zeroing in on those that might. Later the vendors can be asked to testify how the searches were conducted.
evidence comes not from what's in a file, but from its "metadata" - the automatically applied labels that explain such things as when a file was made, reviewed, changed or transferred.
From there, even the end product comes in digital form. The evidence found by electronic discovery firms can be put on secure Web sites for legal teams to pore over, mark up and redact if necessary.
This kind of service often runs well into six figures, but there will be pressure to bring that down as cost-conscious companies replace law firms as the direct clients. And that figures to change the sprawling field.
Some think software providers and tech-services giants will step in and begin baking electronic discovery capabilities into other data-retention products. For example, storage systems can include "litigation hold" functions that let a company instantly preserve certain records if necessary.
"The ultimate buyers of a company like ours have only just begin to emerge in our space," said Massey at Fios. "The names we'll associate with the services we provide in three, four, five years from now will be like IBM and EMC and Oracle."
The overall market is worth close to $2 billion and growing at about 35 percent a year, says Michael Clark, who analyzes the field at EDDix LLC. The number of companies offering computer-related evidence gathering appears to have doubled in the past two or three years, with several hundred now hanging a shingle.
This surge has led Kroll Ontrack to quadruple the size of its data-crunching center in less than 18 months, from a half-petabyte of storage to two petabytes. That's 2 million gigabytes. Consider that the Internet Archive, which aims to store almost every public Web page ever to appear, currently totals one petabyte.
Rival e-discovery vendor Fios Inc. had 48 employees three years ago. This year, the Portland, Ore.-based company expects to employ more than 120, with revenue of $30 million - nearly double its 2004 figure.
Increasingly, e-discovery customers are not just law firms enmeshed in big corporate cases. More and more, companies are working proactively with e-discovery vendors, getting a handle on their data troves so they can meet regulatory requirements - or just in case they are sued.
After all, 90 percent of U.S. corporations are engaged in some type of litigation, according to research by the law firm Fulbright & Jaworski LLP. The average company bigger than $1 billion is wrestling with 147 lawsuits.
"The big risk for companies is too much data that there's really no business need for, being kept in ways that if they had to go looking for it, would be uneconomic," said e-discovery pioneer John Jessen, who founded Electronic Evidence Discovery Inc. in 1987. (It began after Jessen, who had a small computer business in his basement, was able to find a seemingly absent mailing list on a defendant's computer.
Some notable cases involving electronic discovery:
UBS AG equities trader Laura Zubulake won a $29 million award in a federal gender discrimination suit in which she had requested that the bank turn over all internal communications about her. The bank produced 350 pages of documents, but Zubulake knew there were more - she had retained some herself. The judge even sanctioned the defendant for suppressing discovery. July 2003 and 2004 decisions here.
financier Ron Perelman won $1.6 billion from Morgan Stanley & Co. after a judge said the firm had failed to turn over e-mails and other digital evidence in a lawsuit stemming from its role in the 1998 sale of Perelman's Coleman camping gear company to Sunbeam Corp.
The case is being appealed, but still proving instructive. "
on the other hand some laws require companies to get rid of records, making a fine line to walk
European data-privacy laws and the new Fair and Accurate Credit Transactions Act - require companies to go in the opposite direction and dispose of certain kinds of records.
How the data mining companies work:
Generally, a vendor gets raw material from corporate computers and backup tapes, then dives in - with specialized software rather than humans - to remove duplicate files or records that have no bearing on a case, while zeroing in on those that might. Later the vendors can be asked to testify how the searches were conducted.
evidence comes not from what's in a file, but from its "metadata" - the automatically applied labels that explain such things as when a file was made, reviewed, changed or transferred.
From there, even the end product comes in digital form. The evidence found by electronic discovery firms can be put on secure Web sites for legal teams to pore over, mark up and redact if necessary.
This kind of service often runs well into six figures, but there will be pressure to bring that down as cost-conscious companies replace law firms as the direct clients. And that figures to change the sprawling field.
Some think software providers and tech-services giants will step in and begin baking electronic discovery capabilities into other data-retention products. For example, storage systems can include "litigation hold" functions that let a company instantly preserve certain records if necessary.
"The ultimate buyers of a company like ours have only just begin to emerge in our space," said Massey at Fios. "The names we'll associate with the services we provide in three, four, five years from now will be like IBM and EMC and Oracle."
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