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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 president Tom Eid in a December report, "Forecast: Enterprise E-Discovery Software, 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 software. 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.
Another reason is international growth. Gartner evaluated 2011 data and found that 82 percent of EDD software 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 growt — 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. One petabyte holds the equivalent of more than 200 million iPod songs, he continued.
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 wrote. However, "Starting in 2008 and expanding in 2011, Gartner saw a shift in mindset," 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 stated.
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? I think we are seeing that type of growth, and I think that the Foreign Corrupt Practices Act and anti-corruption efforts are a definite area where," he said. "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 added.
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