This document was revised on 22 December 2009. For more information, see the Corrections page on gartner.com.

E-discovery is a maturing market with entrants from multiple categories, including storage and archiving, search and information access, content and records management, and workflow, as well as tools designed as end-user applications for legal professionals and forensic data collection tools aimed at security professionals, regulators and law enforcement agencies. All of these categories of software vendors have added e-discovery to existing suites or purport to cover various aspects of the e-discovery process. There are also pure-play e-discovery vendors to consider.

Enterprises purchasing e-discovery software can reduce the costs of litigation by improving their control over unstructured content, and semistructured content, most notably e-mail. Our client references consistently report that they have cut costs and risks by taking control of litigation hold, litigation-hold-tracking, file collection, file processing and legal review, instead of outsourcing these functions.

The selection of e-discovery software is a joint decision and sometimes a joint purchase between the IT department and the legal department. These two groups must work together to determine the needs of the organization and the individual users, and to build the business case for purchase. Although many corporations do not know the true costs of their legal activity, there is evidence that those costs are substantial. Because the work of legal and regulatory response is spread over different departments, and legal matters can span multiple years, traditional cost accounting does not do a good job of tracking the cost of litigation and regulation.

The legal department pays for outside counsel's services and e-discovery providers; business units pay liability costs if a plaintiff wins a monetary judgment; and the IT department bears the expense of any internal discovery work. That makes it difficult to track costs in a meaningful way. In addition, litigation can go on for years, meaning a single case must be tracked over its lifetime. This, of course, does not follow the way accountants do things, which is on a yearly basis. Legal departments seldom have "budget" allocated to them but, of course, must pay the bills of outside counsel and other providers of legal services, and that money comes out of the legal reserve (see Note 1). Gartner clients that do track "all" legal costs, and that have purchased e-discovery software, report that the software pays for itself in a matter of months, or is justified by the projected cost of "one big case."

The cost savings as reported by clients for early case assessment, along with in-house collection and preservation, can more than justify the purchase of moderately priced e-discovery software ($100,000 to $500,000), or even more expensive software (costing more than $500,000). When interviewed for this MarketScope, clients reported a return on investment (ROI) within three to six months or, alternatively, after one big case, particularly intellectual property disputes (see Note 2). The main areas of cost reduction are in processing data by external service providers, as less time and, therefore, money is spent on outside attorney review, as less material is passed to them. These benefits are achieved by defensibly culling the amount of data that is passed on to further steps in the e-discovery process, by allowing in-house attorneys to "go back to the well" and refine their searches, either coming up with more data (to avoid sanctions) or refining existing data sets to the relevant documents to pass on for further consideration.

E-discovery takes place at the request of outside counsel, or before counsel is retained, at the request of an internal legal department. The amount of material turned over to outside counsel for review has a direct bearing on the cost of litigation or regulatory investigation. Opportunities to reduce spending on both the processes of e-discovery itself and the subsequent review by attorneys of materials obtained during e-discovery are the heart of the e-discovery vendors' value proposition.

Using this report, data center managers, information security officers, information architects, in-house legal personnel and records managers can find information to build a business case, create a list of possible vendors and determine which ones best meet their needs.

The e-discovery product market received a boost from the recession of 2008 to 2009. Because all costs began to be scrutinized, including previously immune legal budgets, corporate legal departments had to start looking for a way to cut their costs. In addition to the recession, awareness of the 2006 changes to the Federal Rules of Civil Procedure (FRCP) in the United States (see Note 3) and parallel efforts on the part of the European Union, South Africa, Australia and Canada continued to grow among the legal profession, providing further growth stimulus. As a final impetus to growth, the Obama administration stimulated demand among government agencies, particularly regulators, by giving them a mandate to make government more transparent. In addition, in 2009, for the first time, our client inquiry showed accelerating interest and awareness of discovery and disclosure in Europe, particularly regarding privacy versus disclosure.

The perception of e-discovery as one of the few growth areas in an otherwise flat or declining software market attracted a number of new entrants in 2009. The year also saw a few acquisitions both by those wishing to enter the market and those that sought to add to their existing functionality. In 2008, we wrote:

"The numbers of new entrants into the market grew in 2007, with more established companies joining the fray in 2007 and 2008, following the market demand with their own established products. Although there have been a few acquisitions along the way, overall, there are more e-discovery vendors in 2008 than there were in 2007. We expect this trend to continue in 2009, as this is a rapidly growing space. Since litigation is counter-cyclical, current economic conditions may in fact accelerate market growth. Simply put, there is money to be saved and money to be made and both enterprises and vendors will continue to enter the market despite the recession."

These statements have largely been borne out. The year 2009 was one of consolidation in terms of product functionality, as well as overall revenue growth; 2010 will be a year of reckoning. The scope for successful entry into the market will diminish, as the established players take more of the business based on "referenceability," scope of functionality and company size. No longer composed of tiny startups or megavendor e-discovery "wannabes," the market now contains a number of credible solution providers that can meet enterprises' discovery needs either in part or fully. The larger, established vendors are moving toward a suite of products that together constitute a way to govern information in a more effective way. E-mail and file archiving, records management and content management applications, coupled with software to manage retention, disposition, policy and e-discovery, are all components of a governance platform. In 2010, several vendors will begin marketing governance solutions with these component parts.

In 2008, e-discovery vendor revenue grew at 30%. Spending on e-discovery software technologies and service offerings is forecast to grow by 21% annually through 2013. This is a decline in the growth Gartner has seen in the past few years, which was running at about 50%. The decline in growth is a result of market saturation and continued overlapping functionality from e-mail archiving, content and records management, search, and other technologies. However, we expect net year-over-year revenue will continue to increase through 2013. Gartner estimates that the total software revenue in the worldwide enterprise e-discovery software marketplace was $808 million in 2008. The five-year compound annual growth rate is approximately 21%. This market is in a period of simultaneous growth and consolidation that should last through 2011.

In 2009, enterprises became clearer about their actual needs and what part of the e-discovery process they wished to manage themselves. Enterprise demand began to coalesce around a set of features and functions. The consolidation in the market has been around a set of features and functions most desirable to in-house applications. As in previous years, we will use the Electronic Discovery Reference Model (EDRM) to describe both the process of e-discovery and how the vendors fit their products into the model. Despite some credible argument that the model is "not detailed enough," it still makes a good starting point for vendor categorization. The EDRM is shown in Figure 1, so that clients can reference it for the purposes of vendor analysis. The main deficiency in the model has proved to be that it lacks a definition of "early case assessment," which many vendors discuss, and which is high on the list of functionality that corporate buyers want.

This has not prevented vendors from offering early case assessment, or clients from using the capabilities in various tools to perform that function. In February 2008, we wrote: "Technologies — from simple relevancy calculation-free search to advanced content analytics — will provide increasingly predictable value for enterprises seeking to assess the risk or opportunity that a given legal case provides them. Strategies exploiting such technologies will reduce the time it takes to identify likely losing and winning cases, therefore reducing attorneys' hours and speeding appropriate settlements. Most studies of legal reviews indicate cost savings of up to a factor of 10 when technology is introduced as a culling agent. Use of such technologies for early case assessment is more palatable, as it does not necessarily have to satisfy judicial scrutiny, and so the potential cost savings stretch across more cases."

This is why, as we predicted, more and more enterprises are looking to insource at least part of the e-discovery function, especially litigation hold, litigation-hold-tracking, e-mail archiving with accompanying e-discovery functionality, identification, preservation and collection of electronic files, along with processing. Through vendor briefings and client inquiry calls, we have discovered that more companies are taking a proactive approach by investing in content and records technologies and processes to be able to respond quickly to discovery requests, as well as to provide in-house counsel with a tool that can be used to assess potential risk or early case assessment.

Until recently, many companies regarded litigation and e-discovery as things that were not subject to normal business process constraints or rules. The view was that each case was different, the processes involved in preserving and collecting evidence were customized, and most of the work was beyond the scope of what normally happened in a corporation. Thus, e-discovery was largely handled by service providers — specialized vendors that dealt with most or all the process on a one-off basis.

Since the change to the FRCP in late 2006, that view has undergone a gradual change. Rather than looking at each case as an exceptional event, corporations are recognizing that e-discovery is, in fact, a routine business process. As such, opportunities for making it more efficient do exist and, when it comes to efficient execution, the company itself has more of a vested interest in efficiency metrics than providers that are charging for time and materials.

When one considers the number of lawsuits that are ongoing or are begun in any one year, it is clear that e-discovery needs to be treated like any other business process. Opportunities for efficiency and cost savings must be sought wherever possible, which is what e-discovery vendors try to address. For an idea of the volumes of suits faced by companies, we cite Fulbright's sixth annual Litigation Trends survey report (see Note 4).

In Fulbright & Jaworski's survey, 53% of companies reported spending more than $1 million on litigation in 2009, up from 45% in 2008. The number of smaller companies spending more than $1 million rose from 4% in 2007 to 13% in 2009, while the number of midsize companies spending $1 million or more went up from 26% to 28%. Of the largest companies, 78% spent $1 million or more. In the healthcare, insurance, energy/utilities and telecommunications/high-tech sectors, spending is most likely to be more than $10 million. Of the companies surveyed, 16% planned to spend more on e-discovery in 2010. Forty-five percent of all companies in the survey said they had at least one regulatory matter commenced against them. The survey also indicated that companies were more inclined than previously to handle regulatory inquiries themselves, reporting a decrease in their use of outside counsel.

There are interesting figures from other sources that may be interpreted as supporting the assertion that "e-discovery is moving in-house." In Fulbright's Litigation Trends survey, the 2008 and 2009 responses indicated that lawyers were anticipating a decline in both litigation and e-discovery disputes. The 2009 survey indicated that lawyers think 2010 will see an increase in litigation, with 40% reporting that 2010 will bring more litigation than 2009. Of the companies surveyed, 48% were doing some e-discovery processes in-house, a trend we expect to continue. Twenty-six percent of respondents said they used law firms with specialized e-discovery practices, a trend that we believe will also drive the tools market, as firms use technology expertise to compete for and win this business (see Note 5).

These facts can be interpreted to support the conclusion that in-house e-discovery, and especially early case assessment, may indeed be having an impact on both the overall volume of litigation and its cost. Another corroborative source is the 2009 Socha-Gelbmann Electronic Discovery Survey (see Note 6). Overall, the survey showed a drop in the overall size of the market for services and software — of 9% — while simultaneously saying overall "volume of business" is up. Although the authors of this study say these contradictory numbers "conceal more than they reveal," we see two possible drivers behind these seemingly contradictory results.

First, the move to in-house e-discovery favors product vendors, rather than service providers, and our own research shows that the product companies included in Gartner's MarketScope survey grew for the most part. This has exacerbated the price pressure in the services market. Oversupply has led to price cutting and, as the ranks of service providers have swelled since 2006, pressure to provide e-discovery services that are inexpensive, quick and good has increased. In other words, business is up for them in terms of cases and data volumes, but prices are down because they had to cut them to compete.

We believe this supports the contention that the market for e-discovery tools that can be used in enterprises or by law firms will continue to grow. The market continues to be driven by the need to control costs, seek early resolution of disputes to avoid litigation completely and to prepare to meet opposing counsel for pretrial discussions about discovery, as specified by the FRCP.

eLawForum, an online legal journal, has compiled litigation data over the past eight years, with more than 20,000 cases spread over 500 of its clients (see Note 7). It has drawn the following facts from this data:

• Among Fortune 500 companies, it estimates the total cost of litigation to be $210 billion in 2008, equivalent to a third of the after-tax profit of those companies.
• The structure of corporate cost accounting encourages legal departments to delay the resolution of cases, that is, to spread the cost over several years.
• Delay inevitably increases costs, as Fortune 500 companies prepare every case as if it were going to trial, but 97% of cases are settled to avoid trial and to prevent the matter from entering the public domain.
• This behavior encourages the plaintiff's bar to hold out longer for bigger settlements, as it knows that the closer the approach of trial, the likelier the chance of a settlement and the higher the monetary value of that settlement.
• Delayed resolution also leads to higher costs because the longer a case goes on, the larger the fee to the plaintiff's lawyers — paid by the corporation if the plaintiff wins.

These facts are relevant to Gartner's IT clients, as they form the basis for beginning a dialogue with personnel from the legal and finance departments, as well as for formulating the business case for bringing some of these functions in-house. When it comes to cost justification, the cost of e-discovery software can be offset against fees that accrue downstream. Even though these are not direct IT costs in many cases, any IT program that helps the business and saves the company money should at least get a hearing.

In the absence of the total cost picture, companies can frequently identify at least some of the costs associated with legal and regulatory proceedings. These are typically high, more than $1 million per year. Respondents to our client reference survey for this MarketScope told us that payback periods could be as short as three months, with few reporting ROI taking more than a year. Generally, the cost of software is offset against fees charged by outside service providers to process data for discovery or against the reduction in legal fees charged by outside attorneys reviewing massive amounts of written electronic material. The payback is immediate and direct. It has an impact on bottom-line profitability, with profits being the source of the fees being paid to outside lawyers and other legal service providers.

In 2009, the average hourly billing rate for an attorney in a small or midsize practice was $284, with an average of 1,835 billable hours expected for an associate. That means that one lawyer working for one year on a case would bill a total of $521,140. That figure does not take into account the billing rate of the plaintiff's lawyers (on average $413 per hour, for a yearly total of $757,855) or additional costs, such as data discovery or processing and hosting by a service provider. Lawyers' hourly rates make e-discovery software look like a bargain when offset against these costs (see Note 8).

Against this cost backdrop, when we look at even the high end of the e-discovery software market, with systems costing $1 million or more, clients report ROI in the short term.

The criteria for vendor inclusion in this year's MarketScope have changed because the market has changed. The emerging nature of the market justified inclusion of smaller vendors in 2008, but this year's revenue cutoff of $15 million reflects the growing maturity of the players, as well as their consolidation and growing revenue bases. With the amount of interest and activity in this market, smaller players with interesting technology are likely acquisition targets. Without major differentiating technology, the barrier to successful entry into the e-discovery market became higher this year, and vendors without the budget to create awareness or to develop the necessary channels to market will not be able to rise above the "noise" around e-discovery.

The functionality that the vendors offer is often confused and overlaps with other product categories. It seems likely that enterprise clients will continue to have fragmented e-discovery tactics spread across different product categories for the near-term future. Another change has been in adjacent markets, particularly e-mail archiving. E-discovery functionality covering litigation hold and review and/or analysis has become necessary for all e-mail archiving vendors. It is no longer sufficient that an e-mail archiving vendor provides these capabilities on its own archive to be considered for this MarketScope. It would need to have augmented this basic functionality with the ability to archive and hold other file types, collect (alone or in partnership) on an ad hoc basis and possess more sophisticated review and analysis capability, in addition to a means to export from the archive for production, at least in native format or EDRM-XML.

The e-discovery market includes products and services that allow electronically stored information (ESI) of all types to be identified, preserved, collected, processed, reviewed, produced and managed over a period of time. There is some overlap with markets beside e-mail archiving, including enterprise content management (ECM), records management (RM), content monitoring and filtering, workflow and information access.

E-discovery is independent of all of them, despite the overlap. This is due to the combination of functionality that is required, and the unique requirements that result from the e-discovery process being ultimately specified by the FRCP and scrutinized and defined by the courts. To be included in this market, a vendor must address at least three of these functional areas, which have been chosen to reflect the clustering of user wants and needs and the process of e-discovery as reflected in the EDRM:

• Identification of machines connected to a network, plus the ability to identify, mark and/or copy individual files contained in e-mail systems, file servers and other sources. Software must have a means of identifying the requested information using a variety of parameters including file type, creator or custodian, date of last access, date of creation, system of origin and keywords. Identification can also include a workflow-based means for attorneys to identify and track custodian-led collection.
• Preservation of files and metadata, and the tracking of these preservation requests, known as litigation hold. Preservation consists of knowing a file exists and either "holding it in place" or copying it to a secure repository for hold purposes. If preservation is custodian-led, the software must have a way of tracking the custodian's responses to preservation requests.
• Collection can be custodian-led or automated. In custodian-led collection, lawyers identify the people who created files or control them, send them a notice to preserve and then ask them to copy or tell them their files will be copied. Collection can also be automated and may involve "copy and move." Information deemed responsive must be copied for processing. Reports for the IT and legal departments in terms of what has been preserved and what custodians have been notified is desirable. Products must preserve the integrity of metadata in the collection process and provide logs of collection activities.
• Evidence repository, archiving repository, content repository or RM repository, which allows at least the preservation of files in an unalterable format, the tagging of files for short- or long-term retention, that is, under the control of a repository database that allows the administration of the files within.
• Initial processing of data, including culling by file type, deduplication or near deduplication, producing reports that show the amount of data that has been collected, categories that have been culled, and the ability to categorize the data. Keyword search and the ability to view and review files in native formats are also necessary.
• Functionality to assist legal personnel in document review — for inclusion or exclusion in production — for opposing counsel, regulators or courts. Attorney review tools may include Bates numbering (see Note 9), sophisticated search capabilities, process support, visualization and pattern recognition techniques, categorization and classification functionality, redaction, native file format viewers, integration with common desktop tools such as Outlook, and the ability to export files in various formats — especially for litigation support databases and other review products.
• Search and information access functionality, including at least the ability to connect to multiple repositories (e-mail, e-mail archiving, file shares, basic content services and document management systems, plus desktops) and a way to find individual items within those repositories, including at least keyword or Boolean search.
• Ability to produce documents at some point in the process, either as "load files" for review platforms, or as a set of documents to be produced for an outside party to review. This functionality implies that various viewing and export facilities be provided; for example, the ability to view documents in their native format, or a transformation to another more portable format, or as XML files.

The categories of vendors that have emerged are:

• Information governance players, which include ECM, RM and archiving vendors, that base their capability on existing e-mail and file archiving, records or content management, with associated litigation hold, preservation, processing, and early case assessment.
• Identification, collection, preservation and processing vendors that have either a workflow-based system for attorneys to track custodian-led collection or a search and information access system for the IT and legal departments to use. The vendors that focus on this part of the EDRM are also increasingly claiming to have early case assessment functionality.
• Vendors focused on processing, reviewing and analyzing documents, either early case assessment or a later state of review, including features such as document categorization, redaction and mechanisms to mark documents as privileged or in other ways to categorize and process them. This category includes the attorney review platforms that have been used for 10 or more years by the legal community to perform document review. It encompasses the older term "litigation support databases."

There have been a few significant acquisitions in 2009. Autonomy acquired Interwoven, and EMC acquired Kazeon. Clients can expect more changes in the market, including mergers, acquisitions, exits, entries and repositioning. The predicted level of activity in the market is based on the facts that it is fast-growing, and contains large, established players and smaller, technology-rich startups. In addition, the evidence continues to accumulate that corporations can save costs and reduce risks by adopting e-discovery technology in-house, and so the growth of the market will continue. In these fertile conditions, a high degree of movement and change is inevitable.

By the end of 2011, as the market moves from emerging to early-stage consolidation, and the early adopters continue to report their results, there will be 25% fewer vendors in the e-discovery market as a result of mergers and acquisitions and vendors exiting the market.

Vendors in this report have met this year's inclusion criteria, including a significantly higher revenue threshold than in 2008. Gartner is, however, tracking and recommending other vendors in the market. The e-discovery challenge is complex and the approach that enterprises take varies by vertical industry, size of company, and litigation profile, along with other factors. Enterprises are approaching these challenges in various ways — sometimes with very tactical point solutions, sometimes with more holistic approaches. There is still some room in the market for innovative and differentiated technology. The list of vendors that Gartner is tracking includes, but is not limited to:

• StoredIQ: This is a competent vendor that performs identification, preservation and collection, with processing, review and analysis features. StoredIQ is a competitor to Autonomy, AccessData, Guidance Software and Kazeon, among others. Its heritage in search makes it a good choice for clients looking for flexible, powerful identification, collection, litigation hold and early case assessment. StoredIQ is positioned well to take advantage of growing market interest in information governance and legacy information management.
• Exterro: A competitor to PSS's Atlas Suite, Exterro enables litigation hold and litigation-hold-tracking, along with a workflow tracking of the entire e-discovery process. Its Fusion Genome product is a data map that is automatically and continuously refreshed and linked to the company's organizational structure. It allows enterprises to locate information sources relevant to particular matters. This map is continuously refreshed via automated means. Exterro's applications are built on an extensible workflow platform to support integration with other enterprise applications.
• Nuix: Nuix competes with Clearwell, Autonomy and other vendors that cover processing and early case assessment. It is highly "referenceable" among its current client base, with clients citing its scalability, speed, cost-effectiveness and language independence as key differentiating features. It is embedded as an OEM module in the solutions of highly regarded service providers and product vendors. Like many companies that do not have their headquarters in the U.S. (its headquarters are in Australia), its penetration of the vital North American market has been slower than that of some of its competitors. Starting from a different region is no barrier to success, but it does affect the revenue trajectory of the company.
• kCura: kCura's product Relativity is a Web-based review, analysis, and production platform that competes directly with CT Summation, Concordance, Autonomy's Introspect, CaseLogistix, FTI Technology's Attenex, Ringtail Legal and others. Relativity is offered as both an on-premises solution and a hosted solution by many well-known and highly regarded e-discovery service providers worldwide. Relativity has gained momentum by combining customizable workflow and scalability to accelerate the document review process.

These vendors will be formally rated when and if they meet the inclusion criteria. There is no reason not to consider them now if they meet your company's needs.

It is worth noting that no vendors in this year's MarketScope scored below Promising. That is an indication that user wants and needs and vendor offerings are converging into an offering that could possibly be evaluated by our Magic Quadrant methodology. This market has moved very swiftly from the emerging to consolidating phase, driven by the changes to the FRCP, the ever-escalating costs associated with keeping vast amounts of data that companies have accumulated over a decade or more of automation of business processes, and spiraling legal fees.

The recession has made end-user client organizations aware of the ways in which their own data management tactics are creating unnecessary cost. The drive for cost reduction, coupled with the pressures of e-discovery and regulatory actions, have raised awareness of the vast amounts of digital information that companies hold. Many of the vendors in the e-discovery space come from an information management background. The archiving and content management vendors, along with the information access vendors, are positioned to help their clients with technology to support better information governance. Many IT organizations have used the e-discovery driver to raise awareness with upper management that the "digital landfill" currently under their control must be dealt with to reduce the associated costs and risks. This is corroborated by Fulbright's sixth annual Litigation Trends survey, in which lawyers said that increasing scrutiny of legal costs had caused them to rethink both discovery and information management issues, with about one in seven saying they were "using other methods" to decrease the cost of e-discovery. Interestingly, a very common and, we think, ultimately futile approach to this has been to block access to social networking sites. As the number of companies that find it difficult or impossible to keep the content from social media sites out of the courtroom, we expect more will have active retention and usage policies that will again rely on good governance methods to work.

When enterprises have dealt with their most urgent e-discovery issues, they are turning their attention to the larger subject of information governance. The next focus of end-user organizations will be using technology, people and process to manage legacy information, as well as to control more effectively the creation of data and content on a "go-forward" basis. The market for information governance products will overtake and subsume most of the vendors in the e-discovery market within the next five years, although a much smaller stand-alone market of pure-play vendors will remain.

Enterprises are continuing to acquire e-discovery tools tactically but are increasingly guided by a strategic framework. Those vendors that have capabilities across the discovery spectrum (from identification through production) will be best positioned to take leadership of the e-discovery market. E-discovery projects are being seen in the context of an overall information governance or enterprise information management strategy. Achieving full proactive control of all data — which is the ultimate answer to legal challenges — will take at least five years, given the scale of the problem. Gartner encourages clients to view e-discovery solutions in this way, as reflected in the EDRM itself, which starts the discovery process with the task of "information management." For most companies, full control over all the data they hold is several years away. However, e-discovery can serve as a driver to jump-start a program that will eventually reach every part of the enterprise and that will have quantifiable business benefits.

Evidence is growing that corporations are trying to reign in legal spending "at the source" by adopting new strategies to deal with regulation. Initially, this will mean an increase in law firm work, but the ultimate goal will be to reduce overall legal spending by making sure regimes are in place to manage all information, particularly legal and regulatory information, in a more systematic way (see Note 5).

Against this background of increasing enterprise interest in information governance, success will be more elusive for new players, as user behavior changes subtly. E-discovery requirements have proved to be a powerful factor in forcing companies to think about the way they manage electronic information. As the scope of the legacy information management problem became clearer, IT executives, lawyers and corporate officers became aware of the vast amounts of money they spend on keeping data that is not in any way useful from a current business perspective. The recognition that information governance (including RM, archiving, content management, storage management and other technologies) must become an area of focus to control cost and risk is changing the market for e-discovery software. User wants and needs are beginning to coalesce around these components, but most organizations are too immature in their information management and governance practices to take advantage of them. Rule and policy development are prerequisites for making information governance work, and human resources must be dedicated to formulating and implementing policies. The vendor's governance platform components will be ready before companies are ready to take advantage of them.

Gartner is moving to segment the e-discovery market into three distinct elements. The first is e-discovery software that speaks to the products behind the firewall products, which are covered in this report. Gartner has published two previous MarketScopes on this segment. The second segment of the e-discovery market on which we are focusing is hosted/software-as-a-service (SaaS) solution providers. These are the vendors that provide primarily processing, review and analysis via either a hosted platform or a SaaS model. Finally, the third segment we will be exploring is e-discovery professional service providers. These are primarily consulting companies that help the enterprise by providing the needed expertise and staffing to meet e-discovery needs. They often leverage e-discovery software, as well as hosted/SaaS, as part of their service delivery model.

To be included in this MarketScope, a vendor must meet the following criteria:

• Have a software product that can be licensed for implementation and use inside a company's firewall or by a third-party service provider.
• Cover at least three of the functional areas of the EDRM.
• Have e-discovery-related product and maintenance revenue of at least $15 million.

We added EMC, CT Summation (Wolters Kluwer) and Concordance (LexisNexis) to this year's MarketScope. EMC's acquisition of Kazeon means that the two are now evaluated together.

We dropped Nuix from this year's MarketScope as it did not meet the revenue criterion. We dropped i365 as the company has effectively exited the market.

Overall Market Rating: Positive.

The necessity to react effectively to requests for information and subpoenas is forcing this market to grow swiftly. Users must navigate a confusing collection of vendors with conflicting ambitions, but the criticality of represented functionality will attract significant spending. In addition, large vendors have entered the market either organically or through acquisition. Clients have reported that they have saved money on storage, legal discovery services and spending on outside law firms by purchasing e-discovery software this year. The Positive rating is also based on the many vendors that have entered the market in the past three years, either with new functionality or by relabeling or finding new uses for existing products. Our own numbers, based on vendor surveys, indicate that vendor revenue is growing by 35% a year. The reasoning behind the rating being Positive and not the highest rating, Strong Positive, is the sensitivity of the market to external conditions, namely judicial scrutiny. We have also seen companies and law firms changing their tactics and the overall volume of litigation decreasing because of the excessively high cost of e-discovery. More cases are settled out of court and more are using alternative dispute resolution. The number of vendors involved and the remaining uncertainty over which way companies will choose to manage their data in the long term prevents us from rating this market as Strong Positive.

Founded in 1987, AccessData is a privately held company that has been addressing the e-discovery market since 2003, with a workforce of 170. Its software focuses on the identification, preservation, collection and processing phases of the EDRM. The AccessData product is well known to law enforcement officials and courts as a forensic data collection tool. AccessData can collect from a range of data sources, including desktops. Its search methodology supports multiple relevancy models and multiple file-culling methods and concepts. AccessData is able to do identification and collection on the basis of its distributed technology, which allows IT administration to place hidden agents on individual workstations. A high percentage of its customers are using these capabilities in support of multiple types of investigation (inappropriate activity, remote intrusion, e-discovery), and it would be valid to characterize them as general-purpose discovery and forensic engines. AccessData differentiates itself on the basis of its forensically sound collection methods, market longevity and presence in many organizations, particularly in the law enforcement field. Identification, preservation and collection are difficult and technically complex parts of the process and AccessData's ease of use in these areas is a differentiator. It added early case assessment in 2009. The company must expand its sales and marketing efforts to remain viable. AccessData's main competitors are Autonomy, Clearwell, EMC (Kazeon), Guidance Software and StoredIQ. It was rated Positive in last year's MarketScope.

Rating: Positive.

In business since 1968, Anacomp is a public company that has been addressing e-discovery since 2007, following its acquisition of CaseLogistix. It employs 600 staff. Its EDRM focus is on processing, review, analysis and production, but its e-discovery is an element of a broader product line, including document archiving and retrieval. The vendor has a good understanding of the legal end user and is highly rated among its service provider partners. CaseLogistix can ingest and export a wide range of file types and indexes. It supports native file review for hundreds of file types, including audio and video, without third-party applications. Collection and search are facilitated through embedded dtSearch, augmented by integration with key technology partners. CaseLogistix is offered in both on-demand and on-premises models. Anacomp's expertise in hosting and managing large amounts of unstructured data, its data center presence in the U.S. and Europe, and presence in law firms are advantageous. It has recently expanded its functionality to include early case assessment and advanced content analytics. It must work to penetrate more corporate legal departments, as well as leverage its integrated document archiving and retrieval customer base and data to differentiate itself in the ever-more crowded on-demand model for review and analysis. It competes primarily with other on-premises and hosted processing, review and analysis platforms. The vendor was rated Promising in last year's MarketScope.

Rating: Positive.

Autonomy is a public company with 2,000 employees. Its products have been addressing e-discovery (Introspect) since 1992. The suite covers all aspects of the EDRM: information management (Zantaz archiving, Interwoven document management and Meridio Records Management), identification, preservation and collection (Aungate Legal Hold), processing, review, analysis and production (Introspect). Autonomy has grown organically and through acquisition. It has an unmatched range of connectors and a sophisticated, tunable relevancy model that includes being able to search audio and video. Stellar marketing, an aggressive sales style and multiple use cases have made Autonomy a formidable competitor, appearing in all categories of e-discovery deal types. Software is available both on demand and on premises. Third-party service providers (Huron Consulting, Deloitte and Ernst & Young) have used it to build on-demand services. Autonomy has become a complex vendor with many offerings that cover all aspects of the EDRM, so client experience depends on which products they buy. An ongoing commitment of technical resources is necessary to success for enterprise-scale implementations, but other more limited implementations (for example, EAS e-mail archive) are simpler to run. Depending on the components a company chooses, implementation can take between one and six months or longer. Autonomy competes effectively with PSS Systems, Guidance Software and StoredIQ. Because of its range of functionality, Autonomy also competes with Clearwell, Symantec, IBM, EMC (Kazeon) and CA. Autonomy is rated in "Magic Quadrant for E-Mail Active Archiving," "Magic Quadrant for Enterprise Content Management," "Magic Quadrant for Information Access Technology," "MarketScope for Records Management" and "Magic Quadrant for Web Content Management." It was rated Positive in 2008's MarketScope. Its breadth of functionality, appearance on client shortlists and improved client references have moved it to Strong Positive.

Rating: Strong Positive.

CA is a public company that entered the e-discovery market in 2005 with its purchase of iLumin and subsequent acquisition of MDY. CA's coverage of the EDRM includes information management (archiving and RM), identification, preservation, collection, and processing. It has recently added analysis, review and production. CA has approximately 200 employees focused on e-discovery. CA's e-mail archiving products are not market share leaders, but are not far behind those of IBM or Autonomy, which has enabled it to become an information management player. It is particularly strong in government. CA has both on-demand and on-premises models. CA's approach to holistic control and disposition of physical, electronic and e-mail content via a single policy engine for enterprise content is a strength for organizations with disparate content sources. As with other platform players focused on governance, CA depends on clients wanting to do the right thing regarding information governance. As a visionary vendor with an information governance message, CA's best performance may be ahead of it, but it needs to gain more traction for its foundation platforms, particularly e-mail archiving. Because e-mail archiving is still the primary driver for clients that wish to move to more comprehensive information governance, Symantec remains CA's strongest competitor, along with Autonomy (Zantaz), and EMC. CA is rated in "Magic Quadrant for E-Mail Active Archiving" and "MarketScope for Records Management." The vendor was rated Positive in last year's MarketScope.

Rating: Positive.

Clearwell is a privately held company, with approximately 100 employees, focused solely on e-discovery, covering the identification, processing, review, analysis and production phases of the EDRM, along with early case assessment. Its product is offered as an appliance and is quick to install and use, with most users reporting that it took only hours or minutes to install. Clearwell's fast-to-install and easy-to-use enterprise appliance model gives it clear advantages to organizations that are under pressure to have data processed on time. Clearwell's go-to-market strategy has been strengthened by its developing partner network, including e-discovery service providers that offer Clearwell in a hosted SaaS model. It has a highly scalable implementation model, a strong understanding of the market and a proof-of-concept methodology that allows users a free software trial before they purchase. Clearwell's recent product announcements have expanded its capabilities to cover the identification, review and production parts of the EDRM, and demonstrate that the company has an understanding of customers' wants and needs. Clearwell must continue to expand its functionality to encompass more of the EDRM in order to maintain its strong market position. The vendor was rated Strong Positive in last year's MarketScope.

Rating: Strong Positive.

CommVault is a public company. Its Simpana software addresses the information management (archiving), identification, preservation and collection aspects of the EDRM, along with review, analytics and production. It has been in the e-discovery market since 2005 and has 1,100 employees, with 100 focused on e-discovery. CommVault is a data and information management software vendor that, in recent years, has extended its archiving and data protection capabilities with search and analytics functionality to provide e-discovery capabilities in its archive. It incorporates Fast Search & Transfer (acquired by Microsoft in early 2008) to enhance its indexing and search capability. It is unique in that it can search backups and archives as a single repository. CommVault has a growing customer base in e-discovery, underpinned primarily by its backup and archiving. It has a particularly wide range of file types and sources that it can collect, archive and index. CommVault's vision is extensive, as it aims to be a complete information governance platform. The complexity of its product and features may prevent clients from seeing its true capabilities. Currently, it succeeds primarily in situations where it is already an incumbent backup and recovery vendor. By positioning itself as a platform player, its competitors are Symantec, EMC, Autonomy and IBM, formidable companies with large marketing budgets. CommVault is rated in "Magic Quadrant for E-Mail Active Archiving." This vendor was rated as Promising in last year's MarketScope.

Rating: Promising.

CT Summation — its parent company is Wolters Kluwer — has been providing litigation support products since 1988 and has approximately 130 people working in its e-discovery division. CT Summation was one of the first litigation support databases adopted by law firms and is thus very familiar to much of the legal community. CaseVault and Discovery Cracker are processing, review, analysis and production tools, applications aimed at legal end users. Its current customer base is dominated by law firms, with only a very small percentage of corporate clients. Summation's Blaze LG family of products are entrenched with lawyers and paralegals and, given their cost-effectiveness, will certainly remain important review tools. With a long-established place in the litigation support market and historically having only one or two competitors, CT must revamp its products and strategy to meet the demands of the highly competitive market space in which it now finds itself. The product is new to the MarketScope this year. The Promising rating does not reflect Summation's current status in the legal community, which is strong, but rather the significantly changed competitive landscape of today's e-discovery marketplace.

Rating: Promising.

EMC has revolutionized its position in the e-discovery market. In April 2009, with the release of SourceOne for archiving, with additional e-discovery management modules, the company made it clear that it was serious about the e-discovery and information governance markets. The recently closed acquisition of Kazeon to cover the identification, collection and legal-hold capabilities outside the archive will enable EMC to compete against the most capable vendors in the e-discovery market. EMC's Documentum product family, which includes RM, is widely deployed in heavily regulated industries, the same industries most in need of end-to-end e-discovery capabilities. EMC's acquisition of Kazeon is confirmation of the trend that e-discovery must become part of infrastructure vendors' offerings, as enterprises seek short-term tactical solutions to their most pressing e-discovery issues, along with a longer-term strategy of better information governance. EMC has a solution that covers information management through processing and that allows for early case assessment. Along with its worldwide sales and marketing teams, which include a unique legal and technology sales team, EMC is now a formidable competitor in the e-discovery market. EMC is rated in "Magic Quadrant for E-Mail Active Archiving" and "Magic Quadrant for Enterprise Content Management," Kazeon is rated in "Magic Quadrant for Information Access Technology," and EMC's RM product is covered in "MarketScope for Records Management." EMC was not formally rated in last year's MarketScope, while Kazeon was rated as Positive.

Rating: Positive.

FTI Consulting is a public company that was founded in 1982 and has more than 3,000 employees, approximately 550 of whom work in the FTI Technology practice. FTI owns the brands Ringtail and Attenex, which were integrated in 2009 to provide processing, analytics, review and production. It seeks to sell both on-premises software and to provide hosted services. Gartner regards this as a good strategy, as many companies will need both on-premises and hosted solutions, with the hosted solution providing a growth driver for on-premises solutions and vice versa. FTI's partner channel has shrunk, but with more focus on revenue-producing partners, this is not a negative development. There are still many providers that do not have their own technology, that address different market segments or have otherwise overlapping but not wholly competing businesses. As service providers begin to require more commercial off-the-shelf software, rather than doing development themselves, FTI has an opportunity to grow its partner channel significantly. Being both a services and a product business is difficult, but FTI seems to be performing well so far. Its technology offerings, revenue growth and road map position it for continued positive performance in 2010. It has recently added an in-house appliance-based offering that will allow early case assessment, moving it to the left in the EDRM, where Gartner believes there will be strong growth for product vendors. FTI was rated as Strong Positive in last year's MarketScope.

Rating: Strong Positive.

Guidance is a public company with 410 employees. Its EnCase product has been in the e-discovery market since 2002. EnCase Enterprise searches, collects and preserves data for e-discovery, and EnCase eDiscovery can be used for identification, preservation, collection, processing and producing load files for review platforms. Guidance is able to do identification and collection on the basis of its distributed technology, which allows IT administration to place hidden agents on individual workstations. A high percentage of its customers are using these capabilities in support of multiple types of investigation (inappropriate activity, remote intrusion, e-discovery), and it would be valid to characterize EnCase as a general-purpose discovery and forensic engine. Guidance's products are well known to law enforcement officials and courts as a data collection tool. Their ability to reach every node in a network, including desktops, make them a well-known collection and processing tool among e-discovery service providers, as well as enterprises. Guidance sells a "single user version" and an enterprise version, both delivered on-premises. The interface and implementation were revised late in 2008 to make them more "lawyer friendly." It has also released a litigation-hold-tracking module. Guidance's main competitors are AccessData, Autonomy, EMC (Kazeon) and StoredIQ. Guidance was rated Positive in last year's MarketScope. Guidance's performance in 2009 takes place against a background of positive but difficult change within the company, as it moves from a technology-led to a marketing-led organization. Changes to pricing models and sales strategies have not yet had their full effect but demonstrate willingness to adapt and compete in a fast-changing market. These strategic changes had a positive impact on the company's performance in 2H09.

Rating: Positive.

IBM entered the e-discovery market in 2002 with e-mail archiving and RM, formally adding eDiscovery branded modules in 2006. As with other large companies, a breakdown of the numbers of employees devoted to e-discovery product development and sales, along with revenue, is not available. IBM is committed to the e-discovery market and has demonstrated that with investment in technology, marketing and partnerships in the past three years. IBM provides an e-discovery product (IBM InfoSphere eDiscovery Manager [eDM]) for collection, classification, RM, search, search refinement, case foldering, release/hold management, and native and EDRM XML export for production. Based on the same platform, IBM is able to collect files from file servers and also from desktops. IBM InfoSphere eDiscovery Analyzer (eDA) provides analytics capabilities, purpose-built for attorneys, paralegals and litigation support specialists. These analytics offerings, which are a strong differentiator for IBM, also support early case assessment. It partners with PSS Systems (Atlas) for litigation-hold-tracking functionality. Because IBM provides information infrastructure components for so many companies, its discovery products should at least be shortlisted for clients that use its content management, archiving or business application platforms. IBM has consolidated various pieces of functionality for a more straightforward offering, although its offering remains a multiple product or module purchase. IBM is rated in "Magic Quadrant for Information Access Technology," "Magic Quadrant for Enterprise Content Management," "Magic Quadrant for E-Mail Active Archiving" and "MarketScope for Records Management." The vendor was rated Positive in last year's MarketScope.

Rating: Positive.

LexisNexis — its parent company is Reed Elsevier — acquired Concordance in 2006. Concordance had been one of the first litigation support databases adopted by law firms and is thus very familiar to much of the legal community. Concordance and LAW are processing, review and analysis tools, applications aimed at legal end users. They are also widely used by hosted service providers. The current customer base is dominated by law firms, service providers and government agencies that do investigations and prosecutions. Concordance is described by its legal end users and service providers as a necessary tool but one that does not meet 100% of their needs. Concordance is well entrenched with lawyers and paralegals and, given its cost-effectiveness, will certainly remain an important review tool for small to midsize document sets. Its current strategic plans for product, marketing and sales direction recognize the dramatically different e-discovery marketplace in which it now competes. LexisNexis has announced that Concordance is undergoing a major upgrade and is adding significant new functionality, including early case assessment, litigation hold/hold tracking and a Web client in a series of planned 2010 releases. The product is new to the MarketScope this year. Its Promising rating is a reflection of its current status in the legal community and its strategic direction in response to significantly changed market conditions.

Rating: Promising.

Mimosa was founded in 2003, has 240 employees and is privately held. Mimosa is an e-mail archiving vendor that has extended its capabilities to include several other file sources, including SharePoint, desktops and file archiving. It covers the information management, identification, preservation and collection phases of the model and allows early case assessment, but only of files that have already been archived. It makes a copy of the files that are to be preserved. Mimosa has significantly strengthened its technical, sales and management teams. It is well positioned to win business below the level of the Global 500, with a well-architected archiving solution that can easily be expanded to cover discovery needs for data within the archive. As governance and discovery become more important to this large constituency, Mimosa is a well-placed competitor. We recommend that clients using it for e-mail archiving also use its e-discovery capabilities, but they will need other vendors to complete their e-discovery functions. To remain a strong player, Mimosa must continue to expand its file type collection capabilities for both archiving and general identification, preservation and collection. Mimosa is rated in "Magic Quadrant for E-Mail Active Archiving." Mimosa was rated as Positive in last year's MarketScope.

Rating: Positive.

Open Text is a public company that is a leading ECM vendor, with presence in the document management, archiving and RM markets. As an information management platform, Open Text enables its existing customers to perform litigation hold, review and analytics on objects already in one of its repositories. Additional functionality (early case assessment, collection, processing, review, analysis and production) can be facilitated by using Open Text and its partner Recommind. Open Text's solution best suits companies looking to reduce e-discovery costs through a disciplined approach to RM, leveraging existing legal support and RM functions in their company. Existing Open Text ECM Suite and Open Text e-mail and content archiving customers should consider Open Text as they consider their options for managing e-discovery. The Open Text eDiscovery solution allows enterprises to immediately address litigation hold and collection, while addressing the implementation of RM, e-mail management or document management — which typically requires corporate commitment, longer deployment time, and can be more expensive. Open Text is rated in "Magic Quadrant for Enterprise Content Management," "MarketScope for Records Management" and "Magic Quadrant for Web Content Management." Open Text was rated as a Caution in last year's MarketScope. Its partnership with Recommind and positioning as an information governance vendor mean that Open Text should continue to perform well in the market and, as with other vendors with a core message of better information management, its best performance in the e-discovery market lies ahead of it.

Rating: Promising.

PSS Systems has been in the market since 2001. It is privately held. Atlas Litigation Communications and Collections (LCC) manages preservation and collection workflows for legal personnel and serves as a secure, searchable repository of information collected. It supports a variety of reports on holds, collections management and workload. The Atlas Enterprise Retention Management (ERM) module allows specification and communication of retention policies from central legal and business managers to those responsible for carrying out the policy in IT and lines of business, facilitating managed and documented data destruction. Atlas for IT provides discovery workflow automation including a framework that defines a common protocol for communicating hold, collection and retention requests. It is a software development kit that allows customers and third parties to build connectors to simple data sources. PSS has begun to successfully partner with collection vendors this year, enabling it to field additional functionality. It also has integrations to repositories that allow holds to be placed on records from Atlas directly in the third-party repository. These sales and technical partnerships will significantly enhance the ability of the Atlas software to meet customers' e-discovery needs. Clients with existing repositories that have different mechanisms for legal hold can use Atlas to federate and track those all in one system. PSS has very good recognition and acceptance in the legal community. PSS was rated as Positive in last year's MarketScope.

Rating: Positive.

Recommind is privately held, was founded in 2000 and has 130 employees. Recommind's background as an information access vendor has given it a strong position from which to meet the needs of the e-discovery market. Because of its historic focus on the legal vertical, Recommind is particularly appealing to legal end users. In the past two years, it has added significant and specific e-discovery capabilities, addressing the identification, preservation, collection and processing parts of the EDRM, along with review, analysis and production. Recommind's autocategorization capabilities, along with its conceptual search and entity extraction, are important differentiators. Its legal hold capability and early case assessment functionality will increase its appeal to the corporate market. Its go-to-market strategy has focused on partnerships and channels, along with direct sales. Recommind's partnership with Open Text will be of great benefit to Recommind, as Open Text has a large installed base of content management customers, many of which have e-discovery requirements. In 2009, it has increased both its partner channel and its corporate client list. It is rated in "Magic Quadrant for Information Access Technology." Recommind was rated as Positive in last year's MarketScope.

Rating: Positive.

Symantec is a public company that entered the e-mail archiving market in 2005 with its acquisition of Veritas Software, which had previously acquired KVS. Symantec has used its dominant position in e-mail archiving to successfully make inroads into e-discovery functionality for many of its clients. With the launch of Discovery Accelerator in 2004, it was one of the first archiving vendors to address search, preservation, review and workflow of archived content with a tool aimed at legal users. Focused on the left-hand side of the model (see Figure 1), Symantec is an information management platform that ingests and manages content from multiple sources and allows it to be retained, managed, reviewed and exported. The 2008 release improved its review capabilities for early case assessment and in-house review, but only for content already in the archive. Symantec relies on an open approach with integrated third parties to collect and ingest unarchived content for more sophisticated downstream processing and case assessment needs. As early case assessment becomes a more important feature for corporate clients, Symantec needs to consider whether aspects of the current partner model should become a native offering. Symantec offers RM capabilities through a series of connectors to leading RM applications, combined with native tools for retention folders and classification. However, it stops short of providing a traditional RM solution itself. Symantec is rated in "Magic Quadrant for E-Mail Active Archiving" and "Magic Quadrant for Content-Aware Data Loss Prevention." The vendor was rated a Strong Positive in last year's MarketScope.

Rating: Strong Positive.

ZyLAB was founded in 1983 and is a privately held and long-established player in the information access market, from which it began participating in the e-discovery market. The company has approximately 100 employees. ZyLAB addresses images, video and text very effectively, in addition to having strong paper conversion and management capabilities. It is well known in government and law enforcement organizations, having been used by the War Crimes Tribunal in the Hague, as well as by other European and U.S. government clients, and case law refers to it in the U.S. courts. The company has pursued very effectively its strategy of addressing lucrative vertical markets related to litigation and investigation. ZyLAB has an unusually broad sales and support presence in Europe and Asia. As a privately held, European vendor with no current intention of growing the company via outside funding or acquisition, its consistent growth and stable financial position nevertheless make it a good choice for even cautious companies. The vendor is highly "referenceable" in the U.S. federal government market. ZyLAB provides enterprise software, SaaS, and appliance-based solutions. It is rated in "Magic Quadrant for Information Access Technology." The vendor's rating was Strong Positive in last year's MarketScope.

Rating: Strong Positive.